Rusmet reported that global scrap market resisted the decline for long but in mid-October the prices started falling acutely in all key markets.
Turkish metallurgical companies have knocked down the quotations for American HMS № 1&2 to about USD 260 per tonne to USD 265 per tonne CFR. Russian A3 scrap is sold to Turkey at 260 per ton CFR and less.
In Far East the price for the US scrap decreased to USD 285 per tonne to USD 300 per tonne CFR at that these prices are considered over estimated by the consumers. Japanese H2 scrap is purchased by Taiwanese and Korean companies at USD 290 per tonne CFR and less.
In Japan domestic quotations fro scrap fell by 30% in recent two months due to the drop of Chinese import almost to zero level. Tokyo Steel Manufacturing Company again decreased purchasing prices for scrap since October 16th to JPY 21500 to JPY 23500 with delivery.
In the USA the prices for main kinds of scrap decreased by USD 10 per tonne to USD 20 per tonne as compared with early October. Local metallurgists buy HMS No 1 at USD 240 per tonne to USD 250 per a long ton with the delivery to a mill.
The main cause of the prices drop is the absence of serious purchases in Turkey and China, the countries which were the biggest scrap importers in the first three quarters of 2009. By now China almost stopped scrap importing due to domestic steel products prices decrease. Turkish companies which had to reduce steel melting volumes, buy small amounts of scrap. American and European companies have stopped making scrap stockpiles. They are to return to the market in January.
The fall in scrap market happened by the same reasons as steel products prices decrees. The main reason is steel overproduction caused by too optimistic expectations of the crisis finish by the end of current year and according steel prices increase. Metallurgical companies started buying raw materials in July to August, preparing for market recovery. This caused scrap shortage and scrap prices increase to about USD 320 per tonne CFR in Turkey and to mere than USD 350 per ton CFR Eastern Asia. Now steel makers use these excessive scrap stockpiles and they have all opportunities for operating for a fall.
The depth of the market fall will depend, first of all, on the situation in the Middle East finished products market. In 2009 the difference between the prices for HMS No 1&2/�3 CFR Turkey and rebar FOB Turkey was USD 180 per tonne to USD 230 per tonne. By all appearances Turkish long products manufacturers now try to keep rebar from the decrease to less than USD 450 per tonne FOB level. In this connection there are no reasons for scrap prices fall to less than USD 230 per tonne to USD 250 per tonne CFR Turkey. At that, it should be taken into account that Turkish metallurgists did not make large transactions with scrap in early September. That is why their scrap stockpiles are rather small. It is possible to rely on the fact that Turkish companies will resume scrap purchases in November and will help the prices to stabilize thereby.
Scrap prices decrease in Eastern Asia countries can return China into the market. Domestic prices for scrap similar to HMS No 1 reach USD 350 per tonne and more with delivery in Eastern provinces. At the decrease of import prices to USD 290 per tonne CFR and less such transactions become profitable for Chinese traders despite of the crisis.
Thus, there is big possibility that scrap prices decrease in Mediterranean will stop at the point of USD 230 per tonne to USD 250 per tonne CFR Turkey; in Far East region at USD 280 per tonne to USD 290 per tonne CFR China.
After that the market will stabilize due to the demand increase. In the beginning of 2010 scrap is likely to increase due to the activization of consumers in the USA and Europe and seasonal deliveries decrease.