Long products global market is in long depression condition, which is likely to continue for a bigger part of 2010. Due to low demand mini mills have to limit output volumes; scrap demand decreases consequently. Integrated metallurgical plants equipped with blast furnaces, which use scrap in furnace charge also decreased the demand for scrap. In early December Reuters announced the estimation of Sims Metal Management, which was the world biggest scrap trader according to which global demand for this material which was about 475 mio tons in 2008 decreased to less than 400 mio tons in 2009.
Nevertheless in recent several weeks scrap prices in global market grow despite the unwillingness of the buyers from Turkey, China, and Eastern Asian countries to overpay for scrap, growing expenses for which are very difficult to be transferred to finished rolled steel cost. In the end of last week Turkish companies received the offers for HMS № 1&2 (80:20) from the U.S. traders at $315-320 per ton CFR, and the prices for Russian, Romanian, and Western European scrap could exceed $310 per ton CFR. In China the quotations for the U.S. scrap are between $330 and $340 per ton CFR, and Taiwan, Vietnam, and other Far Eastern countries buy this material at $310-320 per ton CFR. As compared to the end of November the prices rose by $10-15 per ton.
Surely, one of the main reasons for scrap prices increase in global market was scrap prices growth in exporting countries, which were the USA and EU. The U.S metallurgical companies, which started active scrap purchases in November, caused its prices increase in domestic market by $40-80 per ton in 1.5 months. In Europe mills have to pay for scrap by 20-30 euro per ton more than in the first half of November. Consequently, exporters compare their offers with domestic prices volume.
However, all these say only about scrap shortage which will worsen in the nearest months. Current growth happens in rather positive environment: in neither exporting country there is no scrap demand boom, and steel output volumes in Western exporting countries is by 20-30% lower than before-crisis figures. Once a main market player increases purchases, scrap will boost. It is not improbable that in February-March, when scrap market undergoes seasonal maximum its price in the Mediterranean will exceed $350 per ton CFR.
According to the estimations of Sims Metal Management, up to 80% of old scrap collecting in Western countries fall on used cars and housing appliances. Now this income reduced, since in difficult financial conditions consumers postpone the purchases of expensive goods. The programs of cars demand stimulating by means of donations worked well, but they have been completed. Corporations decreased the expenses for repair and updating, so that turning old equipment into scrap fell as well. Generally, the situation in scrap procurement will improve when Western countries feel that they are overcoming the crisis only, and this can not happen soon.
At the same time the demand for scrap will grow despite negative situation in the long products market. In Western countries metallurgical companies are gradually expand the capacity load which is necessary for profitability reasons. In China steel output grows which will further the demand for imported scrap provided the limit for domestic recourses. Obviously, Russian and Ukrainian metallurgists can not avoid further scrap growth. In both countries steel output started increasing again, and the growth is faster than scrap collection. It is possible that in long term Russia and especially Ukraine will turn to scrap net importers.