/Rusmet.ru, Victor Tarnavskiy/ Scrap prices in global market are decreasing during recent 2.5 months. Low demand for scrap in all main markets against seasonal growth of collecting volumes changed the shortage of late winter and early spring to the excessive supply. The problem is not in the excessive scrap offered in the market, but in the lack of consumption. Long products output in recent several weeks reduced in Europe, Middle East, and even China. The US and Japanese steel manufacturers refused to the output increase.
In the end of 2008 in similar situation the market responded by the scrap collecting volumes increase. However, the growth in the end of 2009 and in the beginning of 2010, during which scrap prices jumped by 70% and more, caused the suppliers’ activity increase. As the result of this scrap collecting volumes remain high despite the prices decrease.
European traders are the most active in recent time. EU domestic market fell: the demand for scrap in Italy and Spain, which are the largest scrap importers in the region, in the Q3 of 2010 can occur by 30-50 % lower than in the same period of last year. The price of imported scrap HMS № 1&2 in Italy fell in the first half of June to 270-280 euro (около $305-320) per ton CFR. European companies are ready to sell the scrap to Turkey at $315-320 per ton CFR and to India (the most active market today) at $320-330 per ton CFR.
The US traders are in worse situation. They offer HMS № 1&2 (80:20) to Turkey at not less than $330 per ton CFR and to China at $350-360 per ton CFR. However, Turkish buyers prefer cheaper scrap from Europe, Middle East, or CIS. Chinese companies almost ignore external market. Besides, Japanese exporters decreased their prices for Н2 scrap to $325-340 per ton FOB.
In the USA scrap prices fell in June again, although slightly - by $5-25 per ton. HMS № 1 price with the delivery to the eastern cost and to middle west amounts about $300-315 per Mt. The US traders say that the demand from the local manufacturers is low and the steel mills do not consider scrap stockpiles decrease a problem. (Last time the stockpiles were refilled in April). The suppliers do not have the opportunity to cover negative business conditions in domestic market by means of export.
Negative expectations prevail in global scrap market. Most exporters forecast somewhat decrease of HMS № 1&2 scrap in Turkey to less than $300 per ton CFR. According to some sources Turkish companies are ordering A3 scrap from CIS at $290-300 per ton CFR. Negative conditions are based, first of all, on the weakness of global long products market, which is unlikely to recover at least till the end of summer.
However, significant decrease of scrap prices is not likely to happen in the nearest months. During April, May, and early June the consumers were decreasing raw materials stockpiles. Even taking into account reduced production volumes, steel manufacturers will be unable to keep from purchased till the end of summer. Besides, the rally in Middle East rebar market can start in July before Ramadan. However, the possibility of the rally is not very high.
Obviously, scrap prices in Turkey will fall to less than $300 per ton CFR, but it is unlikely to decrease to the last-year level.