/Rusmet.ru, Victor Tarnavskiy/ With the beginning of Ramadan Turkish scrap buyers’ activity fell. But they did not stop the purchases. Some companies continue to make the stockpiles for September-October. Taking into account large number of potential suppliers from Western Europe, the USA, CIS, and Romania in the market, this should have caused excessive supply and the prices drop. However, the prices in Turkey are still rather high.
It was reported last week that separate lots of European HMS № 1&2 (70:30) and Ukrainian А3 were sold to Turkey at $380 per ton CFR or at a slightly lower price. However, the most traders are not ready to make concessions. The US scrap HMS № 1&2 (80:20), as a rule, is offered at $395-400 per ton CFR. The absence of the deals at such terms does not disturb the exporters very much. European and Russian scrap is usually offered at $385-395 per ton CFR.
The sellers’ behavior is explained by scrap prices growth expectations in September. According to the traders Turkish steel producers will have to refill scrap stockpiles after the Ramadan. In early autumn European mini-mills, stopped for the summer, will resume working. This will cause scrap demand in the EU and the decrease of scrap supplies to Turkey. Besides, today global scrap market is kept in form by active demand in Eastern Asia.
Many plants in Far East started raw materials purchases with a view to rolled steel output growth in September, after the beginning of rain season. In particular, large volumes of scrap are being delivered to Taiwan and to Vietnam. China also imports large amounts of scrap. There is scrap shortage in China today due to the lack of domestic collection. According to Chinese sources some mini-mills even stand idle because of raw materials shortage.
Scrap prices in Eastern Asia vary in a wide range. Thus, the US shredded scrap prices reach in India and China $410-420 per ton CFR. HMS № 1 scrap is offered at from $375-385 per ton CFR (in containers) to $400 per ton CFR and more (bulk). Japanese companies which had to increase domestic prices of scrap due to scrap shortage in the beginning of August, try to make export prices for Н2 to $360-370 per ton FOB.
Export activity furthers the prices increase in the US domestic market. In August the prices for main kinds of scrap increased averagely by $20-30 per ton. Similar growth is expected in September. As well as in Europe, many companies in the USA did not make scrap stockpiles for the summer. That is why they will have to refill the stockpiles soon.
But, global scrap prices increase, expected in September, will be rather a long-term trend than a jump. According to experts the demand for scrap during the nearest several months will be higher than the supply. Steel output after the summer decrease is expected to grow all over the globe, whereas there is no new scrap sources available. Neither consumer’s market nor machine and equipment market recovered after the crisis. The return to the before-crisis level is not expected in 2011, at least in Western countries. Thus, there will be no new income of scrap, as industrial as old scrap.
Thus, the traders have all reasons to ignore temporary decrease of the demand in Turkey. In three or four weeks the demand will rise again and scrap suppliers will have new opportunities for the prices increase.