Scrap steel prices have fallen from a high of $520 per ton to $440 while hot roll coil (HRC) prices are climbing. The market now presents some anxious moments to buyers as they fear a repeat of 2008 may occur with prices reaching a peak point and thereafter crashing.
Many analysts believe that the prices may hit a saturation point soon giving way to a deep slump, although it presents a great buying opportunity.
UBS, premier global financial services firm, has forecast weak prices ahead for scrap metals. The major reason behind the price spikes in last the years is said to be the unaltered demand from Turkey which continues to be the leading importer of scrap metals from USA.
For the last four years from 2007, Turkey has been the largest buyer of scrap steel from United States. According to US commerce department and US census bureau, Turkey led the buying from 2007 to 2010 by accounting 19.8%, 20.8%, 16.1% and 18.6% respectively. Only in 2009, China surpassed Turkey accounting for 28% of US imports, while Turkey fared lower at 16.1 %.
John Ambrosia in one of his analysis in Scrap Price Bulleting said that “It seemed like every time the market needed a bump, there was Turkey coming in and placing orders,” a New York-based domestic dealer said. “And each time we took a hit on scrap prices, it was because Turkey was out.”Throughout 2010, Turkish steelmakers made huge buy in the market averaging somewhere around 300,000 metric tons each month helping to create a seller’s market for most of last year.
So far this week 700 lots (14,000 tons) of HRC traded on the CME Group Domestic HRC futures contract. The vast majority of this week’s trades were for 2nd Half 2011 at $700. 32 lots of April/May traded between $745 and $750.
Futures traders remain cautious on HRC prices for 2nd Half 2011, waiting on the outcome of a variety of factors including the continued impact of the flooding in Australia on iron ore and metallurgical coal prices, the return of the Chinese buyers after the Spring Festival and the continued economic rebound in the U.S.
Recent floods in Queensland which ravaged many resources and an upward trend of global recovery has boosted the prices so far, according to many analysts it’s time up for the prices to give a pause while the global steel makers are increasing prices day by day.
Global economic recovery trends, rising equities and base metals in LME, NYMEX are providing further support for the HRC and steel scrap complex; and coupled with reasonable growth in developing economies, there is no reason for undue crash in prices.