At the end of March export prices for CIS scrap have started declining. Amid slow finished product market, Turkish mills have forced EU and US suppliers to cut offers. A revival in the steel product segment this month has been disrupted by force majeure in the Middle East and North Africa, so mills' sales are not stable at present. The future of demand in this market being vague, steelmakers buy raw materials with caution, only to satisfy immediate needs. This does not allow scrap suppliers to maintain upward policy, so prices for raw materials have not flattened out yet.
After being static for two weeks, quotations of import scrap to Turkey have moved down by $10-15/t from March peak levels. This means trading activity will dry up for most exporters of Azov-Black Sea region.
In particular, scrap collectors from Rostov-on-Don report Turkish traders bidding $435-440/t C&F for A3, which means $410-420/t FOB excluding freight rates, whereas last week some companies managed to sell at $462/t C&F ($435-440/t FOB). However, few sellers are interested in deals at the above levels. Taking into account quotations at ports, workable export prices are $450-455/t C&F ($430/t FOB) for A3; contracts below these levels are rare.
Although scrap collection is increasing, exporters cannot reduce purchase prices, since local mills have again raised theirs by $10/t recently, to $380/t CPT (road transportation). In order to stay competitive scrap collectors at ports are forced to bid no less than $348-359/t CPT for A3 grade.
Baltic traders are still out of the market, since BMZ is the only available export destination, which is rather a domestic consumer due to a specific pricing policy. Today Saint Petersburg scrap collectors can ship to BMZ through traders at $447/t DAF (mill’s price is $450/t DAF). The cost of transportation is $36/t. Current BMZ buying prices fully cover scrap collectors' expenses, enabling them to easily purchase A3 grade at $355-369/t CPT. However, shipments to the above destination are restricted by a lack of railway cars due to distribution of the Russian Railways rolling stock among independent transportation companies. Besides, taking into account an expected price correction by Severstal in Central district, bids of BMZ will stay attractive for a few days. The lowest acceptable level to resume shipments by sea is $475/t C&F ($420/t FOB) for A3.
Only Ukrainian suppliers can ship to foreign countries amid current export market conditions. Lower purchase prices and tax burden play into their hands. Amid a seasonal upturn in scrap collection, entailing a drop in quotations, Ukrainian traders can buy the material at $313-319/t CPT, against $320/t CPT a week earlier. Thus, exporters can afford selling A3 scrap at $435/t C&F ($410-415/t FOB), which is by $10/t lower than mid-March transaction levels.
The outlook for demand in finished product segment being pessimistic, Turkish mills will hardly become more active, so CIS scrap exporters may not have an opportunity to push through an increase in the short term. Besides, a seasonal upturn in scrap offer volumes will prevent probable speculations on limited supply.