Market Analysis for Raw Materials
After increasing substantially in early December, scrap dealers expected prices to surge again the following month and therefore held inventories back. But when US domestic mills came into the market in early January, it was evident that scrap dealers may have held back too much inventory and availability—particularly busheling—was overabundant. So, dealers who were able to sell scrap early collected an approximately $20-$30/mt premium over December prices, but those who sold later were only able to sell up $10-20/mt from early December prices. Domestic HMS I prices increased by about $15/mt in the East Coast and Midwest, while shredded scrap prices registered the most significant month-on-month increase of $25-$30/mt, a reflection of strong export activity in previous weeks.
As January wore on, however, the US export scrap market quieted. On the US West Coast, almost no transactions were heard as mills in the Far East chose to keep inventories lean ahead of the Spring Festival holiday. Waning finished steel demand in Turkey also kept ex-US scrap export activity from the East Coast minimal as Turkish mills found US offer prices to be far beyond their expectations, and export prices gradually softened on a weekly basis throughout January and into February. By early February, ex-US East Coast bulk scrap offer prices to Turkey fell to about $435-$445/mt CFR for a mix of HMS 80:20, shredded and P&S scrap, compared to $460-$470/mt CFR Turkey during the beginning of January.
The drop in export prices, as well as a mild winter that allowed for steady scrap collection, resulted in a similar decline in US domestic HMS I and shredded scrap prices for February. In the East Coast, shredded scrap prices fell about $25/lt to $450/lt ($443/mt) and $25-$30/lt in the Midwest to approximately $440/lt ($433/mt). HMS I prices fell about $20/mt in the Midwest and East Coast to $390-$400/lt ($384-$394/mt). Busheling prices fell more significantly as scrap availability was heightened by an overhang of imported pig iron that some mini-mill operators used instead of scrap. Busheling prices fell about $30-$35/mt in the East Coast to $480/lt ($472/mt) and a more substantial $40-$45/mt in the Midwest to $470-$475/lt ($463-$468/mt).
Turkish mills delay scrap bookings throughout January
As Turkish mills made minimal scrap bookings in early January, ex-Black Sea A3 scrap offers to Turkish mills stood at $455-$460/mt CFR in general. In Romania, scrap collection prices were approximately $417/mt, while ex-Romania A3 scrap offers to Turkey were $455/mt CFR. Meanwhile, ex-Russia (Black Sea) A3 scrap offers for Turkish mills were in the range of $455-$460/mt CFR and a few A3 scrap transactions from Russia to Turkey were concluded at $455/mt CFR Marmara Sea ports.
After curtailing scrap buying activity in the first few days of January in order to assess the market, Turkish mills headed for ex-deep sea scrap bookings when US domestic scrap prices for January settled. Compared to booking prices in late December, Turkish mills’ ex-deep sea scrap transactions registered minor increases. Meanwhile, ex-US HMS I/II 80:20 offer prices to Turkey were $468/mt CFR, while the price of ex-Europe HMS I/II 80:20 was approximately $454/mt CFR. New ex-US HMS I/II 80:20 offers for Turkish steel producers were higher at around $475/mt CFR.
Turkish buyers still limited their activity in mid-January, and transactions were almost non-existent as poor scrap demand in the Far East and Turkey exerted pressure on scrap prices. But as a result of the weakened euro against the US dollar, scrap suppliers readjusted their prices. Thus, new prices of ex-Europe HMS I/II 70:30, which was at $444/mt CFR Turkey previously, regressed to $439/mt CFR Turkey. Ex-Europe HMS I/II 80:20 offers to Turkey stood at $455-$460/mt CFR.
Turkish scrap booking activity did not improve in mid-January and Turkish mills were still delaying scrap purchases, as weak finished steel demand in both the Turkish domestic market and Turkish producers’ export markets resulted in lower finished steel prices. Softening finished steel prices caused Turkish mills to delay their scrap purchases, even though they did not book enough scrap for February shipments. But there was no shortage in scrap availability and US scrap availability remained robust as well. SteelOrbis learned from market sources that some ex-US scrap suppliers were capable of supplying HMS I/II 80:20 to Turkey at $465/mt CFR, but nonetheless, Turkish producers were not inclined to purchase scrap at this price level.
Even as January came to a close, scrap demand coming from Turkish mills remained weak, and scrap transactions were few and far between. Many scrap suppliers from the US, Europe and the Black Sea region were already in the market; however, these suppliers preferred to wait until buyers returned to the market, rather than issuing offer prices in the absence of buyers. Although no ex-US HMS I/II 80:20 offers were reported, sources noted some suppliers’ willingness to drop prices to $450-$455/mt CFR Turkey; Turkish steel producers were reportedly not inclined to purchase material at this price level for the time being. So while finished steel demand remained poor in the international market, some Turkish mills concluded local sales instead, resulting in increased domestic market activity. If this increased activity level could be maintained, Turkish mills, which had not yet completed their scrap bookings for February shipments, might then return to the scrap market.
In the final days of January two Turkish mills returned to the market and purchased ex-US scrap cargoes composed of HMS I/II 80:20 at $440/mt CFR, shredded scrap at $445/mt CFR and P&S scrap at $450/mt CFR.
Chinese scrap prices trend sideways in the beginning of the year
In the beginning of January, steel scrap prices in most regions of China were steady while transactions continued to slide. Following the reduction in scrap purchasing activities in the Northern region, scrap purchases in the Eastern and Southern regions of China also slowed.
Even as mid-January approached, Chinese steel mills weren’t interested in purchasing scrap cargos as inventory levels were decent. As a result, scrap prices in some regions of China decreased, although scrap sellers limited market supplies in order to prevent any big price drops.
Despite some slight price declines in a few regions of the country, transaction activity was minimal and scrap traders became less active in the market. Meanwhile, scrap supplies in China mainly consisted of import and scrap material from mills’ production operations.
Following the Spring Festival holiday in early February, the Chinese steel scrap market was still quiet and prices were stable; traders had not yet returned to the market. Most traders were still on holiday and were expected to return to the market after the Lantern Festival on February 6. The two nearly consecutive holidays were cited as the main factors for the lackluster market situation and extremely low booking activity in early February.
Upward movement in Chinese domestic iron ore market
Toward the end of January, the Chinese domestic iron ore market trended upward. Australian and Brazilian iron ore import prices increased by a larger margin than Indian iron ore prices, while prices of domestic iron ore increased by RMB 20-40/mt ($3.17-6.35/mt). By early February, the price of Indian 63.5 percent fine ore at Qingdao Port was $167.7/mt, while the price of Australian 62-63 percent lump ore was $170.9/mt. Meanwhile, in the Tangshan region, the price of 66 percent iron ore concentrate was $153.7/mt and in Beipiao the price of the same material was approximately $128.4/mt.
In the first week after the Chinese New Year holiday, activity in the Chinese iron ore market gradually increased, so international miners also raised their offer prices to China. Despite increases in iron ore activity, Chinese steel mills were still cautious with every purchase.