As the US continues to be a major shipper of scrap to the rest of the world, the effect of exports on the domestic market continues to be debated in the scrap circles, , as it was at this week's AMM scrap conference held in Charlotte, North Carolina.
Turkey and China remain the largest recipients of ex-US scrap; however, their positions as first and second-largest ex-US scrap buyer have flip-flopped over the past year as China has taken over the top spot. Turkey's main finished product export market, the Middle East, remains quiet and therefore ,Turkish bookings of ex-US material are expect to remain somewhat low over the next two months. Current offers of HMS I/II 80:20 are at $255 to $260/mt CFR Turkish ports, which represents a $10 to $20/mt decrease in the last few weeks.
At this week's scrap conference, Mr. Greg Quinton of Commercial Metals Company pointed to a correlation between falling oil prices, scrap prices and the Middle East's weak demand for long products, all of which lead him to believe that a rebound in scrap demand from the Turkish markets should not be expected for the near-term. At the same time, the weakness of the US dollar has made US scrap the product of choice for international markets. Additionally, the EU suppliers also have a very strong Euro to overcome in competing with the US for scrap sales to Turkey.
As mentioned, China is increasingly playing an important role in US scrap exports. One question which was raised at the conference was: : when, if ever, will China become a self-sufficient scrap market and, in turn, become a net exporter of scrap? One delegate, Mr. H. Allen Grow of ArcelorMIttal, predicted that we will see a self-sufficient China within the next 10 years; however, Toby Powell of Steel Dynamics suggested a more distant time-frame of 20+ years. Others supported Mr. Powell's forecast, pointing to the insufficiencies in China's scrap infrastructure which should prevent the country from becoming a net exporter in the near-future. Until that time comes, China, as well as the smaller Asian markets, will continue to look to the US for a large portion of their scrap needs. Current offer prices for US scrap to China have been heard at about $290 to $300/mt CFR for HMS I/II 80:20 via bulk shipments.
In the meantime, China's smaller neighboring countries continue to impact the US scrap market, one container at a time.
The emergence of containerized scrap exports was another main area of focus at the event, since, in recent years, the container business has opened up many inland suppliers to the export market. These are suppliers who, in years past, would have either been subject to whatever price a bulk exporter was willing to pay or would have just completely stayed out of the market, according to Nathan Frankel of Advanced Steel Recovery. Now, inland suppliers are more educated on market conditions are able to set their own terms, and are able to fully participate in the export market as long as there is river, truck, or rail access within a reasonable distance. The growth of the container export business creates a more transparent and efficient market, according to Frankel.
David Hodory of David J Joseph Company also pointed out the benefits of containerization in today's market, citing its inventory management advantages, as well as other advantages, such as the ability to secure credit for ex-US scrap shipments in the absence of a large bulk order and the mitigated risk of several containers opposed to that of one large bulk shipment.
Containers have essentially "propped up the US scrap market" as Mr. Grow of ArcelorMittal put it. With China's continued growth and India's plans to spend approximately $567 billion over the next five years in infrastructure development, as well as the expected demand growth in other container-friendly Asian markets such as South Korea and Vietnam, demand for ex-US scrap should continue to grow, and containers will remain a viable shipping method of US scrap collectors and processors for some time.