German and Polish scrap markets move down for the second month

Domestic scrap quotations in Germany and Poland have moved down during September for the second consecutive month.

As domestic scrap procurement prices in Germany decreased during September, market sources state that the main reason of this fall was the excess of supply, which was supported by mills’ unwillingness to pay higher levels for scrap in the absence of Turkey. As a result, the decrease recorded was deeper than the initial expectations. According to market sources, particularly E1 grade scrap supply is on the high side in Germany, causing steel mills to feign reluctance in terms of purchasing. One player in Germany reports that, despite the €30/mt reduction they made in their collection prices, the flow continues as always. The same player states that “scrap inventories on hand today is enough to meet the whole demand for October.” German suppliers are trying to conclude sales for October, while some sales were done from Central Germany to Italy despite the high freights. Also, amid the absence of Turkey, Dutch scrap sellers are seeking opportunities in Germany. As a result, local scrap prices in Germany are expected to decrease further in October, deeper as €30/mt for E1 grades and €5-10/mt for higher grades.

On the other hand, the increase in gas costs in the EU are creating uncertainties for the regional steel production. According to Reuters, gas prices in the EU have risen more than 250 percent this year, forced some steelmakers to suspend operations. While several sources state that it is too early to voice numbers, a global steel producer states that their initial assessments signal for €40-60/mt rise in production costs. Also, the financial crisis of Chinese Evergrande Group is creating further uncertainties for the global steel market and is monitored closely by all parties. The situation is compared to Lehman Brother’s bankruptcy in 2008, though Chinese government’s precautions to prevent a similar crisis are to be seen. As of today, Chinese central government has not made an announcement about Evergrande, some sources state that one is expected tomorrow, September 23. On Monday, September 20, S&P Global Ratings said in a report that it does not expect Beijing to provide any direct support to Evergrande unless “there is a far-reaching contagion causing multiple major developers to fail and posing systemic risks to the economy. Evergrande failing alone would unlikely result in such a scenario".

According to the latest data provided by the BDSV, in the first 20 days of August local scrap prices decreased by €19.7-42.3/mt month on month. On the other hand, the annual increase is significant in the range of €109.4-212.7/mt. Prices are average prices for domestic transactions across Germany in the first 20 days of the given month. The prices are provided by Bundesvereinigung Deutscher Stahlrecycling-und Entsorgungsunternehmen e.V. (BDSV).

Specifications:
E1 - Old steel scrap: thickness ≥ 4 mm, maximum dimensions 1.5 m x 0.5 m x 0.5 m
E2/E8 - New steel scrap: maximum dimensions 1.5 m x 0.5 m x 0.5 m
E3 - Heavy old steel scrap: thickness ≥ 6 mm, maximum dimensions 1.5 m x 0.5 m x 0.5 m
E40 - Shredded scrap: excluding incinerator steel scrap and collection scrap; density ≥ 1.1 mt/m3, Fe ≥ 92%
E5M - Turnings: excluding iron and automatic steel turnings

Meanwhile, prices in the local Polish market for HMS I scrap have declined significantly to around €360-370/mt DAP versus the €420-425/mt DAP recorded last month, while HMS II prices are currently standing at €320-325/mt DAP. In some rare occasions, HMS II scrap was priced at €330/mt DAP, market sources state, though this is the maximum level for this grade. Additionally, new scrap prices such as busheling and P&S grades in the local Polish scrap market are in the range of €380-390/mt DAP. SteelOrbis has learned that demand from Polish mills for scrap is good as their production rates are stable month on month. As a result, Polish steelmakers are willing to procure domestic scrap. It is expected that domestic scrap prices in Poland will stay stable in October.