Domestic
scrap prices are down again this month, as demand keeps declining due to the weak steel market.
Back in June, the state of the
scrap market was very different. Prices were at their peak because of the strong demand from domestic steelmakers, and prime industrial
scrap was hard to find. Since then, the picture has turned from rosy to black as steelmakers are slowing
production in the fourth quarter, resulting in slow buying activity in the
scrap market and price deterioration.
Scrap prices have been dropping since the beginning of November 2006. Busheling
scrap has taken the biggest hit, dropping an average of $30 /long ton, while shredded
scrap prices have dropped an average of $15 /long ton. Busheling
scrap is used mostly for flat rolled steel
production. Not surprisingly, the US flat rolled market has softened the most compared to the markets for other steel products, and still has some more room to fall before bottoming out.
Some industry insiders say that the domestic
scrap market will continue to soften for remainder of this year, as inventories are still higher than usual. Currently, steel stockists and end users are lowering their inventories. However, they will have to replenish them for the better times to come in spring, when demand from the
steelmaking industry picks up.
US steel production will most likely increase at that time, with
scrap expected to register gains in January and February 2007.
For now, a steep decline in pricing has been avoided by the steady activity in exports. Most
scrap cargo from the East Coast goes to
Turkey,
Egypt and
Greece, while West Coast exports go to
China, South
Korea and the
Far East. The current East Coast FOB ship prices for shredded
scrap range from $235 - $245 /mt while No. 1 heavy melt goes for $230 - $240 /mt.
While
Russia is still a major exporter, more and more Russian
scrap is consumed locally. The US is now meeting
scrap demand in some of the traditional markets where
Russia previously dominated, such as the
Far East and Middle Eastern countries. For this reason, the US is now exporting to more markets and countries than before, diversifying its sales regions and obtaining better prices. Export pricing is expected to remain stable before moving up again in the first quarter.
Pricing for completed orders of US
scrap to
Turkey have stayed relatively stable for the past two months. SteelOrbis is informed that a Turkish mill has concluded a mixed
scrap cargo booking ex-US at $278.50 /mt CIF Marmara Sea for December shipment. Fifty percent of the cargo is composed of shredded
scrap and the remaining half is HMS I/II 80:20
scrap. Last month, a similar order was completed for $279 /mt CIF.
The most recent USITC data available shows that during the month of September, the top recipients of shredded
scrap from the US were:
Turkey at 68,000 mt,
Mexico at 42,000 mt, and
Taiwan at 34,000 mt.
China, which imported 31,000 mt from the US in August, only imported 4,000 mt in September. Neither
Malaysia, which imported 85,000 mt from the US in August, nor
Peru, which imported 32,000 mt, imported any shredded
scrap tonnage from the US in September. However,
Taiwan imported significantly more in September, at 34,000 mt, when compared to 3,000 mt for August.
The top importers of HMS 1 grade
scrap from the US in September were:
Turkey at 156,000 mt,
Malaysia at 80,000 mt, and
Taiwan at 33,000 mt. Another major buyer is
Egypt, at 25,000 mt.
Korea, which imported 17,000 mt last month, didn't import any HMS 1 grade
scrap tonnage from the US in September.
The total amount of ferrous
scrap exports from the US in September totaled 925,000 mt, 268,000 mt less than the amount exported in August. Year-to-date (up to the end of September) total US ferrous
scrap exports reached 7,315,000 mt - a drop of 2.5 percent when compared to the figure of 7,503,000 mt for the corresponding figure of 2005.