The circular relationship between strong US domestic demand, adequate-to-tight supply levels depending on scrap grade, higher global raw material prices, and strong international import prices are working in tandem to ensure strong prices continue in the US export scrap market into September. However, expectations are mixed regarding the potential for higher priced ex-US deals to Turkey.
In the domestic market, strong demand is expected to continue supporting US scrap prices, which lifted through August in preparation for the September buy-cycle on export competition. A source noted that demand for scrap is further supported by scrap being an attractive feedstock as met coke and premium iron ore prices increase; as such, BOF mills may pursue additional scrap buys in September. On the export front, firm pricing for ex-EU and ex-Baltic scrap is holding Turkish import scrap prices stable with a limited short-term downward outlook for future ex-US deals.
On the East coast a US scrap trader stated today, “At a minimum we hope for an additional ex-US HMS I/II 80:20 scrap deal at $353-358/mt CFR as some market uncertainty is creeping into decision making and status quo is the most likely course of action.” The range was based on the latest North American deals on HMS I/II 80:20 scrap for ex-US at $353/mt CFR Turkey and ex-Canada at $357.50/mt CFR Turkey that were transacted in the first two weeks in August. Another source noted that global support from China’s regulatory activity on steel for the remainder of 2017, overall strong global raw material prices, higher Turkish offer prices on steel, and overall optimism for H2 2017 could result in slightly higher deals in early September.
On the West coast, export scrap prices have remained relatively stable as Taiwan seems to have capped its buys at approximately $300-303/mt CFR Taiwan as mills contend with weak domestic demand for rebar. In Japan, a large contract between a mill and a large automaker is causing some concern for steel pricing forecasts into the latter part of the year. The long term contract was apparently achieved at slightly lower prices, yet the Japanese H2 export scrap market has continued its upward pricing trend. Scrap demand from India is not expected to regain strength for some months due to a slow domestic economy and the limited construction in September due to the monsoon season. Additionally, ex-US scrap prices are considered too high by Indian traders as their import prices have declined by $5/mt over the week according to a source. Overall, US West coast scrap pricing is expected to remain stable as Asian markets seek to determine if the “ceiling” has been achieved.