Sluggish US scrap market may not improve until September

Wednesday, 18 July 2007 16:19:49 (GMT+3)   |  
       

Domestic scrap prices have not seen any significant movement since last month. The scrap market is barely maintaining prices, with very little sales activity observed in July.

The main reason for the soft market is that the domestic mills have bought very little scrap recently. Mills often shut down or cut production for repairs and maintenance during the summer months. These operation stoppages traditionally make July a slow month for scrap buying. As steel demand is usually more sluggish in the summer (and it is particularly sluggish this summer), producers avoid bringing in new scrap supply, keeping current inventories at a moderate level.
 
It is interesting to note that busheling scrap prices are down by about $50 /long ton compared to summer of last year. Finished product prices have come down along with the scrap prices, resulting in less production, and therefore, less scrap buying.

However, scrap collecting activity has also been slow due to the hot weather, which keeps the scrap supply evenly matching the current demand. It is expected that scrap demand will not exceed supplies before the very end of the third quarter, when scrap inventories may start to run out and the market for finished products will likely start to bounce back. 

Current upper East Coast domestic busheling scrap stands at $280 to $290 /long ton, with shredded scrap going for $265 to $270 /long ton. HMS I now ranges from $240 to $250 /long ton. Prices in the Great Lakes region have an extra $5 to $10 /long ton. Insiders predict that prices will stay close to current numbers, with a tendency to drop slightly in August before they strengthen again in September.
 
As for the export market, demand from Europe and the Middle East has been less than usual. Turkey, for instance, while remaining the largest foreign recipient of US scrap, is meeting its scrap needs by making smaller purchases from the Black Sea region and Europe, as their end product sales are also going through a soft summer spot. The number of US scrap cargoes per month destined to Turkey has lessened in July due to lack of demand.

SteelOrbis is informed that a Turkish mill has concluded a booking of a scrap cargo ex-US for August shipment. The cargo is composed of shredded scrap booked at $324.50 /mt CIF Iskenderun and HMS I/II 80:20 scrap booked at $321 /mt CIF Iskenderun. 

Freight rates are also going up, putting more pressure on US scrap yards to lower their prices. 

The most recent USITC data available show that during the month of May 2007, the top recipients of shredded scrap from the US were: Turkey, at 111,000 mt; Korea, at 55,000 mt; Malaysia, at 54,000 mt; Greece, at 53,000 mt and Thailand, at 47,000 mt. Saudi Arabia, India, Mexico, Taiwan, Egypt and Portugal also imported shredded scrap from the US in May.

The top importers of HMS 1 grade scrap from the US in May 2007 were: Turkey, at 92,000 mt; Korea, at 47,000 mt; Thailand, at 35,000 mt; Italy, at 25,000 mt and Taiwan, at 22,000 mt. Some other countries which imported HMS 1 grade scrap from the US in May include: Malaysia, Greece, China, Mexico, Indonesia, Bangladesh, Egypt, Vietnam, Canada and India.

The total amount of ferrous scrap exports from the US in May totaled 949,000 mt - 310,000 mt more than the amount exported in April. Year-to-date (Jan. to May 2007) the total amount of ferrous scrap exports is 4,391,000 mt - an increase of 30.3 percent when compared to the figure of 3,369,000 mt for the corresponding period of 2006.


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