The US export market met a severe downturn in the early June buying-cycle when prices settled at approximately $213/mt ($210/gt) for HMS I, $244/mt ($240/gt) for shredded scrap, and $254-$264/mt ($250-260/gt) for busheling scrap. These numbers decreased by $51/mt (50/gt) for HMS I, $51-$56/mt ($50-$55/gt) for shredded scrap, and about $35/mt ($34/gt) for busheling compared to May.
April and May were riddled with optimism resulting from China's economic revitalization plan along with expectations for decreased supply from planned mill outages in China more than as a result of a fundamental robust local demand for steel goods. June saw an adjustment downward as a result of decreased offer prices of Ex-Chinese billets, decreased demand of Turkish finished steel goods both domestically and internationally, and what some experts close to SteelOrbis believe may have been an overcompensating adjustment due to the increased inventory that was still being delivered in June from the May purchases.
Since the second week in May, expectations for June had decreased $20-$30/mt ($20-$30/gt) domestically as a result of continued offers to Turkey which were not attracting buyers. By late May, Turkish steelmakers clearly communicated that $250/mt ($246/gt) CFR offers were unacceptable and could be negotiated down should they want to proceed and that their primary concern was not the price of raw materials but the soft demand for their finished steel products both domestically and abroad.
On the East coast, HMS I/II 80:20 dropped down to $183/mt ($180/gt) domestically in the June buy cycle from the already adjusted level of $200/mt ($196/gt).
Previous week, a Turkish steelmaker booked and ex-US cargo of 15,000 HMS I/II 80:20 scrap at $235/mt ($231/gt) CFR. The steelmaker also booked 20,000 mt of shredded scrap at $240/mt ($236/gt) CFR and 5,000 mt of P&S grade scrap at $245/mt ($241/gt) CFR, all for June shipment. This reflects a $95/mt ($94/gt) CFR decline on HMS I/II 80:20 from the last US export cargo booking, which was concluded in early-May.
Inland, domestic prices were certainly affected due to the impact of the decline in export demand to Turkey, our largest scrap importer, but for HMS I and shredded scrap, they were able to maintain their pricing decline to the $20-$30/mt ($20-$30/gt) range as expected. Prime was affected in the East Coast at a decline of $35/mt ($34/gt), but inland it was able to maintain its May pricing levels of $280-$290/mt ($276-$285/gt). Therefore, pricing of busheling is not expected to decrease significantly to meet present export trends.
Looking forward, US sources close to SteelOrbis believe that $230-$235/mt ($226-$231/gt) CFR on HMS I/II 80:20 meets their point of equilibrium for the summer due to both their need to balance inventory with domestic demand requirements as well as the fact that historically they have encountered a $10/mt market spread between ex-EU scrap and ex-US scrap. Yet, from discussions with Turkey steelmakers, as recent as today, they are stating that $230/gt for HMS I/II 80:20 ex-US may not be feasible in July as they are sourcing HMS 80:20 scrap at $225/mt ($221/gt) ex-Baltic. Additionally, in more recent transactions, they have purchased ex-Europe HMS I/II 75:25 scrap at $220-$223/mt ($217-$219/gt), HMS I/II 80:20 scrap at $226/mt ($222/gt), HMS I scrap at $229/mt ($225/gt), bonus scrap at $236/mt ($232/gt), and busheling scrap at $238/mt ($234/gt), all in CFR terms.
SteelOrbis has also learned that while North American HMS I/II 80:20 scrap offers to China remain unchanged at $230-235/mt ($226-$231/gt) CFR, Europe offers to China have declined $5/mt ($5/gt) to meet the same price levels, a move that communicates Europe's desire to establish themselves competitively as July planning begins.
As some dampening is expected domestically due to planned mill outages in summer, seasonality, effect of some imports on local production, and comfortable inventories at service centers and mills, export demand will play an even more important role in establishing East coast pricing in July. Presently, sources close to Steelorbis are forecasting a slight decline in domestic pricing taking into account concerns from Turkey steelmakers as well as a decreased scrap inflow resulting from the decreased scrap purchase prices they recently communicated to their scrap collectors. In the East coast, several outfits immediately encountered a 20 to 30 percent decrease on daily scrap inflow volume in the first week. This may adjust as expectations on the collector's side become clearer, but presently, they are also influenced by the wait-and-see perspective. Finally, the downward expectations are in line with the declining ex-China and ex-CIS prices on semi-finished and finished steel goods we are continuing to see through mid-June.