US scrap market indications point to May reversal

US scrap prices seem to have bottomed out and are expected to turn around in May, due to the recent up-tick in the US scrap export market as well as the recent domestic price correction.

Although scrap demand in the US domestic market remains weak and there have been very few purchases concluded from domestic mills since the beginning of the month, the recent up-tick in the US scrap export market is expected to prevent the US domestic scrap prices from falling further. In fact, domestic scrap prices are now expected to rise by $10 to $15 /long ton in May.

In addition to the recovery on the US scrap export side, market insiders believe that domestic prices are currently too low, even after bouncing back slightly mid-month, and that they will undergo further upward price correction in May. Moreover, to continue at the current rate of steel production, domestic mills will need to purchase at least some smaller quantities of scrap tonnage in May.

Currently, on the US East Coast, both domestic busheling and shredded scrap prices are in the range of $170 to $180/lt, while HMS I prices are between $155 and $165/lt.

Meanwhile, the recent up-tick in the global scrap demand has been facilitating the US export scrap market. Last week, SteelOrbis learned that one of  the Turkish mills concluded a deal for an ex-US scrap cargo at $253/mt CIF Marmara for 15,000 mt of shredded scrap, at $248/mt CIF Marmara for 22,000 mt of  HMS I/II 80:20, and at $258/mt CIF Marmara for 3,000 mt of P&S scrap for May shipment. Prices have gone up approximately $18 /mt from two weeks ago.

The latest USITC data show that the total amount of ferrous scrap exports from the US in February 2009 was 1,485,000 mt, representing an increase of 609,000 mt when compared to the figure of 876,000 mt in January.

The top recipients of shredded scrap from the US in February 2009 were: China, at 351,000 mt; Turkey, at 115,000 mt; South Korea, at 82,000 mt; Switzerland, at 44,000 mt; and Greece, at 40,000 mt. Some other countries which imported shredded scrap from the US in February include: India, Pakistan, Thailand and Taiwan.

For HMS I grade scrap, the top recipients of US exports in February 2009 were: South Korea, at 149,000 mt; Turkey, at 112,000 mt; China, at 51,000 mt; and Taiwan, at 43,000 mt. Japan and Vietnam also imported some tonnage of HMS I grade scrap from the US during the period.