US scrap prices have trended sideways after rising in August and September, though they are already showing signs of weakness to come in October and November.
Scrap buying has slowed down since September due to slower demand from mills. Major scrap buyers like Nucor purchased a significant amount of scrap tonnage in September, and are therefore not looking to buy much in October. Also, export tonnage from the East Coast ports has slowed down some with export yards losing business to European suppliers due to the high ocean freight cost from the US East Coast to Mediterranean destinations.
While shredded scrap has held up fairly steadily, busheling prices have been declining slightly. Weaker busheling prices are another indication that the flat rolled market hasn't quite regained its strength yet. Midwest busheling scrap is going for $310 to $320 /long ton, and shredded scrap is going for $290 to $300 /long ton, while HMS I ranges from $265 to $275 /long ton.
Although the US economy is slowing down and steel demand is sluggish, there is sufficient demand from overseas to keep export prices strong. Also, ocean freight rates are still very high due to the shortage of ship availability in the market. SteelOrbis is informed that a Turkish mill concluded a booking of a scrap cargo ex-US last week. The cargo is composed of shredded scrap booked at $352.00 /mt CIF Turkey and HMS I/II 80:20 scrap booked at $347.00 /mt CIF. CIF prices in Turkey remain more or less the same from last month; however, scrap yards have had to discount their FOB prices to compensate for the increase in freight rates.
The most recent USITC data available show that during the month of August 2007, the top recipients of shredded scrap from the US were: Turkey, at 91,000 mt; Greece, at 97,000 mt; Malaysia, at 66,000 mt; and Egypt, at 42,000 mt. India, Thailand, Taiwan, South Korea and Indonesia also imported some tonnage of shredded scrap from the US in August.
The top importers of HMS I grade scrap from the US in August 2007 were: Turkey, at 93,000 mt; South Korea, at 56,000 mt; and Taiwan, at 42,000 mt. Some other countries which imported HMS I grade scrap from the US in August include: Egypt, Malaysia, Greece and Indonesia.
The total amount of ferrous scrap exports from the US in August 2007 totaled 1,025,000 mt -- 42,000 mt more than the amount exported in July. Year-to-date (January to August 2007), the total amount of ferrous scrap exports is 7,338,000 mt -- an increase of 14.8 percent when compared to the figure of 6,390,000 mt for the corresponding period of 2006.
In the meantime, scrap substitutes for raw materials such as pig iron are still significantly higher-priced than the local scrap prices. Pig iron prices are at $330 to $340 /mt FOB loading port, and by the time it reaches the final consumer, these prices are higher than $400 /mt levels. Year-to-date (January to August 2007) pig iron imports to the US primarily came from: Brazil, at 2,251,765 mt; Russia, at 638,493 mt; and Ukraine, at 169,339 mt.
In other news, market sources mentioned that Indiana-based Steel Dynamics Inc.'s (SDI) recent purchase of OmniSource will certainly have an impact in the marketplace, especially in the Midwest region. OmniSource has been supplying 10 to 15 percent of SDI's scrap requirements, and it is expected to increase their supplies to SDI, leaving less for other accounts.