January turned out to be a disappointment for steelmakers around the world. They did not see the up-tick in sales which they were hoping for after the series of long and steep price declines that took place in the fourth quarter.
January was not the turning point for steel prices or demand, and steelmakers kept their production at significantly reduced rates, making only small raw materials purchases. As of early February, the light at the end of the tunnel has not been observed and scrap demand remains somewhat pitiful. The continued weak demand may herald a reversal of the slightly positive scrap price trend seen in January, even though the supply of cut grades and industrial scrap remains low.
The current state of US scrap exports can be viewed as a tale of two coasts when looking at the respective demand from both regions, which seem to tell two different stories.
Out of the East Coast, scrap export demand and prices have weakened after a slight increase in January. The Turkish mills are not looking to add to their existing scrap inventories due to a widely felt weakness in the finished product markets. One of Turkey's main markets for rebars, Dubai, has also slowed its growth as many construction projects have been put on hold. The supply for scrap is also down as less scrap is collected due to cold weather conditions. But due to low demand outstripping low supply, prices have decreased by $10 /mt since two weeks ago. New US East Coast scrap export offers to Turkey are seen at approximately $275/mt CFR Turkey for HMS I/II 80:20 as reported a few days ago.
On the contrary, demand out of the West coast has fared much better as Southeast Asian mills continue their import scrap purchases. With Vietnam, Taiwan and Thailand back in the market, and China buying more than usual, export scrap prices from the US West Coast have been heard to be holding steady at the $280/mt CFR level for HMS I/II 80:20. It is reported that China's consumption has quadrupled over the past two months in the face of their own planned stimulus projects. However, many industry sources expect that this increased demand may be not sustained.
With the current world economic condition, the inauguration of a new US administration, and historic initiatives on the table, many within the industry remain undecided as to where the raw materials markets are going. Even though the outlook for scrap is still soft right now, the markets can swing heavily on a moment's notice -- just as they did in early 2008.