US scrap exports have seen up-ticks in prices and in tonnage during the early weeks of 2009.
One of the reasons for the up-ticks is increased demand from the Asian markets. Scrap supplies are limited due to the seasonally slow scrap collection activity, and more Asian producers are looking to stock up on inventory before the Chinese New Year. Scrap prices coming out of the US Gulf are hovering at around $230/mt FOB with $30 /mt to $40 /mt freight. Exporters also indicate that more orders from Asia have been booked in recent weeks than were booked in the last two months of 2008. On a delivered basis, US Gulf to China scrap prices have been ranging from $275 to $285/mt CFR for HMS I/II 80:20, while US Gulf offers to Vietnam of the same material range from $285 to $295/mt CFR for HMS I/II 80:20.
However, the main reason for the increased activity in the US scrap export market is that Turkey has started restocking their inventories, which are currently at low levels. Export scrap prices out of the US East Coast have remained unchanged since last week, though these numbers reflect a slight increase since the beginning of the year. Bookings to Turkey are currently at the level of $285/mt CFR for HMS I/II 80:20, $290/mt CFR for shredded, and $295/mt CFR for P&S. It is estimated that Turkish mills have increased their scrap usage to about 60 to 65 percent of their normal consumption level, and this rate is expected to increase further in the coming months.
The consensus within the export market is that we will see the normal sluggish prices as winter winds down and a jump up in spring and summer. However, in these unstable times, industry leaders reiterate the warning that things could change at a moment's notice.
Domestic prices have remained the same since the slight increase that was observed in the beginning of January. Last week, US East Coast domestic prices were seen at about $270 to $280/lt for busheling, $260 to $270/lt for shredded, and $210 to $220/lt for HMS I.
A good portion of the wait-and-see stance in the market stems from the uncertainty as to what the new administration will bring. Even with President-elect Obama's stimulus plan looking like a sure thing, it is unclear when we will see the full benefits. In theory, the stimulus package will include significant funding for infrastructure and construction projects which should keep domestic steel producers busy and increase their production and raw materials purchases. However, some feel that that the market won't see any real improvement in steel consumption until 2010, with only little trickles coming through in the 2nd and 3rd quarters of 2009. Also, the federal Troubled Assets Relief Program (TARP) should eventually result in some improvements in bank lending and in easing the credit crisis.
Even so, some sectors of steel production will benefit more than others. Construction-related products such as rebar and structurals will see more demand than housing-related products such as flat rolled coils. The good thing for the scrap market, though, is that most steel used in construction in the US is made from scrap.