The activity seen in the US export scrap market in early April has given some suppliers reason to believe that there is a light at the end of tunnel. Over the past couple weeks, scrap export activity out of all US coasts has seen a slight up-tick as Turkish and Far Eastern steel producers look to imports to replenish their scrap inventories.
The Turkish market has been active in recent weeks relative to most of the first quarter of 2009, when Turkish producers were absent from the international scrap market completely. However, the recent rise in Turkish bookings may be temporary. Industry sources expect a quick exit by Turkish producers by end of April, leading to weak demand in May, before returning to the market in June. It is reported that the most recent bookings to Turkey from the US East Coast have been concluded around the level of $240 /mt CFR.
With the exception of China, demand out of the Far East has remained stable as of late with Vietnam, Korea, and Thailand keeping suppliers busy. Rates out of the West Coast to the aforementioned regions currently range from $225 to $235 /mt CFR. This is up about $15 /mt from a month ago. In response to the steady demand, suppliers are pushing for a $25 to $30/mt rate increase. However, with no traction as of yet, this increase may go by the wayside.
Industry sources tell SteelOrbis that beginning May 1, shipments out of Texas to India will see an increase in freight rates by $5 to $10/mt for containers, resulting in higher scrap prices. Current HMS I/II 80:20 rates out of the Gulf are heard at $245 to $255 /mt CFR India.
Despite the slight upward trend that US export scrap prices have seen in early April, US domestic scrap prices have seen a $10 to $30/long ton decrease in April, depending on the region. 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. As a result, many suppliers who normally remain in the domestic supply chain are venturing out into the more lucrative export market.
With a good chance that the US scrap market will start to recover by the end of 2009, there is a strong possibility we will see high $200 to low $300/mt CFR shredded exports by the end of this year, one industry source told SteelOrbis, going on to say that a sustained turn in the scrap market will be on the back of the firming of the downstream industries. However, given the uncertainty of the world economy and the possibility of an extended lack of demand in the finished market (early predictions look to a return of finished product demand in Q3 at the soonest), many remain cautious in forecasting beyond the foreseeable future.