While the expectations of US domestic decreases in scrap prices looms, international markets are taking a wait-and-see approach.
Turkish producers have yet to return to the US scrap market and are perceived to be waiting to see how far the US domestic prices will fall before establishing their position. As previously reported by SteelOrbis, offer prices for ex-US scrap to Turkey have been heard at $395/mt CFR HMS I/II 80:20. This price level is considered to be high by most Turkish producers, given the expected $20-$40/lt decrease on US domestic material in October. Freight rates have dropped for material off US Eastern ports to Turkey by as much as $4/mt, however, market sources state that freight rates should reverse trend and head up as the grain season gets into full swing.
Far Eastern producers are following suit, with limited transactions from US based suppliers. Recent prices for ex-US containerized HMS I/II 80:20 were heard as high as $365/mt CFR Taiwan, however, but they have fallen $5-$10/mt over the past few days, and with last week's typhoon, mills are expected to slow activity in the near term. Also, the enforced mill closures due to government action on electrical usage are not helping the situation. The rapid increase in BAF mills over the years in China has been well documented, and as a result, has led to a saturated industry, causing fierce domestic competition and lower capacity rates. The forced closures have many wondering where the slack in capacity will be picked up. Will it be by the remaining domestic mills or will it be shipped out to surrounding markets like Taiwan and Korea?
As stated earlier, US domestic scrap prices are expected to fall as much as $40/lt and possibly more for prime grades. According to one US supplier, if the price decrease gets into the $50/lt range, you will see US scrap suppliers hold for greener pastures.