Earlier this week, the correlation between the ex-EU and ex-US scrap prices have been disrupted with the EU scrap prices dropping sharply. This new dynamic is raising questions amongst market players, who think the same disruption is seen between short sea and deep sea scrap quotations.
Market sources report that with a major Marmara-based mill cutting its capacity utilization rate has created a void in the market, giving more leverage to alternative buyers. With the rising number of available scrap cargoes in the EU, and due to the lower collection prices of European scrap yards, Turkish mills are in an advantageous position. Yesterday, collection prices of EU-based export yards were in the range of €240-245/mt DAP. Today, a German subcollector reported that bids received from EU-based export yards have declined to €235-240/mt DAP. “We believe we have already closed the year. Our initial expectation was for a revival at the end of the year, but now we do not believe we will see that,” the source commented. Automotive and construction sectors in the EU are struggling and demand for steel is failing to recover in the EU. Another Germany-based market player said that “I think local scrap prices will decline further by €10/mt next week, the total fall in September will be €20/mt. On the other side, scrap flow is on the low side. If things go like this, I believe in 8-10 weeks, there may be a shortage on scrap.” Meanwhile, dock prices on the US side have also been reduced by the exporters, reportedly by $10/mt. Flow to US-based yards, particularly for the HMS scrap, are slower than usual as US mills are buying the material with more attractive prices due to their rebar orders.
There are rumors of an ex-Poland scrap deal done by a Marmara-based producer on September 10, for HMS I/II 80:20 scrap at $337/mt CFR Turkey. While the deal was done, this price was not confirmed but is believed to be very close to this level, maybe $0.5-1/mt of a difference can be seen. Since this deal was older than the ex-Netherlands booking SteelOrbis reported yesterday, reference prices for ex-Baltic HMS I/II 80:20 scrap has remained at $331-333/mt CFR.
“China became an alternative once again due to their lower billet offers, protectionism all around the world has been and is still a negative impact on steel market. Wars and political turmoil are not giving a breather to mills. We do not expect things to improve for the rest of this year,” a source from a major mill commented today. All Turkish mills SteelOrbis talked this week signal the same thing, lack of steel demand in the local market or in exports, saying even with the tonnages they managed to sell there is no profit to be found. Another source from a Turkish mill reminded that a fall in scrap segment is not necessarily helpful to producers, “When scrap price falls, we are expected to reduce our rebar quotations too”. Additionally, a source on the scrap seller segment mentioned that there are stressed sellers in the market with high inventory levels but when those cargoes are sold, suppliers would start showing resistance to lower price levels. “This may cause prices to move back up to $330-335/mt CFR range,” the player commented.
Under the current conditions, the deep sea benchmark HMS I/II 80:20 scrap prices in CFR terms have moved down by 2.42 percent week on week. The prices are now 3.35 percent lower month on month in the deep sea segment, with quotations being in the range of $327-337/mt CFR.
US ferrous scrap prices for September delivery in the Ohio Valley and the Northeast settled sideways for most grades, though a $20/gt discount was noted for prime busheling grades following three straight months of overall sideways settlements.
October US scrap pricing is seen mixed this week following the recent steady to lower settles posted in the September scrap market, insiders told SteelOrbis this week. While one group of respondents to a SteelOrbis survey sees October scrap potentially higher as a result of increased long steel production in the late-3rd and 4th quarters -which could require more scrap- the other camp points to continued low US scrap demand, plentiful mill inventories (especially busheling) and an expectation for low US East Coast export requirements next month as a key reason for a lower October scrap pricing expectation.
During September scrap buy-cycle negotiations, following three months of steady pricing, US Midwest prime busheling scrap in the Ohio Valley, settled $20/gt lower at $415-440/gt ($423-448/mt), while shredded scrap settled flat to August at $375-380/gt ($381-387/mt). Ohio Valley P&S and HMS grades traded flat for a fourth month at $361-371/gt ($367-377/mt) and $325-345/gt ($330-387/mt), respectively, SteelOrbis monthly scrap data shows.
The Italian scrap market has remained quiet in the past week. Steel producers have remained in wait-and-see mode, and they are not willing to buy scrap for the moment. The few agreements that have materialized on the market are mainly long-term, with unchanged prices as preferred choice. In some cases, a decline of between €5-7/mt has been registered, while in other cases – especially for long-term suppliers or higher scrap quality purchases – slight upward corrections have also been granted.
In the local scrap market in Spain, on the other hand, prices are lower than in Italy and the market expects further declines in the coming weeks.
Some mills in Poland have started to publish their scrap purchase prices at the beginning of September round of purchases, lowering them by around €15/mt on average for all scrap qualities compared to August prices. If in August equivalent HMS I scrap prices from mills in Poland were on average at €265/mt delivered, now scrap purchase prices for the same quality are being reported at around €250/mt delivered.
In the meantime, export yards are facing a quite critical scenario. HMS I equivalent scrap prices at export yards have been reported at €252-254/mt DAP, down by €5-7/mt week on week.
Negotiations for the September round of scrap purchases in Germany have started this week. In general, scrap demand remains on the low side, and mills have decided to lower their scrap purchase prices by €10/mt on average amid sluggish market conditions, especially in the finished steel segment. Market players are still worried about the consequences of an incident that happened recently at a plant in the north of Germany.
The leading Japanese EAF-based steel producer Tokyo Steel has announced upward adjustments for its domestic scrap prices in two regions, up by JPY 500/mt. Since April 9, this is the first upward price revision done by the Japanese steelmaker. As mentioned in SteelOrbis’ previous reports, the total cut in Tokyo Steel’s domestic scrap procurement prices has reached $24-30/mt since the downtrend started on April 9.
Despite the price change, the general range for H2 grade scrap price has remained stable at the range of JPY 37,000-40,500/mt ($250-273/mt) depending on the mill.
Taiwan’s import scrap market has remained soft this week with further decreases seen on the US side, despite the firm stance of Japanese sellers. As no improvement on rebar sales have been observed this week, Taiwanese producers continue to exert pressure on import scrap quotations.
Over the past week, the offer prices for ex-US HMS I/II (80:20) scrap in containers have softened further by $3-5/mt to $300-305/mt CFR. Offered prices for Japanese H1/2 (50:50) scrap bulk cargoes have remained stable at $315-320/mt CFR.
Over the past week, Vietnam’s import scrap market has softened with offer prices moving down. Steel demand in Vietnam remains to be stagnated, causing Vietnamese mills to maintain a cautious stance against scrap imports.
The general range of ex-Japan H2 scrap offers to Vietnam has declined on the upper end over the past week from $320-335/mt CFR to $320-330/mt CFR. Ex-US scrap offers for this grade are now at around $340-350/mt CFR Vietnam, softening a bit on the lower end.
Meanwhile, the Tokyo Bay FAS-based prices for H2 grade scrap have increased by another JPY 500/mt week on week to JPY 40,500/mt ($274/mt), up by $4/mt. The FOB-based export price remains at JPY 41,500/mt ($280/mt) for the grade in question, up by $3/mt week on week.