Local German scrap prices fall sharply in May negotiations, possible rises in June

As anticipated in SteelOrbis’ report last week, price reductions in the local German scrap market have been significant, coming as a surprise to most local market players. Due to the fact that low material availability is still an issue, such declines in scrap prices probably will not last long, SteelOrbis believes. Players in the market think that next month’s round of purchases will lead to a partial compensation for these declines.

Good scrap stocks at mills’ yards were the main reason for the declines, together with low demand. In northern Germany, price cuts have been around €40/mt. In the east, the declines have been sharper than in other parts of the country. In fact, during April’s negotiations, mills in this region closed contracts at unchanged prices very early in the month, avoiding the €10/mt downward adjustment experienced in other regions. Consequently, this month’s scrap purchases have been concluded at levels €40-45/mt lower. In western Germany, price reductions have been reported at around €25/mt, whereas in southwest Germany prices were down €35-40/mt. Finally, in the southern part of the country, scrap purchase prices from mills have been reported at minus €30/mt.

Other European countries have experienced similar reductions in scrap purchase prices from mills - in France, for instance, scrap prices fell by €40/mt, whereas in Luxembourg and Austria they declined by €35/mt and €30/mt, respectively.

According to a local scrap dealer in Germany, this was a “strange month” as the declines have been too sharp and there was very low demand from mills. “We sold 50 percent of our previous volumes this month. June is going to be very uncertain,” he said. Other sources, however, believe that there is room for slight rises next month.

For the moment, the export market and local market prices are more or less balanced, offering valuable alternatives for scrap subcollectors. The latter, however, do not seem inclined to sell, considering bids too low and waiting for better market conditions. In this scenario, water levels in some segments of the Rhine have not been this low since the 80s, leading the Waterways Shipping Authority to restrict shipping, most probably causing freight rates to rise in the coming period.

Nonetheless, these better conditions will probably be long in coming. As Reuters reported, in fact, the German economy is expected to stagnate this year, with previous expectations of a slight growth failing to materialize. Moreover, the new government is not giving the positive boost that the country was expecting, and, in spite of the €500 billion special fund for infrastructure investments approved in March, its impact will not be seen before next year.

According to the latest data provided by the Bundesvereinigung Deutscher Stahlrecycling-und Entsorgungsunternehmen e.V, in the first 20 days of May scrap prices moved down by €24.4-36.4/mt month on month. On year-on-year basis, scrap prices indicated declines ranging from €34.5/mt to €62.7/mt.

The prices are provided by Bundesvereinigung Deutscher Stahlrecycling-und Entsorgungsunternehmen e.V. and are average prices for domestic transactions across Germany in the first 20 days of the given month.

Specifications:

E1 - Old steel scrap: thickness ≥ 4 mm, maximum dimensions 1,5 m x 0,5 m x 0,5 m
E2/E8 - New steel scrap: maximum dimensions 1,5 m x 0,5 m x 0,5 m
E3 - Heavy old steel scrap: thickness ≥ 6 mm, maximum dimensions 1,5 m x 0,5 m x 0,5 m
E40 - Shredded scrap: excluding incinerator steel scrap and collection scrap; density ≥ 1,1 mt/m3, Fe ≥ 92%
E5M - Turnings: excluding iron and automatic steel turnings