Low demand causes German mills to cut local scrap prices further

Over the past month, prices in the local German scrap market have decreased further in line with the international market. Scrap export prices had exerted pressure on the local market, and German mills took the opportunity to lower their procurement quotations as they were also cutting back their production rates. Currently, Germany is gradually entering its holiday season. This will mean lower scrap flow to yards, but also lower demand from German producers. “We are already observing a 40-60 percent fall in scrap flow if we compare it with a normal month,” a sub-collector in German stated. Some rolling mills in Germany have decided to close for the holidays earlier than planned because of the Russian gas issue, as there are still concerns about this problem in the EU. A major producer in the region stated that the demand for steel is also not great, and so both demand and supply are slowing down.

“Last week, European scrap suppliers would have been more willing to sell because of the euro-dollar exchange rate, but today the situation has changed,” a contact commented, adding, “I do not think that players would like to tie their money up by buying scrap since they would also need to deplete those stocks to spin the wheel.” Also, the water levels in the EU are “historically and critically low”, while vessels prefer to carry coal instead of scrap due to more attractive freight rates. This results in higher domestic freight costs in Germany in general. For a while now, transportation by truck has been considered unfavourable in Germany and is more expensive than water-based transportation since Germany is struggling to find enough truck drivers. As a result, market players believe that the future outlook of local scrap prices in Germany is negative. While some players state that there may be an equilibrium in August, some believe prices have room for a €50/mt decline during that month.

According to the latest German data, in the first 20 days of July local scrap prices moved down by €31.2-46.6/mt month on month. Additionally, the year-on-year increase is now in the range of €88-144.5/mt. Prices are average prices for domestic transactions across Germany in the first 20 days of the given month. The prices are provided by Bundesvereinigung Deutscher Stahlrecycling-und Entsorgungsunternehmen e.V. (BDSV).

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