Russian domestic scrap market is stable

Despite the worrying statements issued by market experts at the end of last year, the Russian domestic scrap market has entered 2007 with stable trends in respect to both prices and availability of scrap in the domestic market. Although the Russian domestic scrap market saw a 15 percent increase in scrap consumption year on year in 2006, this growth rate was not so strong as to cause scarcity of this raw material in the market. In 2006, the Russian domestic scrap consumers were able to satisfy their scrap needs due to the redirection of additional volumes away from exports. The high domestic scrap prices throughout most of the year had played their role in diverting scrap flows to the domestic users. In addition, the Russian steelmakers – having learned from last winter's tough experience, when winter frosts hindered domestic scrap collectors in their work, causing a scarcity of scrap in the market - started to build up their stocks as early as the end of October/beginning of November. As a result, by the end of December most of the Russian steelmakers had completed their scrap stocks. Currently, most steel mills are working from their reserves and buy additional scrap only in rare cases. This situation, as well as the relatively mild winter this year, helps to support the current stability of scrap supplies in the domestic market. The scrap prices for their part have not seen much change since the middle of December. The most recent A3 grade scrap prices in the Russian domestic market stood at Ruble 5,500-6,400/mt ($208-242) – the same level as in the middle of December. As the main factors ensuring a stable scrap supply for the market, the favorable weather conditions and full scrap inventories have been responsible for keeping scrap prices steady in Russia for such a long time. Even the reactivation of scrap purchases in the Black Sea region market seems to have had no negative consequences for the Russian domestic scrap prices.