US scrap exports are practically at a standstill.With the Far East's exit from the market, Turkish mills seemingly content to produce steel from CIS billets instead of scrap, even with falling scrap prices, US processors are having difficulty finding homes for their inventory.
Scrap traders haven't really seen a situation like this before. Domestic steel production is reduced at least by 50 percent, the demand from overseas is extremely weak and there is no precedent to use as a blueprint for a successful rebound. "There are not very many options left," as one executive of a US scrap company put it. "The US exporters are in a 'no man's land.'"
Aside from the sparse bookings of smaller shipments from the US, Far East producers are looking to closer neighbors to fill their inventory needs. The little activity that has been heard has been at the level of $210 to $220/mt CFR to Taiwan out of the West Coast. Meanwhile, a slow finished products market looks to keeping the recent Far East powerhouse, China, out of the US export market for the foreseeable future.
With rates out of the US East Coast at $220/mt CFR for shredded, Turkish buyers have been absent from the market for some time now and don't see any reason to resume purchasing unless an advantageous offer is made.
"We are in damage control mode" another processor said. Indeed, the global economic crisis is putting many US yards in a tough spot. Most have opted to use a "hand to mouth" model to cut down on inventory and labor costs. However, damage control will not save everyone; many of those that went strong on capital investments backed on cash flow through the period of rapid rate increases are now highly at risk of acquisition or closure. With the finished market trending down, a steel production forecast in the high 60s to low 80 million tons for 2009, and scrap purchases down 33 percent year-over-year from 2008, a rebound for the scrap market does not seem to be in sight.