US scrap exports: Lower volumes, higher prices

The major destinations for US scrap exports, China and Turkey, have remained quiet this month as holidays and high pricing kept transactions sidelined.

With US export prices exceeding $345/mt CFR HMS I/II 80:20 and Turkish finished markets slumping, regional producers continued to look to the European Union as their primary international scrap source. According to some within the US scrap industry, Turkish buying could resume in the US as early as mid-March at US levels. However, this remains speculative; aside from the recent one-off booking, transactions for ex-US material bound for Turkey are not foreseeable in the near future as Turkish producers look to come in at $325-$335/mt CFR. What is known is that Turkish producers will need materials shortly and with a strong domestic market, US prices look to be firm.

China also remained quiet this month, albeit for mostly non-industry related reasons. In observance of the Chinese New Year, purchase transactions to Asian markets slowed considerably. Several market sources anticipate Chinese buying activity to pick up again mid-March at current offer prices of $380-$390/mt CFR shredded (bulk), depending on iron ore prices.

The smaller Asian markets have fared better for US suppliers; containerized shipments had some life, although down in volume when compared to previous months. Prices rose in several Far Eastern markets as much as $50/mt from early February. Current offer prices for ex-US containerized material has been heard at $375-$385/mt CFR HMS I/II 80:20 Taiwan, a $40-$50 increase over early February, and $345-$355/mt CFR HMS I/II 80:20 Korea, a $10-$20 increase over early February.

The US domestic scrap market is expected to be strong through March, as the increasing demand from US auto production will likely maintain high scrap price levels. However, this puts even more strain on the already short supply of prime grade material. The current production rates at flat rolled mills are as high as 85 percent, far above the 55-65 percent long and structural production rates. The US scrap supply is expected to loosen once the cold weather in the US East Coast subsides and allows the collection and flow of scrap to regain momentum and keep up with growing mill production and capacity.