The US scrap export market has begun to throttle back as Turkish and Far Eastern producers have slowed their buying activities as of late.
As Turkish producers begin to receive September shipments during the month of Ramadan (August 22 - September 20) it is expected that US suppliers will see a mild slow-down in buying activities from Turkey and Middle East. In conjunction with the regional slow-down in steel demand due to the holiday, the Turkish finished product market outlook is uncertain past the end of Ramadan, which, combined with the weak steel demand in the region prior to Ramadan, has already led to a decline in scrap purchases.
Nevertheless, while the sluggish Turkish finished market is making justification for purchasing scrap at current import rates difficult, as of the fourth week of August, most Turkish producers had yet to fill their September scrap needs. Therefore, at least some moderate purchasing activity is expected to continue throughout the holiday period.
Current scrap rates out of US East Coast ports are heard at $315/mt CFR for HMS I/II 70:30 and at $325/mt CFR for shredded.
Ex-US scrap buying activities from the Far East have also seen some slowdown as Chinese producers have been on the sidelines for the past two-plus weeks due to a lackluster finished product market. This, along with the possibility of tighter government policies affecting specific industries, makes it unclear when US suppliers will see a return of Chinese buyers. Korean producers have also backed out of the import market somewhat after a healthy buying spree consisting of 10+ cargoes for September.
Rates recently heard for ex-US scrap headed to Far Eastern ports are: $357/mt CFR for HMS and $362/mt CFR for shredded bulk shipments, both down about $5/mt from a week ago. In contrast to many of the Far Eastern markets, Taiwan has continued its steady buying trend, with rates for containerized materials heard at $325/mt CFR. Freight rates out of the US Gulf sit at $65/mt and freight is about$35/mt out of US West Coast ports (approximately $5/mt less for 30k+/mt vessels). A $7-$10/mt September freight rate increase for containerized shipments has officially been announced.
US domestic scrap prices are expected to increase by at least $10-$20/ton in September as demand from local mills has increased (to an estimated 70 percent capacity for minimills) and domestic scrap supply remains tight. Although the CARS, or "cash for clunkers", program is over, many vehicles have yet to be scrapped, and the program should result in a minor boost in domestic supply over a 2-3 month period, an industry expert tells SteelOrbis. But it will take some time for those vehicles to reach the shredders as parts dealers take their time to strip useable parts.
So, despite the modest slowdown in export activity, the tightness in US scrap supply and an anticipated increase in domestic rates are making US suppliers reluctant to lower their export rates too significantly.