April was another soft month for the US scrap market, with both busheling and shredded prices retreating a whopping $50 to $60 /long ton during the course of the month. Earlier in April, the decrease was observed at about $30-40 /long ton; however, with the auto bundle auction at the end of the month, it was obvious that prices have actually softened more dramatically than first anticipated.
The main factors driving down US scrap prices are the adequate inventories and the soft export market. When scrap prices rose dramatically in January and February, so did scrap collections, and as soon as the colder months were behind us, a record amount of scrap accumulated at scrap yards. In the meantime, US mills were struggling with less than stellar demand for end products, particularly for flat rolled products, and therefore reduced their scrap buying. Also, the quantity of US scrap purchased by the main scrap buyer from the US, Turkey, was dramatically reduced in April, which is the final reason why demand has become soft and prices had to come down.
Current domestic busheling scrap stands at $275 - 285 /long ton, with shredded scrap going for $250- 260 /long ton. Both HMS 1 & 2 decreased approximately $40 /long ton in April. HMS I now ranges from $225-235 /long ton.
While scrap prices went down significantly during March and April, one should consider that US scrap prices went up dramatically at an average of $135 /long ton in January and February. Most insiders were not surprised to see the prices come down again this month, though they are optimistic about the current market. US scrap prices were considered to be too high in the first quarter, which led to the current price correction. And despite the recent price drop, market sources told SteelOrbis that the current market is still doing much better than it was last year. Insiders believe that the current US scrap prices are close to bottoming out, as prices are not expected to see another drop in May and are expected to hold steady next month.
While the US domestic prices came down in March and April, export prices were heading down as well. Export prices have been reported at about $370 /mt CFR in March, their highest level. By mid April, prices declined to about $337 /mt CFR level and recently bounced back up to $344-$345 /mt CFR level for HMS I/II 80:20 cargo. Freight rates are between $50-55 /mt from US East Coast to Turkey.
Turkey, Greece and Egypt are the main countries that import scrap from the US East Coast. Since the Turkish mills have concluded only a few purchases for June, it is expected that Turkish mills will return to the market in one or two weeks' time and conclude bookings for June loadings.
The most recent USITC data available show that during the month of February 2007, the top recipients of shredded scrap from the US were: Turkey at 215,000 mt, Thailand at 90,000 mt, India at 76,000 mt, Mexico at 45,000 mt, and Taiwan at 41,000 mt. Malaysia, Italy, and Korea were also importers of shredded scrap from the US in February.
The top importers of HMS 1 grade scrap from the US in February 2007, were: Turkey at 284,000 mt, Malaysia at 56,000 mt, and Korea at 38,000 mt. Some other countries which imported HMS 1 grade scrap from the US in February include: Thailand, Taiwan, Bangladesh, India and China.
The total amount of ferrous scrap exports from the US in February totaled 1,196,000 mt, 363,000 mt more than the amount exported in January, and 413,000 mt more when compared to the figure of 783,000 mt in February 2006. Year to date (January to February 2007) total amount of ferrous scrap exports was 2,028,000 mt, a 48.3 percent increase when compared to the figure of 1,368,000 mt for the corresponding period of 2006.