US scrap prices drop further along with sluggish economy

US scrap prices have registered another serious decline since our last scrap report issued September 8; in the beginning of October, busheling prices came down by approximately $255 /long ton (lt), shredded scrap prices dropped by around $145 /lt, and HMS I prices declined by about $80 /lt.

On the East Coast, busheling scrap is now in the range of $320 to $330 /lt. Shredded scrap is currently sold for $245 to $255 /lt, while HMS I prices range from $210 to $220 /lt. With the weak demand both domestically and internationally, market sources mention that another slight $10 to $20 /lt price decrease this month is possible.

Although the gap between industrial scrap and cut scrap prices has been rapidly narrowing, the current price difference between busheling and shredded scrap is at around $75 /lt, whereas the price difference was around $20 /lt a year ago.

The direction of the US scrap market is uncertain, even in the short-run, as demand is poor from the finished product markets, the economy is suffering, all steel consumers are in “panic mode” and the export market is quiet. Almost everyone in the industry is holding off from purchasing during these uncertain times.

Export demand for scrap continues to soften, as Turkey, the leading US scrap importer, has not been buying from the US recently because of the past Ramadan holiday and its weak domestic steel market as well as the weakness in the steel market of its main customer, the Middle East region.

The US sellers are quite motivated, however, and they are believed to be accepting deals at about $300 /mt CFR Turkish ports for basic cargoes if the buyers are willing to step up. The export numbers were at about $410 /mt CFR Turkey in our last report a month ago.

The total amount of ferrous scrap exports from the US in July (the latest month for which data is available) was 1,772,000 mt, representing a decrease of 78,000 mt when compared to the figure of 1,850,000 mt in June. However, all in all, the US had very strong scrap exports this year, at least in the first half -- Year-to-date through July 2008, the total amount of US scrap exports was 10,023,000 mt, which reflects an increase of 58.8 percent when compared to the figure of 6,313,000 mt in the corresponding period in 2007.

USITC data show that the top recipients of shredded scrap from the US in July were: Malaysia, at 207,000 mt; Turkey, at 145,000 mt; Thailand, at 125,000 mt; Taiwan, at 121,000 mt; and South Korea, at 95,000 mt. Mexico, India, Egypt, Japan and Indonesia also imported some tonnage of shredded scrap from the US during the period.

As regards HMS I grade scrap, the top recipients from the US in July were: Turkey, at 151,000 mt; Taiwan, at 104,000 mt; South Korea, at 72,000 mt; Egypt, at 62,000 mt; and Thailand, at 53,000 mt. Some other countries which imported HMS I grade scrap from the US in July include Spain, Indonesia, Malaysia, and Mexico.