US scrap prices follow the worldwide trend

Low scrap inventories and demand from overseas are pushing US scrap prices up. Most US scrap yard inventories are low for the time being. Insiders predict that the domestic pricing trend is headed up in the short term and will go up further next month and possibly into March. Despite all the steel capacity cuts, domestic scrap demand is decent, but not particularly strong. Specifically, scrap demand from hot rolled coil producers has been down, as the mills are struggling to maintain HRC prices above $500 /nt. Therefore, melting has been limited, so not much busheling scrap has been needed. However, the deficit generated by busheling scrap consumption is offset by the exports. The US has been exporting heavily, taking advantage of the weak US dollar and filling in the gaps left by typical scrap exporters like Russia. Since the beginning of the year, we have seen domestic scrap prices climb up. First, the auto bundle prices increased at approximately $30 /long ton. This was a good indicator that scrap prices would rise in turn. Several days later, busheling scrap increased an average of $30 /long ton, and shredded scrap increased by an average of $25 /long ton, while HMS I and II went up at an average of $25 /long ton. Busheling prices now range from $260 -$270 /long ton, while shredded goes for $250 - $260 /long ton. As for exports, overseas demand is strong, and this is also forcing the domestic market prices higher. In addition, freight rates are increasing, resulting in a net increase in the delivered price. The strength of Russian scrap demand is another factor making the US export market stronger. As Russian demand for domestic scrap continuously increases, it is exporting less and less scrap. Therefore, countries that used to purchase scrap from Russia are now turning to the US for imports. Turkey, which consumes a lot of scrap at minimills, mostly for rebars and wire rods, imports the most from the US East Coast. For the US West Coast, Korea, Japan and China have been the major buyers. Pricing for executed contracts of US scrap to Turkey has increased from last month. SteelOrbis is informed that a Turkish mill has concluded a booking of a single cargo of scrap ex-US at $304 /mt CIF Iskenderun level for February shipment. The cargo is composed of 18,000 mt of HMS I/II 80:20 scrap and 7,000 mt of shredded scrap. Other scrap bookings for different Turkish destinations have been fixed over $300 /mt and the prices have been going up daily. The most recent USITC data available shows that during the month of November, 2006, the top recipients of shredded scrap from the US were: Turkey at 110,000 mt, Mexico at 73,000 mt, Taiwan at 34,000 mt and Greece at 33,000 mt. Some other major importers included Egypt and Malaysia, while Korea also imports some. Egypt, which did not import any shredded scrap tonnage from the US in October, imported 31,000 mt in November. However, Peru and Indonesia, which imported 32,000 mt and 31,000 mt respectively in October, did not import any shredded scrap tonnage from the US in November. The top importers of HMS 1 grade scrap from the US in November, 2006 were: Turkey at 211,000 mt, Malaysia at 43,000 mt, and Korea at 25,000 mt. Italy, which did not import any HMS 1 grade scrap tonnage from the US in October, imported 22,000 mt in November. Some other countries that imported HMS 1 grade scrap from the US in November include: Greece, China, Thailand, Taiwan and Egypt. Turkey, which imported 123,000 mt HMS 1 grade scrap from the US in October, saw a big jump in November.