Although US scrap prices have already registered a total decrease of approximately $65 /lt (long ton) since the beginning of February, the weak scrap demand and dismal steel market are expected to force scrap prices down further in April.
There does not seem to be any improvement on the horizon for US scrap. The finished product market continues to weaken, and the scrap export market has also slowed down, resulting in an overall lack of scrap sales and demand.
The finished product market is so weak that, even with the low raw material costs, steelmakers are having a hard time staying out of the red. Nucor Corporation, North America's largest recycler, recently released its Q1 2009 earnings guidance, warning shareholders of a net loss for the first quarter, the company's first-ever, due to the lack of steel demand and high inventories. The company does expect to see the benefit of the lower scrap prices by the end of the second quarter, although it says that any improvement in Q2 results will be dependent on an increase in steel demand. Nucor estimates that its first quarter capacity utilization will be at only 43 percent. With US mills producing at such low levels, there is not a very strong likelihood that scrap will recover until at least the end of the second quarter, at the soonest. Market insiders expect US scrap prices will go down approximately $20 /lt in April.
Currently, US domestic East Coast busheling scrap prices range from $200 to $210 /lt. Shredded scrap is sold for $190 to $200 /lt, while HMS I prices are at the level of $165 to $175 /lt.
On the export side, due to the global production cutback and softening finished product market, foreign scrap demand is also weakening. The latest USITC data show that the total amount of ferrous scrap exports from the US in January 2009 was 876,000 mt, representing a decrease of 348,000 mt when compared to the figure of 1,224,000 mt in December 2008.
The top recipients of shredded scrap from the US in January 2009 were: China, at 115,000 mt; Turkey, at 53,000 mt; Italy, at 48,000 mt; India, at 43,000 mt; and Greece, at 30,000 mt. Some other countries which imported shredded scrap from the US in January include: Mexico, Egypt and Taiwan.
For HMS I grade scrap, the top recipients of US exports in January 2009 were: Turkey, at 116,000 mt; China, at 79,000 mt; and Egypt, at 64,000 mt. South Korea, Taiwan, Pakistan and India also imported some tonnage of HMS I grade scrap from the US during the period.
Export stats for China saw a large jump in January; however, scrap traders report that export activity to China has diminished in recent months.