Scrap prices in the US have soared in the past month, and while the January buy-cycle has yet to conclude, many believe that prices will settle at $80-$120/gt above December settled levels. Yet now that China’s loosened regulations mean Chinese mills can source scrap from offshore sources, some question whether this will cause US scrap prices to skyrocket.
There might be historical precedent; China was a major force in the US export scrap market throughout 2003 and 2004. In fact, their need was so vast and their quest was so focused -- that Chinese mills were booking cargoes off both the East and West coast of the United States. One SteelOrbis source noted that domestic steel producers had no choice but to compete with China for material, and, as a result, US scrap prices soared.
For example, in March 2004, The New York Times reported that in 2003, China became the first country to import more than $1 billion in scrap from the US Further, the news outlet reported US scrap prices spiked by approximately 400% between 2001 and mid-2004.
“China bought everything that wasn’t nailed down,” a source said. “Not only did this cause scrap prices to go up, domestic mills kept raising [finished steel] prices so they could pass the increase onto customers. China didn’t seem to care what the price was as long as they could book cargoes and considering the fact that labor in that country was so cheap, [Chinese mills] didn’t mind paying a premium.”
Other sources say they believe that once China starts to book scrap cargoes from the US, the nation will experience a “trickle down effect” from those purchases.
“It may take several months to unfold, depending on how much they start to buy,” another source said. “It also depends on how much higher Turkey is willing to go in terms of their booking price. For now, we’re all keeping tabs on it. Until when and if China starts booking, all of this is speculation.”