Will upward price trend continue for US scrap market?

After bottoming out in November, US scrap prices bounced back up in December, with busheling and shredded scrap prices rising approximately $115 /lt, and HMS I increasing approximately $90 /lt from their price levels at the beginning of December.

Market insiders believe scrap prices rebounded because they were settled at levels that were too low in relation to export prices. Furthermore, US mills typically stock up on scrap in December, as scrap collection becomes more difficult in the following winter months. Also, due to automotive production cutbacks, auto scrap generation has been scarce. Nevertheless, with the financial crisis and weak finished products market, there was still very little of scrap buying activity taking place in the first weeks of December.

On the US East Coast, current busheling scrap prices now range from $255 to $265 /lt. Shredded scrap is sold for $240 to $250 /lt, while HMS I prices now range from $190 to $200 /lt. In January, market sources expect that scrap prices won’t increase in a big way, as the demand is still relatively weak. Even if the end product demand picks up in January, it will be a while until the steel producers adjust their production upwards again.

On the export side, after scrap prices demonstrated a considerable up-tick in the beginning of November, the export market has slowed down since mid-November, and suppliers are trying to maintain the pricing level at around $260 /mt CFR, though in some cases prices have dipped below that level. Last week, a Turkish producer concluded two ex-US scrap deals at the following prices: $240 to $245/mt CFR for HMS I/II 80:20; $245 to $250/mt CFR for shredded scrap and $250 to $255/mt CFR for P&S scrap. Currently, the Turkish mills are in the middle of the week-long Bayram holiday, and therefore, no buying activity is expected this week.

Year-to-date through September 2008, the total amount of US scrap exports was 12,989,000 mt, which reflects an increase of 60.9 percent when compared to the figure of 8,071,000 mt in the corresponding period in 2007. However, with the global financial crisis and economic downturn, the latest USITC data show that the total amount of ferrous scrap exports from the US in September was 1,131,000 mt, representing a decrease of 704,000 mt when compared to the figure of 1,835,000 mt in August.

The top recipients of shredded scrap from the US in September were: Turkey, at 368,000 mt; India, at 85,000 mt; Malaysia, at 51,000 mt; China, at 46,000 mt; and Mexico, at 32,000 mt. Italy, Thailand and South Korea also imported some tonnage of shredded scrap from the US during the period. Egypt, which imported 107,000 mt in August, did not import any tonnage of shredded scrap in September.

As for HMS I grade scrap, the top recipients from the US in September were: Turkey, at 106,000 mt; South Korea, at 59,000 mt; China, at 37,000 mt; and Taiwan, at 20,000 mt. Some other countries which imported HMS I grade scrap from the US in September include Indonesia, Canada, Bangladesh, Malaysia and India.