Softening demand from both domestic and export customers has once again caused US scrap prices to fall significantly, though the overall drop happened so quickly that there is a good chance that prices may have slid too much, and will need to make an upward correction in the near future.
Scrap demand continues to be sluggish; however the once-quiet Turkish customers have woken up, having booked several cargoes in recent weeks. More export activity has been observed at the dock within the last week.
The global financial crises and the sluggish US economy continue to be the main culprits behind why scrap buyers have refrained from making purchases. Steel mills are now adjusting their production seriously; some are shutting down indefinitely, while others are extending their scheduled maintenance in order to slash output to equalize with the sagging demand. Unfortunately, these corrective actions in the steel business tend to crash scrap and other raw material demand in return. Since more and more of the steel community are close observers of scrap prices, any decrease in scrap price builds expectations for further steel price decreases, and so spins a vicious cycle. As the decreases in steel prices and scrap prices fed each other, we witnessed steel and scrap prices collapse in the last three months.
When compared to SteelOrbis' last scrap report on October 24, 2008, busheling prices have fallen by approximately $60 /long ton (lt), while shredded scrap prices have decreased by $55 /lt, and HMS I prices have declined by about $25 /lt. From the peak in July 2008, busheling, shredded and HMS I prices have dropped $730 /lt, $465 /lt and $430 /lt respectively.
As for current market prices, on the US East Coast, busheling scrap now ranges from $140 to $150 /lt. Shredded scrap is sold for $125 to $135 /lt, while HMS I prices now range from $100 to $110 /lt.
Despite these huge drops, the good news is that market sources believe scrap prices have finally hit bottom. With the current low pricing level, scrap dealers are not willing to sell anymore, mainly because most are losing money and they are now hoping to reach more profitable levels, above $200 /lt. In addition, the low scrap prices started attracting some export opportunities, which should turn the pricing trend upward.
Over two weeks ago, Turkey resumed scrap purchases when prices hit bottom, falling within the range of $130 /mt to $150 /mt CFR Turkey. And over one week ago, pricing levels of ex-deep sea HMS I/II 80:20 grade scrap were being offered in the range of $160 /mt to $170 /mt CFR Turkey. Despite the recent up-tick, however, prices have come down approximately $250 /mt since the beginning of September.
The latest USITC data show that the total amount of ferrous scrap exports from the US in August was 1,835,000 mt, representing an increase of 63,000 mt when compared to the figure of 1,772,000 mt in July. Year-to-date through August 2008, the total amount of US scrap exports was 11,858,000 mt, which reflects an increase of 61.6 percent when compared to the figure of 7,338,000 mt in the corresponding period in 2007. However, with the globe in the midst of financial crises, export statistics are expected to show a rapid decrease in September and October 2008.
The top recipients of shredded scrap from the US in August were: Turkey, at 258,000 mt; Malaysia, at 176,000 mt; India, at 124,000 mt; Egypt, at 107,000 mt; and South Korea, at 88,000 mt. Thailand, Japan, Taiwan, Mexico, Peru and China also imported some tonnage of shredded scrap from the US during the period.
As for HMS I grade scrap, the top recipients from the US in August were: Turkey, at 135,000 mt; South Korea, at 89,000 mt; Taiwan, at 59,000 mt; Malaysia, at 46,000 mt; and Egypt, at 40,000 mt. Some other countries which imported HMS I grade scrap from the US in August include Japan, Thailand, and Canada.