In general, demand for steel products slowed down in August, just like demand for raw materials like scrap and pig iron. Despite the significant price hikes seen in July, US scrap prices have softened in August, mainly due to the weakening demand from the export market.
In the first week of August, both US prime grade scrap and cut grade scrap prices declined. The price reduction varies significantly from one region to another. On average, however, busheling scrap prices, after five consecutive months of price hikes, have come down by $50 /lt, and by as much as $75 /lt in some regions. Shredded scrap prices have decreased by an average of $45 /lt, whereas HMS I has dropped by an average of $60 /lt, and by up to $100 /lt in some regions.
In the Midwest, since our last report a month ago, busheling scrap prices have decreased by around $20 /lt, and prices are now in the range of $850 to $860 /lt. Shredded scrap is currently sold for $550 to $560 /lt, which reflects a decrease of approximately $40 /lt since last week. As for HMS I, current prices range from $440 to $450 /lt.
Scrap prices have come down primarily because of the softening demand from the export market, which has had an especially big impact on the East Coast scrap business. Since the end of June there has been very little booking activity from Turkey. Last week, SteelOrbis was informed that a Turkish mill concluded a booking for 40,000 mt of scrap ex-US at $560/mt CFR Marmara for prompt shipment. Many European mills are on summer vacation, and this has negatively impacted foreign scrap demand as well. With the weak export demand, scrap prices have fallen significantly. For this reason, market sources expect US scrap prices to continue trending downward in September as well.
In addition to the weak export market, most pig iron offers have decreased to the mid $700s /mt FOB from Southern Brazil. The decrease in pig iron prices has contributed to the decrease in prime grade scrap prices, as pig iron is a substitute for prime grade scrap to make high quality steel. Buyers generally choose between pig iron and prime grade scrap based on which one has the more favorable pricing and, therefore, prime grade scrap prices are expected to soften in step with pig iron prices.
Raw material demand is softening from the Far East, India, Vietnam and China, and this is a big part of the reason why pig iron prices are going down. The lack of demand makes buyers hesitate to purchase now, as it is expected that prices will come down further next month, possibly to the tune of $30-40 /mt.
USITC data show that the top recipients of shredded scrap from the US in May were: Taiwan, at 163,000 mt; Malaysia, at 153,000 mt; Thailand, at 136,000 mt; South Korea, at 119,000 mt; Turkey, at 105,000 mt; and Mexico, at 101,000 mt. India, China, Japan, Greece, Peru and Colombia also imported some tonnage of shredded scrap from the US during the period.
As regards HMS I grade scrap, the top recipients from the US in May were: Turkey, at 227,000 mt; South Korea, at 193,000 mt; and Taiwan, at 83,000 mt. Some other countries which imported HMS I grade scrap from the US in May include Thailand, Malaysia, Egypt and Greece.
The total amount of ferrous scrap exports from the US in May was 1,919,000 mt, which shows an increase of 649,000 mt when compared to the figure of 1,270,000 mt in April.
The total amount of pig iron imported to the US year to date (January to April, 2008) was 1,147,192 mt. During the period, the US imported pig iron mostly from Brazil, at 1,005,115 mt. Besides Brazil, some pig iron was also imported from Russia, UK, and South Africa during this period. Russia, normally a large supplier of pig iron to the US, noticeably reduced its export quantities in the first four months of 2008.