With a combination of weak scrap demand, softening finished product sales and a stalling economy, US scrap prices continue to trend downward and are expected to drop approximately $10 to $20 /long ton (lt) in April, depending on the region.
Scrap supply is low in the market as there is less scrap being generated. However, the warmer spring weather may improve the supply situation to some degree in the coming months, while domestic scrap demand will likely remain weak.
There are a very limited number of scrap transactions being concluded from US mills, and only in small quantities. The majority of the domestic mills are not purchasing scrap tonnage and are operating at reduced capacity. Some mills that still have scrap inventories but aren't operating are transferring scrap tonnage to their other plants in operation, while some mills are not melting scrap at all.
In addition to the weak scrap consumption, the continuous softening finished product market and deepening economic crisis has also caused steel industry players to retreat from the market. Therefore, in April, market sources expect that the domestic scrap prices will decrease approximately $10 to $20 /lt, depending on region. On the US East Coast, it is expected that the April busheling (domestic) scrap prices will range from $180 to $190 /lt. Shredded scrap will be at the level of $170 to $180 /lt, and HMS I prices will range between $155 and $165 /lt. East Coast prices tend to be higher than in other regions of the US due to the export business.
Meanwhile, the export US scrap market recently showed a slight upward trend, which, if sustained, may prevent further price slippage on the domestic side beyond April. Turkish mills have returned to purchase scrap from the US East Coast over the past two weeks in order to replenish their low scrap inventories. SteelOrbis was informed last week that Turkish mills concluded an ex-US HMS I/II 80:20 scrap deal at $230/mt CFR, shredded scrap at $235/mt CFR, and P&S scrap at $240/mt CFR. The US export price for HMS I/II 80:20 has increased approximately $10 /mt since early March.
As for pig iron, one raw materials trader described the market as “extremely weak.” There is hardly any pig iron business in the US, as mills are still slowly consuming the expensive pig iron tonnages that they bought several months ago.
As the overall pig iron demand is very poor, more than 50 percent of the pig iron mills are closed in Brazil. Pig iron prices have gone down around $50 /mt in two months to the current level of $210 /mt FOB Southern Brazil. The US pig iron market will likely turn around when the US scrap market picks up, which is not expected to happen before the third quarter of 2009.
Statistics show that the total amount of pig iron imported into the US in 2008 was 4,976,867 mt, which represents a decrease of 239,905 mt when compared to the figure of 5,216,772 mt in the corresponding period of 2007. The top pig iron exporters to the US during the period were: Brazil, at 3,606,951 mt; Russia, at 711,278 mt; Ukraine, at 309,526 mt; and Canada, at 181,626 mt. The US also imported some tonnage of pig iron from South Africa, Sweden, Venezuela and Trinidad & Tobago during the year of 2008.