As SteelOrbis expected, US scrap prices have come down significantly and across the board this September. In the last month, busheling scrap prices have gone down $275 /lt, shredded scrap prices have dropped by $160 /lt, and HMS I prices have declined $150 /lt.
On the East Coast, busheling scrap is now in the range of $575 to $585 /lt. Shredded scrap is currently sold for $390 to 400 /lt, while HMS I prices range from $290 to $300 /lt. The gap between industrial scrap and cut grade scrap prices has narrowed in September, however. The price difference between busheling and shredded scrap is currently about $185 /lt, whereas the price difference was around $300 /lt in August.
The US scrap market is currently under serious correction, as supply is greater than demand. Soaring scrap prices had been lingering at high levels in the last few months, so scrap market players were seeing a big profit margin and attracted others who were not in the recycling business to collect scrap and get involved in scrap trading as well, leading to what one scrap dealer described to SteelOrbis as a "herd mentality."
However, on the buying side, the sky-high scrap prices combined with the elevated scrap surcharges slowed down purchasing activity as buyers waited for a price correction. In addition, the weak export market, which has seen hardly any bookings taking place from overseas recently, caused scrap yard inventories to rise, especially on the US East Coast. These factors all contributed to push prices downward.
Last week, SteelOrbis was informed that a Turkish mill concluded a scrap booking ex-US at the level of $410 /mt CIF Marmara for late September shipment. The cargo is composed of 14,000 mt of HMS I/II 80:20 scrap, 15,000 mt of shredded scrap and 1,000 mt of P&S scrap. Export scrap prices have come down by approximately $150 /mt so far since our last report in August, and it is expected that foreign scrap demand will continue to be slow in September, due to the Ramadan holiday. Due to low buying activity that will carry over for at least another few weeks, scrap prices are not expected to rebound in a significant way in September. However, once Turkish mills start buying again, the market may experience a rebound in October.
With this scrap price drop, US raw material surcharges will come down significantly for October. Some US steel producers like Nucor base their raw materials surcharge on the Chicago consumer buying scrap price reported by AMM. According to the latest index numbers, the raw materials surcharge for flat rolled products will come down by $300 /nt, and for long products, down by $146 /nt. Nucor is expected to raise base prices to soften the net price decrease.
USITC data show that the top recipients of shredded scrap from the US in June were: Turkey, at 261,000 mt; Taiwan, at 141,000 mt; and Malaysia, at 118,000 mt. Thailand, South Korea, Greece, Peru and China also imported some tonnage of shredded scrap from the US during the period. Year-to-date January to June, 2008, the total amount of shredded scrap that Taiwan imported from the US was 682,000 mt, while Turkey imported 647,000 mt, and Malaysia imported 401,000 mt.
As regards HMS I grade scrap, the top recipients from the US in June were: Turkey, at 252,000 mt; South Korea, at 107,000 mt; and Taiwan, at 89,000 mt. Some other countries which imported HMS I grade scrap from the US in June include Thailand, Malaysia, Indonesia and Egypt. Year-to-date January to June, 2008, the total amount of HMS I that the US exported to Turkey was 1,057,000 mt, to South Korea --523,000 mt, and to Taiwan -- 298,000 mt.
The total amount of ferrous scrap exports from the US in June was 1,850,000 mt, which shows a decrease of 69,000 mt when compared to the figure of 1,919,000 mt in May. Year-to-date January to June, 2008, total amount of US scrap export was 8,251,000 mt, which reflects an increase of 54.8 percent when compared to the figure of 5,330,000 mt in the corresponding period in 2007.