The pick-up in ex-US scrap export activity seen in March and April has slowed down somewhat in recent weeks, but the flurry of activity that took place last month along with the decrease in automotive scrap production put a crimp on US supplies, pushing up US domestic scrap prices by an average of $43 /long ton (lt) in the first week of May.
When compared to the prices in the beginning of April, US busheling scrap prices have gone up by around $50 /lt; shredded scrap prices have increased by approximately $45 /lt; and HMS I prices have risen by about $35 /lt. Currently, on the East Coast, busheling prices are in the range of $220 to $230 /lt; shredded scrap prices are between $215 and $225 /lt; and HMS I prices are at a level of $190 to $200 /lt. However, it is heard that these prices have not been accepted by several domestic mills.
The price increase in US domestic scrap was mainly due to the busy export market in April, as the domestic demand for scrap is still quiet and there is still very little scrap buying activity taking place from domestic mills. Domestic mills’ scrap purchases in recent weeks have been highly selective and only in a small amounts. Mills are also doing a lot of negotiating in order to get the best price. Moreover, with the sluggish finished product market and operating rates among most steelmakers reduced by at least 50 percent, domestic steel mills are not in a hurry to purchase any significant scrap tonnage for the time being.
On the supply side, however, automotive production will shrink further this summer with the shutdown of many GM and Chrysler plants, which means less high-grade scrap will be generated. The reduced generation of auto scrap will likely help to counteract to some degree the typical increase of scrap collection in the warmer summer months. Therefore, most market insiders expect that domestic scrap prices will trend sideways in June. Still, given the continued weak scrap demand from US mills, there is a chance that US scrap prices could even decrease slightly within the next month.
As for exports, Turkish mills' scrap buying activity softened somewhat over the last week after their up-tick in purchasing activity in April, as finished product demand in their main markets has yet to improve significantly. Still, there is still a fair amount of activity transpiring on the West Coast to Far East mills.
The latest USITC data show that the total amount of ferrous scrap exports from the US in March 2009 was 1,724,000 mt, representing an increase of 239,000 mt when compared to the figure of 1,485,000 mt in February.
The main recipient of shredded scrap from the US in March 2009 was China, at 601,000 mt. Some other countries which imported shredded scrap from the US in March include India, at 55,000 mt; Pakistan, at 41,000 mt; Taiwan, at 32,000 mt; Thailand, at 27,000 mt; Turkey, at 20,000 mt; and Vietnam, at 16,000 mt.
For HMS I grade scrap, the top recipients of US exports in March 2009 were: China, at 232,000 mt; South Korea, at 88,000 mt; Turkey, at 80,000 mt; Taiwan, at 34,000 mt; and Vietnam, at 26,000 mt. India, Mexico, Pakistan, Canada, Indonesia and Thailand also imported some tonnage of HMS I grade scrap form the US during the period.
Meanwhile, the pig iron market also remains very weak. Demand for pig iron in the US is poor, and there is any buying activity to speak of. Nevertheless, the pig iron supply is also limited, as about 75 percent of the pig iron mills in Brazil are not currently producing.
Despite the weak demand, the limited supply of Brazilian pig iron has caused prices to rise from $250 /mt FOB in April to the current level of $270 /mt FOB Brazil. Although pig iron prices have increased slightly, it is premature to conclude that the market is seeing a recovery, as no significant improvement has yet been seen on the demand side.
However, the latest statistics show that the year-to-date (January to February 2009) amount of pig iron imported into the US was 734,107 mt, reflecting an increase of 169,240 mt when compared to last year’s figure in the corresponding period. The top pig iron exporters to the US during the period were: Brazil, at 466,002 mt; Russia, at 173,027 mt; Trinidad & Tobago, at 59,727 mt; and South Africa, at 34,598 mt. The US also imported some tonnage of pig iron from Canada and India.