World prices for scrap at the beginning of 2023 increased sharply to $420/t

Prices for HMS 1/2 scrap on the Turkish market during January 2-9, 2023, increased by $13/t compared to the previous week – up to $418-420/t. Thus, quotations of raw materials are increasing for the second week in a row and have reached the maximum since the beginning of June 2022. Kallanish price indicator reports about it.

Scrap quotations in Turkiye exceeded $400/t on December 29, 2022, after a sharp increase of $10/t a day earlier. Since then, prices have gradually increased. On January 4, 2023, growth accelerated as businesses and traders began to resume work after the holiday.

Prices for scrap metal began to rise against the background of stable import prices and high domestic demand for rebar. Orders for finished products prompted local steelmakers to quickly replenish raw material stocks and accept previously unfavorable scrap prices.

Strong demand for rebar forced scrap to be bought at prices dictated by sellers, as the low pace of raw materials collection slowed further due to the festive period. In addition, in the near future, steelmakers expect an even greater increase in raw material prices due to low availability, so the filling of warehouse stocks is accelerated.

In addition to the recovery of the rebar market, the increase in prices was also influenced by the decision of the Turkish government to reduce the prices of energy resources for the local industry. Lower production costs allow steelmakers to obtain a larger margin and pay market prices for raw materials.

However, further growth of scrap prices in the short term in Turkiye is unlikely. During the week, demand for rebar slowed down, which reduced the confidence of Turkish steelmakers in the ability to buy raw materials at current prices. In addition, the market has begun to become flooded with scrap, leading market participants to believe that prices have reached a peak, or the level at which suppliers are willing to sell.

At the same time, an increase in quotations is expected in February due to low collection rates. The situation will become clearer after the return of buyers of steel products.

In the near future, scrap prices are expected to rise on the European market. The shortage of the most sought-after grades of raw materials and the recovery of demand in Turkiye may raise the current price of scrap by €30-40/t. The expected cost increase will include an increase in freight rates by German and Austrian rail operators. The market is under pressure in anticipation of the exit of consumers and sellers from the winter holidays.

As GMK Center reported earlier, world consumption of scrap in the first half of 2022 decreased by 8.4% compared to the same period in 2021 – to 248.79 million tons. The negative trend in demand for scrap was supported by the decline in global steel production.

The world consumption of scrap metal in steel production increased in 2021 – up to 620 million tons. Over the year, the share of scrap in steel smelting increased to 32%, while in 2019 this figure was 30%, and in 2020, at the height of the pandemic, it was 29%.