China is out of the general trend, as the country's steelmakers are actively buying raw materials before the national holiday

World scrap prices started falling again last week under pressure from slower demand and lower steel prices. In particular, negative dynamics is observed in the markets of Turkiye and the USA. The Chinese market is getting out of the general trend, as the country’s steelmakers are actively buying raw materials before the holiday.

Scrap prices in Turkiye and for the week of June 13-20, 2023, fell by 2%, or $8/t compared to the previous week – to $378-382/t. Thus, the quotations returned to the fall after a three-week growth.

The Turkish scrap market was gradually declining last week amid a slowdown in demand for raw materials among domestic steelmakers. Steel producers have chosen to stay out of the market due to weakening domestic demand for steel. Despite the reduction in prices from suppliers, steelmakers did not buy large volumes of raw materials, as they were waiting for the final decisions on credit policy from the Central Bank.

Steel sales slowed down amid falling scrap prices in the EU and the US. Now the end consumers of steel products will wait for the fall in prices for raw materials in Turkiye in order to receive finished products at better prices. Export demand is also low due to uncompetitive prices.

Currently, the Turkish scrap market depends on the decision of the Central Bank regarding interest rates and the reaction of the foreign exchange market to these changes. Domestic demand for steel products and trade in raw materials for its production depend on the decision of the Central Bank. So far, Turkish producers and consumers have chosen caution in trading activities.

On the USA market over the week of June 9-16, 2023, scrap prices decreased by 1% compared to the previous week – to $365-368/t. At the same time, the forecast price for June 23 is 358-361/t.

US scrap prices have returned to the downside after several weeks of growth, supported by activity in the Turkish market. The market entered June trading with weaker steel prices and a large supply of raw materials, so the expectations of market participants for a fall in scrap prices were confirmed.

In addition, in the main US export markets, demand for scrap also slowed down, and prices began to fall, which also negatively affects price formation.

Scrap prices in China for the week of June 13-20, 2023, grew for the third week in a row amid positive activity among steel enterprises – by 1%, to $396.2/t. Last week, local steel producers actively booked raw materials ahead of the Dragon Boat Festival holiday.

For the week of June 9-16, 2023, the level of capacity utilization of plants operating on electric arc furnaces increased by 2 pp – up to 50% compared to the week before. The average daily supply of scrap to all steel enterprises of the country increased by 12.2% –to 448.4 thousand tons, and the average daily consumption increased by 3.5% – to 472.1 thousand tons.

The supply of scrap remained limited. Last week, fewer raw materials entered the market with more consumption, driving up prices. It also supported the prices of a slowdown in scrap processing in the summer, which reduces supply during this period.

As GMK Center reported earlier, Ukraine in January-May 2023 increased export of scrap 3.1 times y/y –  up to 77.5 thousand tons. Scrap collection decreased by 33.5% y/y – to 444.3 thousand tons. Deliveries of scrap to Ukrainian steel plants decreased by 44.3% y/y – to 345.7 thousand tons.