World scrap prices are falling amid weak activity of steelmakers

Global scrap prices continued to decline last week as buying activity was at a low level. In the Turkish market, no deals were concluded on the eve of the holidays, in the USA, market participants assessed the prospects of July trades, and the prices of Chinese scrap stabilized due to the transition of steelmakers to a more profitable raw material – pig iron.

Prices for scrap HMS 1/2 in Turkiye for the week of June 26 – July 3, 2023, fell by 0.5% compared to the previous week – to $377-380/t. Scrap prices continued to stagnate last week, but the pace slowed amid a slowdown in trading activity ahead of religious holidays.

Activity was also weak a week earlier as market participants awaited the Turkish Central Bank’s decision on interest rates. After the publication of the relevant document, the market assessed the impact of the decision, which also restrained trade, but several agreements were soon concluded with suppliers from the EU and the US.

No new contracts were signed last week, although in past years some steelmakers have completed July scrap contracts over the holiday weekend, but no such activity is expected this year as the outlook for steel sales is quite dim. Amid this, the plants do not dare to replenish the stocks of raw materials, working only with small batches.

Demand for scrap is not expected to recover in the short term as steelmakers wait for a clearer picture of the market before buying raw materials. In particular, the latest increase in lending rates by the Central Bank of Turkiye was well below market expectations and caused the lira to depreciate more sharply. In addition, Turkish metallurgists expected a further decrease in energy prices, but problems with the devaluation of the lira will most likely contribute to their growth. In particular, the cost of gas for large industrial enterprises in July remained at the level of April, reports BOTAS.

The price of scrap on the USA market for the week of June 23-30, 2023, decreased by 0.3% compared to the previous week – $356-360/t. At the same time, the forecast price for July 7 remains unchanged compared to June 30.

On the eve of the July trades, sentiment in the US scrap market remains negative. Market participants expect quotes to be unlikely to recover as the cancellation of June scrap purchases by some steelmakers dampens the outlook. At the same time, some of them are confident that prices will remain stable amid attempts by US steelmakers to increase rolled steel prices. The main concern about pricing is based on the lack of support from export markets. In particular, the Turkish market does not show signs of recovery, but on the contrary, pushes down scrap prices.

Prices in Chinese scrap market last week were stable at $392.5/t, although during the period they fell to $389.4/t.

Currently, China’s steelmakers have switched to using pig iron, as it is more profitable, and have reduced the activity of scrap purchases, which has a negative impact on pricing. At the same time, there is a slowdown in the supply of scrap on the market amid high temperature, which affects the pace of collection. That is, in the future, there may be a shortage on the market.

During June 23-30, 2023, Chinese electric arc plants used 50% of production capacity, which is 2% less than the previous week.

The average daily volume of scrap supplies to all steel enterprises amounted to 428.1 thousand tons, which is 8.3% less compared to a week earlier. The average daily consumption of raw materials increased by 0.1% – to 488.9 thousand tons.

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