World scrap prices continue to rise amid tight supply

Prices for HMS 1/2 scrap on the Turkish market during January 30 – February 6, 2023, increased by $8/t or by 1.9% compared to the previous week –  up to $425-428/t. Thus, quotations of scrap are increasing for the second week in a row. Kallanish price indicator reports about it.

Scrap quotations in Turkiye continue to rise as demand dominates supply. Local steelmakers purchase raw materials from suppliers from the European Union, the Baltic States, the USA and Canada.

Turkish plants are forced to accept price offers from suppliers because the supply is limited. Scrap collectors, in turn, are aiming for a further increase in quotations.

Evaluating market prospects and weak scrap collection rates, EU suppliers decided not to sell scrap metal to Turkiye at prices below $425/t. American suppliers are taking their time to sell to Turkish steelmakers as they await the February US auctions. It is predicted that after that the cost of scrap in the States will increase by an average of $30/t.

According to Turkish steelmakers, suppliers will enter the market when raw material prices rise to $430/t and more. Now the offer is limited artificially.

Recently, scrap prices have been supported by the flat market in Turkiye, but the recovery in domestic rebar demand last week had a positive impact. Although export demand remains weak, domestic sales have become more brisk.

Scrap prices in Turkiye are likely to remain stable in the near term as the country was hit hard by earthquakes on February 6, 2023, which caused deaths and massive destruction of homes, infrastructure, etc. Since the incident happened recently, it is impossible to clearly assess its impact on the country’s steel industry, but the steel and raw materials markets will lose activity in the near future.

In the long term, scrap quotations in Turkiye will increase, as the reduction in energy tariffs for local industry provides an opportunity to invest the saved funds in the purchase of raw materials. In addition, the domestic demand for rebar may increase sharply amid the reconstruction of the destroyed parts of certain cities, which will provoke a further increase in the demand for scrap.

Prices of scrap metal in USA at the beginning of February increased sharply due to the beginning of February trading. During the week of January 27 – February 3, scrap quotations on the US East Coast increased by $15/t, or by 3.9% compared to the previous week – up to $403-409/t. Prices were supported by rising export quotations, harsh weather conditions and continued tight supply, as well as rising steel prices.

In China scrap prices also spiked after the holidays because of limited supply. During the week of January 27 – February 3, scrap quotations increased by $35/t, or by 8.5% compared to the previous week – up to $440-445/t.

China’s scrap market was still affected by the holiday break, as most market participants are only beginning to resume operations this week. However, most of the EAF plants will start up in the second decade of February, which means that the actual demand for scrap has not yet increased. In general, scrap supplies in Asia are currently tight, supporting regional prices.

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