NEW YORK Ferrous scrap
prices are likely to continue weakening next month as the
market attempts to test the floor, and there is speculation
that at least three steel mills will make minimal or no buys in
July, sources told AMM.
Several scrap dealers have
already lowered prices at the scale in anticipation of a price
drop in July, market players said Tuesday on the sidelines of
the Steel Success Strategies XXVII conference in New York,
co-hosted by AMM and World Steel Dynamics Inc.
Different sources speculated
that the drop wouldnt be as severe as Junes and
could range between $15 and $30 per gross ton on prime and
obsolete grades of scrap.
"We have lowered prices at our
yards by about $20 per gross ton," one scrap dealer said.
"Flows dropped a little bit after we lowered our feedstock
prices at our yards because some competitors are still paying
higher prices. But wed rather have less scrap and more
cash going into July."
A second large dealer said he
expected scrap prices to fall between $20 and $30 per gross ton
"A price drop is certain. What
will define the extent of the drop is how much lower the market
can go before scrap flows stop," he said. "If suppliers feel
weve reached a floor, they will hold onto scrap, and that
could quickly reverse things."
A third source was a tad more
optimistic, agreeing that a drop was imminent, but expects it
to be in the $15- to $20-per-ton range. "I dont know how
much lower it can go," he said. "Were trying to buy the
scrap coming into our yards at these lower prices but are
Later, at a panel discussion
about whether the industry was reaching the end of an era of
high prices for raw materials, steel producers and analysts
suggested raw material prices would soften in the near term,
but none would predict significantly lower prices.
The panel offered a global
outlook on raw material prices, with OAO Severstal chief
executive officer Alexei Mordashov saying the era of high
prices of raw materials wasnt over.
He expressed confidence that the
same demand drivers that have contributed to higher prices this
past decadenamely, growth in emerging economies like
China and Indiawill continue, albeit at a more modest
"We are confident that demand
trends will continue to grow in the future," he said. "As part
of Chinas urbanization program from 2002 to 2011, 200
million people moved from villages to cities. Yet even now,
half of the population lives outside the urban areas. This
urbanization is expected to continue."
Mordashov added that he expects
more growth in the global middle class, estimating 150 million
people will join the Chinese middle class in the next six or
seven years alone.
"Growth in emerging economies
could go down, but these economies have showed strong
resilience. ... They will continue to grow," he said.
"Chinas growth rate of 7 percent is relatively low for
them, but it still good enough for demand."
Tsou Jo-chi, chairman of
Kaohsiung, Taiwan-based China Steel Corp., said he thought the
recent declines in commodity prices were only a correction.
The huge potential of growth in
India and China will contribute to the "super cycle of high
commodity prices," Tsou said, agreeing with Mordashov, noting
that his company has a strategy to lower its raw materials
costs by becoming more self-sufficient.
"Our aim is to reduce cost(s) by
$140 million this year," he said. "Until May, we were on track
to meet this goal."
John Lichtenstein, managing
director of Accenture Ltd.s metals industry group, told
delegates he expected raw material prices to soften, but "not
enough to restore prices to pre-2005 margins." He was referring
to margins between the cost of raw material and sales prices of
Growth in Chinese steel demand
will slow from its current rapid pace to a more sustainable
level at some point, he said, but demand is likely to stay high
over the next decade or so.
By 2025, China will be looking
to achieve 65- to 70-percent urbanization rates, Lichtenstein
said. Chinas urbanization rate stands at 50 percent at
the moment, "so steel demand still has growth drivers," he
added. "Demand is less likely to dip before 2020."