WARSAW, Poland U.S. trade opinion expects November ferrous scrap prices to increase significantly, especially for prime grades, according to Sims Metal Management Ltd. vice president Blake Kelley.
Current global economic conditions appear better than in recent months, and steel production likely will remain at least at near-record rates, although competition for steel sales is severe, Kelley told delegates at the Bureau of International Recyclings autumn conference in Warsaw, Poland, Oct. 28.
"Raw material sales volume will be at corresponding levels. Prices may increase further, especially as we move into months prone to seasonal supply disruptions. In the end, scrap prices will remain related to the cost of blast furnace iron; however, excess capacity will continue to limit margins for steelmakers, miners and scrap processors," he said.
Based on a nine-month projection of World Steel Association data, the world will produce 70 million tonnes more raw steel and 56 million tonnes more iron this year than in 2012, while consuming 14 million tonnes more purchased scrap.
In the United States, prime grades traded between $400 and $420 per gross ton in October depending on grade and location, while recent domestic hot-rolled coil prices are around $733 per tonne ex-steel works and imported hot-rolled coil offers are at $650 per tonne into Houston, he said.
Meanwhile, domestic prices for reinforcing bar are around $711 per tonne "but available for less," he said.
In his review of international scrap markets, Kelley told delegates that Chinas recent scrap import activity has been minimal due to increasing domestic scrap supply while the material margin between the sales prices of finished steel in China and their raw material cost is "most likely the lowest in the world," he said. In the coming months, steel and scrap prices could be affected by Chinas "significant corrective efforts" aimed at reducing pollution in the country, he said.
Kelley anticipates more bulk cargo exports to Southeast Asian countries like Malaysia, Vietnam, Indonesia, and Thailand, but said steelmakers definitely have "sticker shock," referring to the recent spike in prices. A number of steelmakers are interested in buying scrap but say they cannot afford to pay current prices. Scrap in Thailand is trading at $370 per tonne delivered mill, he said. The market will have to provide more evidence supporting the price increases "to unchain their demand," Kelley said.
In Taiwan, domestic rebar and scrap prices are $578 and $385 per tonne, respectively, he said. "This minimal material margin (of $193) causes most steelmakers to run at full capacity to amortize fixed costs as low as possible," he said.
Meanwhile, South Korean mills have remained active in the scrap markets. "Domestic heavy melt scrap was recently forced down $9 to $340 per tonne delivered. Japanese H2-grade scrap has reportedly been purchased at ... about $385 c.i.f. Korea," he said.
In India, a weak Indian rupee has caused the cost of imported scrap to become more expensive. As a result, smaller steelmakers without captive sponge iron or direct-reduced iron have been forced to reduce output, he said.