NEW YORK East Coast ferrous scrap market participants are struggling to find traction for higher prices due to tepid local and export demand, AMM understands.
Philadelphia market participants reliant on domestic mills in the Mid-Atlantic region said the closure of Evraz Inc. North Americas mill in Claymont, Del., in October (amm.com, Oct. 14) has left scrap dealers with just three regional mills to supply.
Two of the three millsChicago-based ArcelorMittal USA LLCs mills in Coatesville, Pa., and Steelton, Pa.source scrap primarily from Philadelphia, where Claymont also obtained most of its scrap. The third regional mill, Gerdau Long Steel North Americas mill in Sayreville, N.J., rarely sourced scrap from Philadelphia but has now received several offers from the region.
Due to this shift in local supply-demand fundamentals, suppliers in specific pockets of Pennsylvania, Maryland, New York, New Jersey, Connecticut, Massachusetts and Rhode Island said they have had to rely heavily on exporters of bulk and containerized scrap for sales.
But business conditions for exporters reportedly also have been tough.
East Coast bulk exporters that sell most of their cargoes to Turkey have found their largest buyer to be a tricky customer over the past few weeks, favoring European scrap over U.S. exports owing to a strengthening dollar (amm.com, Nov. 12)
Suppliers to exporters of containerized scrap also have encountered weak conditions, sources said. Export sales to India, one of two prominent importers of containerized ferrous scrap from the East Coast, have all but frozen due to weak economic conditions, several sources said.
Meanwhile, a push by containerized scrap exporters to sell to other Asian markets, such as Indonesia, Malaysia, Pakistan and Vietnam, has met with mixed results, with the only meaningful demand coming from Far East Asia, according to market participants.
Part of the reason export demand has dropped off is a strong U.S. market, which pushed scrap prices up between $20 and $30 per gross ton in November. "Without that, the two Mittal mills, Gerdau Sayreville and all the exporters would have definitely dropped prices in November," one trader said.
"Without Claymont as a consumer there is excess scrap looking for a place to go. The exporters feel they have first crack at buying most of it," a Philadelphia dealer said.
A second dealer, however, suggested that prices could stay elevated in the near term. "The absence of Claymont may help the two Mittal millsespecially Coatesvilleand Gerdau buy more easily. But flows are pretty weak. Weve seen them taper off ... and with us heading into the end of the year, there will still be upward pressure on prices," another source said. To keep scrap from moving west, eastern mills will need to watch for increases in neighboring regions like the Ohio Valley, he added.
A third dealer said his only hope is that exporters will keep local mills honest, while a fourth dealer said that at least one of the three mills is attempting to play the market to its advantage. "The local mill here has dropped prices by $10 per gross ton if you go back for new orders today. They are saying that they have enough material coming in right now," he said.
Meanwhile, scrap exporters are facing their own challenges. Last week, bulk prices to Turkey slipped about $5 to $389 to $390 per tonne c.i.f. Turkey for an 80/20 mix of No. 1 and No. 2 heavy melt.
Mixed signals from Turkish mills on where their finished product prices are headed and a bullish domestic scrap market have created an uneasy marketplace for bulk exporters, a market participant said.
"U.S. exporters are a little bit confused. For example, (one exporter) is out of the market. They do not want to sell at even $395 per tonne for HMS 1&2 (80:20). (A second exporter) is reluctant but may sell only one cargo around these levels (of $390)," he said.
Another export market source called it a pretty staid market. "Turkish mills have been slow and are not raising their prices since they want to keep rebar pricing down. Indian mills arent being aggressive still. Demand within India is still very weak," he said.
Most Mid-Atlantic players said they expect the market to be status quo in December, with many expecting a brighter January.
A Mumbai, India-based scrap importer expects Indian demand to return by January. "Prices of finished products have started improving a bit, but the gap right now between international markets and Indian markets is about $30 per tonne," he said.