The Brazilian scrap market is facing a downturn in prices this year despite the fact that material generation is at a low level, sources told Fastmarkets on Thursday August 8.
Ferrous scrap prices have fallen by around 40-45% from January due to the weak performance of the long steel sector and high scrap inventories at mills, market participants said.
At some mills in the southeastern Brazilian states of São Paulo and Minas Gerais, bundles of mixed ferrous scrap were traded at 500 Reais ($126) per tonne, consumer buying price. This was around 400 Reais lower than at the beginning of the year, according to sources.
Fastmarkets does not currently assess ferrous scrap prices in Brazil.
Over the same period, the domestic price of rebar has also fallen due to slower-than-expected economic growth in the country, and more aggressive competition.
Fastmarkets assessed the price for steel reinforcing bar (rebar), domestic, monthly, delivered Brazil, at 2,300-2,400 Reais ($579-604) per tonne on August 2 compared with 2,370-2,480 Reais per tonne one month earlier. This was the lowest since 2,200-2,400 Reais per tonne on April 6, 2018. Fastmarkets’ assessment does not include federal or state taxes.
“The reduction in scrap prices has been allowing steelmakers to maintain margins amid the downturn in the steel market,” a Brazilian scrap dealer said.
But scrap generation was also much weaker, because of the low performance of the country’s economy.
“If steel production recovers, there will be a lack of scrap in the market,” the scrap dealer said.
Gerdau, the second-largest long-steel producer in Brazil, was more aggressive in its negotiations with scrap suppliers in the second quarter, to mitigate rising raw material costs, chief executive officer Gustavo Werneck said on August 7.
“This strategy rewarded us with a significant drop in scrap and pig iron costs amid the weaker long-steel market,” Werneck added.
Said a second source in the Brazilian scrap market: “Mills have plenty of scrap in inventory, so they are reducing purchases for most products, and prices cannot hold steady. The export market has been a way to keep volumes going for us.”
Decreasing scrap domestic prices have prompted participants to look abroad in search of customers, and exports were at their highest in years.
Brazil exported 73,185 tonnes of ferrous scrap in July, compared with 20,249 tonnes a year before, data from the ministry of economy showed. Volumes were close to a 30-month peak reported in June 2019 of 74,302 tonnes.
Shipments totaled 341,337 tonnes in January-July this year, from 212,152 tonnes in the same months of 2018.