Brokers remain divided over when the current scrap price cycle will bottom out. The majority plan to limit purchase tonnages and observe market developments in key steelmaking raw material markets – particularly, iron ore and metallurgical coking coal.
In China, provincial quotations fell on average by 2.3 percent in May. Low trading volumes and rising finished steel inventory levels have highlighted the necessity for domestic steelmakers to scale back production. MEPS' sources do not expect to witness a significant recovery in scrap transaction values in the short-term.
Negative price movements were witnessed in three of the four Indian regions researched by MEPS. The Metal Recycling Association of India (MRAI) has criticised the Ministry of Finance's decision to impose a 2.5 percent custom duty on imported ferrous scrap material. The trade association contends that the de facto protection given to the direct-reduced iron (DRI) sector is short sighted and will only result in higher finished steel quotations. Currently, Indian scrap collectors and processors are unable to satisfy the requirements of the domestic steel industry. Importers have begun to cut back their procurement targets for foreign material.
Effective price settlements for the three bellwether cut grades tracked in the United States declined in May. Brokers remain bearish over the prospect, that the month of June, will be the bottom of the current scrap price cycle. Local steelmakers have downgraded their scrap buying programs and undertaken scheduled maintenance downtime. Additionally, no serious shortages are foreseen. Favourable weather conditions have led to healthy flow of material to yards. Exporters, operating out of East and West Coast ports, report that trading volumes to their main offshore customers have stagnated.
Negative price expectations developed in Turkey. Internal steel mills are operating with minimal inventories, in view of the persistently weak domestic orders for finished steel products and dull overseas demand. Several steel producers have temporarily withdrawn from the offshore scrap market. Deliveries to downstream steel consuming industries were weaker than forecast.
Taiwanese containerised scrap transaction values fell in May for the third straight month, and have now reached their low point in 2013. Steel consumption is expected to enter a seasonal lull in July and August as higher temperatures will slow down activities in the construction sector. The price premium for domestic scrap material relative to imports has remained negligible.
Negotiated settlement prices in South Korea declined for a second successive month. Local steel mills plan to persevere with conservative scrap inventory levels, due to weak order-books from key consuming industries and traders. Japanese and North American scrap brokers are reluctant to offer further concessions, fearing such measures would be counterproductive and only fuel more price instability. Support from other global markets remains limited.
Effective transaction values in the European Union have softened for the three grades surveyed by MEPS. Selling figures, in euro terms, last fell to current levels in November 2012. Inventory rebuilding in this region has been postponed due to weak underlying demand for finished steel and economic uncertainties in the Mediterranean countries. The majority of active steel buyers are purchasing hand-to-mouth, in anticipation that the price trend will remain negative in the short-term.
Source: MEPS