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UAE: Domestic scrap index rises $4/t w-o-w; will secondary rebar preference among end-users affect primary mills?

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Melting Scrap

BigMint Bureau

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19 Jul 2024, 20:07 IST

UAE: Domestic scrap index rises $4/t w-o-w; will secondary rebar preference among end-users affect primary mills?

This week, domestic scrap demand is not so great, and only need-based buying is happening in the market and the big mills are procuring. The steel segment not doing well. Overall, workable market prices have come down for scrap in the domestic market and remain at AED 1330-1340/t (around AED 25-30/t lesser than the major mill's scrap purchase price), activity remains slow to moderate levels towards the weekend, sources informed BigMint.

As per market participants, in the UAE's rebar market, a notable shift in end-user consumption is unfolding driven by a significant price disparity between rebar sourced from benchmark mills and secondary mills. This disparity currently stands at AED 90-95/t ($24-26/t), prompting distinct changes in market dynamics and consumer preferences.

This preference for secondary mills is expected to persist unless the price gap narrows to around AED 50/t; the primary market remains sensitive to price variations.

In the rebar market, private sector end-users, particularly those involved in non-government projects, are increasingly favouring rebar from secondary mills due to its cost advantage. Benchmark mill rebar is priced between AED 2,270-2,310/t ($618-629/t), whereas secondary mills offer quotes ranging from AED 2,180-2,220/t. This price differential, along with varying credit and delivery terms, is significantly influencing purchasing decisions. Market observers note that traders face intensified competition as inventories of benchmark mill rebar contend with the rising demand for secondary mill products.

Impact on domestic scrap pricing: The shift towards using rebar from secondary mills due to their lower cost is likely to exert downward pressure on domestic scrap prices. Secondary mills typically source scrap at a lower cost to maintain their competitive pricing.

BigMint's bi-weekly assessment shows an increase of AED 16/t ($4/t) for HMS (80:20) processed, with prices in a range of AED 1,339-1,341/t ($364-365/t) DAP Abu Dhabi.

According to an official with a major trading house, unprocessed HMS (80:20) was offered at AED 1,280-1,290/t while processed varieties were quoted at AED 1,335-1,340/t DAP.

Another mill source informed that HMS (80:20) processed was offered at AED 1,330-1,340/t but we quoted for AED 1,300-1,310/t levels, similarly for shredded we got an offer at AED 1,430/t but the counter bid was at AED 1,390-1,400/t.

BigMint's market survey for week 29 witnessed bookings of 8,000-9,000 tonnes (t) of ferrous scrap. These included 4,000-5,000 t of HMS (80:20) in the range of AED 1,320-1,360/t, and around 4,000 t of shredded at AED 1,450-1460/t DAP Abu Dhabi.

Outlook: Anticipation surrounds the upcoming August rolling rebar price announcement from the benchmark mill, expected around the third week of July. The benchmark mill aims to fulfill 80% of July rebar deliveries ahead of the announcement. Also, domestic scrap prices will be seeing some correction in the coming weeks.