US: Ferrous scrap export index down $3/t w-o-w on bearish Turkish demand

The US ferrous scrap export index softened as Turkish mills shifted focus to competitively priced Chinese billets. The influx of low-cost Chinese billets is affecting sentiment in the Turkish ferrous scrap market, with Turkish mills securing Chinese billets at $480-485/t CFR, down from $500/t.

For billets to maintain a cost advantage over scrap, prices need to be between $510 and $515/t CFR, giving them a $20-30/t edge over ferrous scrap. This shift is contributing to weakened ferrous scrap demand in the region.

The decline in billet prices to around $500/t CFR is significantly impacting the ferrous scrap market in Turkiye, where demand for deep-sea steel scrap has already been weak due to limited long steel sales. Falling billet prices have discouraged mills from purchasing scrap, though delivery delays, including residual effects from the Red Sea issue, are pushing billet arrivals into late September to early October.

Despite these delays, Turkish buyers are leveraging the anticipated billet inflow to pressure scrap prices lower. The expected increase in billets supply is likely to cause further market disruptions once shipments arrive.

In July, Turkish mills booked around 10 US East Coast deep-sea ferrous scrap shipments, up from five in June. However, no new deal has been reported since the last purchase of a couple of US scrap cargoes at $390/t CFR for HMS 80:20 and $410/t CFR for shredded and bonus-grade materials.

US suppliers offered at $388-390/t CFR, and some Turkish mills have placed bids lower at $382-383/t.

US ferrous scrap dealers anticipate potential price increases in August due to tight supply, particularly for shredded scrap. Prices remain steady in the Midwest and Southeast, with stability maintained despite constrained supply.

Dealers report tight shredded scrap availability nationwide, expecting August prices to either hold steady or rise slightly. Market sentiment is bullish, supported by high pig iron premiums and recent outages at domestic HBI/DRI plants. Operating rates have risen above 78%, helping stabilise prices amidst supply constraints. Finished steel prices are mixed but generally stable, with some mills raising offers due to strong order books.

Assessments

• BigMint's assessment for HMS (80:20) bulk FOB east coast decreased by $3/t w-o-w to $357/t on Friday from $360/t a week ago.
  
  
• BigMint's assessment for shredded bulk FOB east coast decreased by $3/t w-o-w to $377/t on Friday from $380/t a week ago.
  
  

European scrap market: In Europe, the scrap market is softer with minimal uptake, and the finished steel sector faces increasing challenges as mills struggle to secure orders. Larger mills are focusing on spot orders, contributing to a weakened market following a brief improvement earlier.

As per recyclers, the mood in the market is decidedly bearish. If European recyclers are lowering their sale prices, US recyclers are likely to follow suit. Indicative tradable values show EU-origin HMS (80:20) at $380/t CFR and US-origin HMS (80:20) at $385/t CFR. Therefore, some adjustment in scrap prices is needed to sustain market activity.

Outlook: US domestic ferrous scrap prices are expected to rise slightly in August as supply tightness persists. Elevated pig iron premiums and stable operating rates will likely drive this trend, though export prices and rising freight costs could influence overseas demand.