US: Ferrous scrap export index inches down by $2/t w-o-w amid weak buying interest

The US ferrous scrap export index registered a slight decline of $2/tonne (t) w-o-w, with limited export inquiries from major buyers such as Turkiye and Bangladesh leading to minimal export price fluctuations.

US domestic scrap consumption, in comparison, remained slow, which gave rise to weak market sentiments among sellers.

The US Federal Reserve, on 18 September, cut its benchmark rate by 50 basis points to 4.75%-5.00%, the first reduction in over four years. This move aims to reduce borrowing costs, with further cuts expected as concerns about inflation and economic growth persist.

Additionally, a source noted that the rate cut has indirectly improved liquidity in the ferrous scrap segment, as the dollar has weakened slightly, and the exchange rates are, thus, attractive.

For domestic steelmakers, lower borrowing costs could lead to increased savings, which would allow for greater investments in production capacity or equipment upgrades. These initiatives could help stabilise the market.

FOB price assessments

• BigMint's assessment for HMS (80:20) bulk FOB east coast decreased by $2/t w-o-w to $343/t on Friday from $345/t a week ago.
  
  
• BigMint's assessment for shredded bulk FOB east coast also decreased by $2/t w-o-w to $363/t on Friday from $365/t a week ago.
  
  

US steel production declines

US steel production declined again after a brief rebound. For the week ending 14 September 2024, crude steel output dropped 1.3% w-o-w to 1.7 million tonnes (mnt), with capacity utilisation falling to 79%, according to the American Iron and Steel Institute (AISI). Year-to-date production was down 1.7% y-o-y.

The west saw the largest w-o-w decline (12%), while production in the Midwest increased by 2% w-o-w.

Gerdau acquires US scrap recycler for $60 million

Gerdau, a leading Latin American steel producer, is acquiring Dales Recycling Partnership, a US ferrous scrap recycler, for $60 million. This acquisition aims to boost Gerdau's self-sufficiency in raw materials and enhance competitiveness. The deal includes assets in Tennessee, Kentucky, and Missouri, pending regulatory approval. Gerdau Ameristeel produces 12.4 mnt of finished steel annually.

Finished steel market

US domestic and imported rebar prices remained steady, with domestic rebar at $735-740/t and imports at $705-710/t.

However, there is slow demand due to ample supply, with the spread between shredded scrap and domestic rebar having increased.

Some sources believe demand may improve if mortgage rates decrease following recent Federal Reserve cuts.

Buyers' market sentiments

Turkish mills stay away: This week, Turkish scrap mills reportedly showed no interest in US-origin materials. US exporters are still aiming for deep-sea deals above $370/t for HMS (80:20), but Turkish buyers have lowered their bids to about $360/t CFR, citing global uncertainties, especially regarding the Chinese economy.

As per a trader, the recent interest rate cuts could also make US scrap more competitively priced internationally, driving up demand and stabilising the market during global uncertainties.

Currently, the scrap-to-rebar spread stands at $218/t, with rebar prices at $588-590/t and US-origin HMS (80:20) at $370/t CFR.

Demand from Bangladesh falls: Bangladesh's demand for US-origin bulk scrap has dropped, with bulk offers continuing to decline. US-origin HMS (80:20) bulk prices stood at $378/t CFR Chattogram, down by $3/t w-o-w.

A representative from a major steel mill stated "Although no major bulk offers were reported from the US West Coast, tradable prices of deep-sea HMS (80:20) have been observed at $380-385/t CFR."

Another source observed, "Latest bulk offers for US-origin scrap are at around $380-385/t for HMS, with an additional $5/t for shredded and another $5/t for the bonus grade. The market expects US prices to stabilise after the elections."

Vietnamese buyers offer lukewarm response: Vietnam's imported ferrous scrap market saw limited interest, which pushed US-origin bulk HMS (80:20) offers down to $355-360/t CFR, from $365-370/t in recent weeks, amid dull buying activity.

Outlook

In the short term, increasing demand from domestic steel mills could drive up domestic scrap prices. However, in the export market, demand is expected mainly from Turkiye and other Asian countries offering lower bid levels, which US suppliers are reluctant to accept.