Weekly round up: Global ferrous scrap prices see mixed trends, price outlook bullish

This week, the global ferrous scrap market displayed mixed trends. In South Asia, India faced market uncertainty due to political unrest and bid-offer disparity caused by rising freight costs and container shortages, leading to minimal trading. In contrast, Pakistan and Bangladesh experienced slight upticks in offers despite weak market sentiments. Turkish scrap prices remained high as mills continued inquiries ahead of a mid-June holiday.

Japan saw a decline in H2 scrap export offers for the third consecutive week, driven by reduced demand and price cuts from Tokyo Steel. South Korean mills reduced procurement prices amid low domestic demand and production rates. In China, Shagang Steel announced a second reduction in scrap purchase prices within a week, reflecting ongoing market adjustments.

Turkiye: Turkish imported ferrous scrap prices remained at slightly higher side as mills continued inquiring ahead of a mid-June holiday, expecting range-bound prices due to equilibrium in the short-sea space.

Turkish steel producers began deep-sea bookings last week for July stocks, driven by demand for finished long steel products. Scrap suppliers are reluctant to offer discounts due to sluggish material flow. In May, Turkish producers booked over 30 deep-sea cargoes mainly for June shipments.

BigMint's assessment for US-origin HMS (80:20) bulk scrap stood at $383/t CFR, with a rise of $4/t w-o-w. Turkish rebar export prices were at $578-580/t FOB, with the scrap-to-rebar spread at $195-198/t FOB.

Early June was quiet, but trade is expected to resume before Eid al-Adha. European sell-side sentiments remained firm with limited scrap availability. EU-origin HMS (80:20) prices are expected to remain at $380-382/t CFR. US-origin HMS (90:10) was offered at $390/t CFR, while Turkish mills likely to raise rebar offers to $585-590/t FOB.

India: Indian buyers showed resistance in making firm commitments amidst rising freight costs, which were further exacerbated by container shortages, resulting in market uncertainty.

Throughout the week, Indian imported ferrous market experienced sluggish activity as buyers adopted a wait-and-see approach due to the parliamentary election resultant uncertainty. This cautious stance resulted in minimal trading and a noticeable bid-offer disparity. Shredded scrap offers from the US and UK/Europe were consistently assessed at $415-420/t CFR Nhava Sheva, occasionally reaching $428-430/t CFR, while buyers aimed for lower prices around $410-415/t CFR. HMS (80:20) offers from the UK/Europe, and West Africa ranged from $395-400/t CFR, with buyer bids slightly lower at $390-395/t.

In domestic scrap market despite high production levels of around 90-95% at steel mills, new bookings for imported materials were scarce. Traders anticipated that the market sentiment might stabilise in coming days, expecting a short-term impact from the election results.

As per market insiders, regional government changes in states like Odisha, Andhra Pradesh, and Uttar Pradesh could have localised effects, but overall, the market was expected to recover. An upward trend in imported scrap prices was also predicted due to increasing freight rates.

Pakistan: During the week, Pakistan's market for imported scrap showed a mixed sentiment, with a gradual improvement in activity despite underlying challenges. Buyers began actively inquiring about offers, particularly for shredded scrap from the UK/Europe, assessed at $420-430/t CFR Qasim. However, tight cash flows and the upcoming Eid holidays significantly influenced buying decisions, alongside the low production rates in the steel industry, hovering around 30-40%.

Traders and industry officials highlighted the impact of high interest rates, currently at 22%, on the economy and hoped for a business-friendly budget and a reduction in rates, considering the drop in inflation to 12-14%. The domestic market also reflected subdued conditions, with local scrap prices between PKR 150,000-156,000/t and rebar prices at PKR 250,000-260,000/t.

Bangladesh: In Bangladesh, buying activities witnessed mixed trends, with some restocking ahead of Eid and others waiting for optimal price levels amid rising freight costs and container shortages.

Indicative offers for shredded scrap from the UK/Europe are at $425-430/t CFR Chattogram, while HMS (80:20) offers are $405-410/t CFR. US-origin bulk HMS (80:20) is offered at $410/t CFR, shredded at $420/t CFR, and bonus at $425/t CFR, but bids are lower. Sellers anticipate a market uptick next week despite low market sentiments due to the Eid holidays and the monsoon season.

In the containers market, Australian-origin HMS (80:20) is offered at $410/t CFR, with buyers bidding $400-405/t CFR. Rising freight rates, especially from East Asian origins, push buyers towards sources like Australia and New Zealand. Offers from Japan and Hong Kong are unviable due to high freight rates, which surged from $700 to $1,500-$1,950 for a 20-foot container from Hong Kong.

Approximately 4,000-6,000 t of shredded, HMS (90:10), and PNS from Australia, Chile, Peru, and other regions were booked at $410-442/t CFR Chattogram.

Japan: Japanese H2 scrap export offers declined for the third consecutive week due to a lack of strong demand from major importing countries, coupled with a price cut announcement from Tokyo Steel, the largest scrap consumer. As per market insiders, the seaborne market is very quiet this week, with Vietnamese and Taiwanese market players not bidding. Compared to the last week, prices have dropped slightly, and it is currently a buyers' market as no one can sell anything.

According to BigMint's latest assessment of Japanese H2 scrap stood at JPY 50,300/t (t) ($323/t), down by JPY 400/t ($3/t) compared to JPY 50,700/t ($326/t) in the previous week.

Tokyo Steel, Japan's leading EAF steel producer, announced a reduction in domestic ferrous scrap prices by JPY 500/t ($3/t), effective from 6 June 2024. New prices of H2 scrap are JPY 51,000/t ($327/t) at both the Okayama and Kyushu plants and JPY 50,000/t ($320/t) at the Takamatsu plant. Consequently, the FAS collection prices in Tokyo Bay dropped to JPY 50,000-51,500/t ($322-331/t).

Vietnam: Offers for H2 scrap from Japan were assessed at $370/t CFR Vietnam, while buyers' bids were noted at $365/t CFR. Due to this bid-offer disparity, buying interest from Vietnamese buyers remained subdued.

Vietnamese mills remained cautious, staying on the sidelines for imported scrap as they awaited clearer pricing signals amid ongoing uncertainties in the steel market.

South Korea: Korean mills continued to remain on the sidelines due to sluggish demand for scrap in the domestic market and low production rates by major mills. Additionally, several steel mills have lowered scrap procurement prices, making domestic scrap prices more attractive compared to imports.

South Korean steel manufacturers have recently decided to reduce scrap procurement prices by KRW 10,000/t ($7/t). Korea Steel will implement this price cut starting on 5 June 2024, while Daehan Steel and YK Steel will follow suit on 8 June 2024. Notably, these manufacturers, located in southern South Korea, made this decision following a drop in the rebar market.

China: Shagang Steel has announced a second reduction in purchase prices for ferrous scrap within a week, effective 6 June, 2024. The updated prices show a decrease of RMB 50/t ($7/t). Under the new pricing structure, HMS (6-10 mm) is now priced at RMB 2,770/t ($382/t), including 13% VAT. Notably, the total decline over the week amounts to RMB 80/t ($11/t).