Weekly round-up: Global scrap market confronts weak demand, price uncertainty

The global ferrous scrap market witnessed mixed sentiments this week, with key regions showing varying levels of interest and material movements. In Turkiye, stable scrap offers and rising collection costs influenced the market, while Indian buyers favoured domestic scrap due to weak steel demand. The Pakistani market remained sluggish, with mills cutting back on scrap consumption. In Bangladesh, bid-offer gaps and weak construction activity kept the market subdued. Meanwhile, Vietnam's mills returned to the market post-typhoon, seeking Japanese scrap, while South Korea saw muted trade due to the Chuseok holidays. Japan and the US continued to face price declines and weak demand.

Turkiye: At the start of the week, Turkiye's imported scrap market showed stability, with US-origin HMS (80:20) offers holding steady at $370/t CFR. Rising collection costs in Europe prompted sellers to seek higher prices, but Turkish mills resisted due to tight rebar margins. Domestic rebar sales saw a slight uptick, quoted between $590-600/t exw, yet mills remained cautious, avoiding major purchases.

The market found itself in a standoff as buyers awaited clearer signals from global developments, particularly regarding China's response to the US Federal Reserve's interest rate decision. Despite expectations for restocking in October, trading activity remained subdued.

Notably, as the weekend approached, frequent deals were finalised from the US and Europe at approximately $360-367/t CFR.

India: In India, the week saw sluggish demand for imported scrap as buyers leaned towards cheaper domestic alternatives due to weak steel sales. Shredded scrap offers remained steady at $385-390/t CFR, but buyers showed little urgency to purchase. By mid-week, some optimism emerged, with hopes of a market rebound in October driven by restocking ahead of the festival season and potential US Fed rate cuts improving liquidity.

Despite this, challenges like bid-offer mismatches and a weak domestic market continued to hamper trade, with buyers holding off on deals, waiting for prices to align with expectations.

HMS (80:20) offers from Europe and West Africa ranged between $365-370/t CFR Nhava Sheva.

Pakistan: Throughout the week, Pakistan's imported scrap market remained sluggish with minimal activity due to weak domestic steel demand and slow rebar sales. Steel mills faced tight cash flows and high inventory levels, leading to production cuts and reduced scrap consumption. Shredded scrap offers from the UK/Europe hovered at $390-395/t CFR Qasim, but buyers showed little interest, preferring to wait for clearer market signals. Domestic scrap prices remained stable, but mills continued to struggle with squeezed margins and sluggish sales. Despite post-monsoon hopes for recovery, the market showed no significant signs of improvement.

Bangladesh: Bangladesh's imported scrap market remained sluggish, with a persistent bid-offer gap and weak domestic demand. Offers for UAE-origin shredded scrap hovered around $385/t CFR, while buyers countered with lower bids of $370/t. Australian and New Zealand-origin offers were higher at $400-410/t CFR. Domestic scrap prices saw some correction, with local HMS priced between BDT 52,000-53,000/t, while rebar prices in Dhaka and Chattogram remained stable.

Difficulties in opening Letters of Credit (LCs) and weak construction activity further dampened buyer interest. With no major bulk deals reported, the market outlook remains cautious, awaiting post-monsoon activity.

Vietnam: Vietnamese mills returned to the seaborne market and showed active interest in Japanese scrap, owing to tight domestic scrap supply after recent typhoon damage. Japanese H2 scrap offers to Vietnam dropped by $15-17/t to $330-340/t CFR, reaching competitive levels with Australian-origin scrap, though buyers aimed for prices below $320/t. The narrowing bid-offer spread and weakening Japanese prices increased the likelihood of deals being struck, as Vietnamese mills sought to replenish scrap stocks amid increasing domestic demand.

South Korea: South Korean mills were out of the seaborne market during the Chuseok holidays from 16 to 18 September, leading to no firm offers or bids heard throughout the week.

Japan: Japanese H2 scrap export offers continued their downward trend this week, a decline that has persisted since mid-July due to weak demand from major import markets. However, a potential rebound is expected from Vietnam as buyers return to the seaborne market, spurred by restocking needs.

BigMint's latest assessment of Japanese H2 scrap export offers stood at JPY 40,500/t ($285/t) FOB Tokyo Bay, down by JPY 1,500/t ($11/t) compared to JPY 42,000/t ($295/t) FOB in the previous week.

Additionally, Tokyo Steel announced its eighth consecutive cut in domestic scrap procurement prices today, reducing rates by up to JPY 1,500/t ($10/t), effective 21 September 2024. The total decline for September now stands at JPY 5,000-6,000/t ($35-42/t), with H2 prices ranging within JPY 39,000-41,000/t ($273-287/t) across plants.

US: The US ferrous scrap export index registered a slight decline of $2/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.