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Factors conspire to drive down ferrous scrap prices

Global – After demonstrating resilience for several months, ferrous scrap prices succumbed to broad-based pressures in September – including a rapid decline in iron ore values and currency depreciation in the key market of Turkey.

End-month price indications for shipments from Europe to Turkey included standard quality HMS I/II 80/20 scrap at US$ 345-350 and shredded at US$ 350-355 per tonne on a cfr basis, equivalent to a decline of US$ 30-35 from late August.

On the domestic US market, meanwhile, early-September scrap price gains of US$ 10-plus per tonne quickly evaporated and latest sentiment suggests further erosion in October. Less than a month after dropping below US$ 90 per tonne, Metal Bulletin’s iron ore index for 62% Fe material slid to around US$ 78 at the end of September.

The value of the Turkish lira, meanwhile, declined from a rate of 2.16 to the US dollar at the start of September to 2.28 a month later, thus creating problems for domestic steel mills buying their imported scrap in dollars but concluding local sales of finished product in their home currency.

The 65 countries reporting their statistics to the World Steel Association produced a combined total of 1.096 billion tonnes of crude steel in the first eight months of this year for an increase of 2.4% over the 1.07 billion tonnes of January-August 2013.

The full version of Recycling International’s latest ferrous market analysis will appear in its October 2014 issue.

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