Page 34 from: December 2015

32 December 2015

M A R K E T A N A L Y S I S

Ferrous
Closed: November 25, 2015

Scrap industry comes to
terms with ‘new normal’
Scrap prices have made further tenta-
tive gains in recent weeks but remain
relatively low, with a number of
experts anticipating a prolonged
period at or around these levels.
Latest cfr price indications for
shipments from Europe to Turkey
are: US$ 190-195 per tonne for
standard quality HMS I/II 80/20
scrap; US$ 195-200 per tonne
for shredded; and US$ 165-
170 per tonne for the HMS I/
II 70/30 mix.

Ferrous scrap prices have contin-ued to make cautious progress
over recent weeks, with some upward
momentum provided in early Novem-
ber by a flurry of bookings from mills
in Turkey.
The year’s penultimate month began
with price levels of US$ 190-192 per
tonne cfr for HMS I/II 80/20 scrap mak-
ing the journey from the USA to the
world’s leading import market. This flow
of orders was accompanied by a steady
increase in what Turkey’s buyers were
prepared to pay for their scrap – despite
mills’ protestations that demand for
their finished product remained muted.
Before the month’s mid-point, US and
Baltic Sea suppliers were able to com-
mand US$ 200 per tonne
for the same HMS I/II 80/20
mix on a cfr basis, although
European exporters were
still a few dollars short of
this threshold.
With Turkish mills said to
have largely completed this
stock replenishment phase,
bookings in the internation-
al marketplace have been
less sustained in the latter
part of November. However,

prices have held reasonably well, with
US and Baltic Sea cargoes of HMS I/
II 80/20 continuing to fetch around
US$ 200 per tonne on a cfr basis and
shredded nearer US$ 205.

Operational cutbacks
These overall gains on the international
front were contrasted by further scrap
price drops of varying dimensions on
the domestic US market in early Novem-
ber, not least because of lower oper-
ating rates in the home steelmaking
sector. According to feedback from the
American Iron and Steel Institute, US
raw steel output in week ended Novem-
ber 21 amounted to 1.562 million net
tons for an average capacity utilisation

rate of just 65.3%. In the corresponding
week last year, mills produced 1.856
million net tons for a capacity utilisa-
tion rate that was almost 12 percentage
points higher at 77.2%.
In an echo of the ‘new normal’ phrase
now in common usage to reflect China’s
changed economy, leading recycler Sims
Metal Management (SMM) is targetting
operational cutbacks – notably in the
central part of North America and in
Australia – to adapt to the new ‘volume
reality’ for the scrap industry, according
to a report in American Metal Market
(AMM). The company’s plans are said
to include the divestment or long-term
shutdown of feeder yards and other
operations, especially where a num-

ber of facilities are in close
proximity to each other and
face insufficient inflows. The
report suggests some 35
facilities could be affected.
The ‘volume reality’ for
many yards around the
world is a 30-40% reduc-
tion in tonnages when com-
pared to the norm, it was
suggested at the recent BIR
world recycling convention
in Prague.

The AMM article also quoted SMM’s
group ceo Galdino Claro as saying that
he expected lower scrap flows and
prices to persist over the next two to
three years, adding: ‘I think we have
come to a point where prices are going
to stay where they are.’ They might drop
slightly, he reportedly added, but not
enough to have a substantial impact
on volume flows.

Sales anchor
Of course, steelmakers in the USA, Turkey
and many other countries besides con-
tinue to point to the global availability
of cheap Chinese product as the anchor
dragging down their sales ambitions (see
box accompanying this report). At a time
when China’s steel exports are being
held up to such international scrutiny,
the volumes shipped abroad fell sharply
in October from the all-time monthly
high of 11.3 million tonnes in Septem-
ber. But while the October total of just
under 9 million tonnes was lower than
the monthly average for 2015, it was still
some 5% above that for the same month
last year. Comparing the first 10 months
of 2015 with January-October 2014,
China’s finished steel exports surged
almost 25% to 92.1 million tonnes.

By Ian Martin