Page 64 from: October 2014

64 October 2014

m a r k e t a n a l y s i s

Ferrous

Scrap prices hit by iron ore
in full retreat
After several months of resilience, ferrous scrap
prices succumbed to broad-based pressures in
September and headed significantly lower.
Latest cfr price indications for shipments
from Europe to Turkey are: US$ 345-350 per
tonne for standard quality HMS I/II 80/20
scrap; US$ 350-355 per tonne for shredded;
and US$ 320-325 per tonne for the HMS
I/II 70/30 mix.

Closed: October 1 2014

Several factors have conspired to turn the screw on ferrous scrap
prices in recent weeks, including the
rapid decline in iron ore values and cur-
rency depreciation in the leading mar-
ket of Turkey.
The falling price of iron ore has been
reflected in Chinese billet values, with
significant volumes being offered into
a range of markets at well below
US$ 500 per tonne on a cfr basis. Turk-
ish billet has been struggling to com-
pete and so the country’s scrap buyers
have been looking for ever-better deals
from their international suppliers. At the
same time, the Turkish lira declined dur-
ing the course of September from a rate
of 2.16 to the US dollar to 2.28 – an

important development given that
domestic mills buy their imported scrap
in dollars but conclude local sales of
finished product in their home currency.
In early September, Turkish buyers were
still prepared to pay more than
US$ 380 per tonne cfr for a Baltic cargo
of HMS I/II 80/20. But stocks were gen-
erally quite high after the significant
buying activity of July and August, with
the result that new deals were few and
far between. Around the middle of last
month, US suppliers were accepting
prices of US$ 370-375 per tonne for
the same mix.
In the latter half of September, how-
ever, the price decline was more pro-
nounced as buyers became ever more

reluctant to confirm deals against a
volatile raw materials backdrop. At the
time of writing, HMS I/II 80/20 from
Europe is being valued some US$ 30-35
per tonne lower than in late August.

Resistance to lower offers
On the domestic US market, early-
September scrap price gains of
US$ 10-plus per tonne quickly evapo-
rated in line with the receding scope
offered by export outlets; latest senti-
ment suggests further erosion will
occur in October. And there has also
been resistance to some of the signifi-
cantly lower offers made available by
US suppliers into South East Asia, not
least because of the cheap billet avail-
able from China. During the course of
September, for example, the value of
HMS I/II 80/20 shipped in containers
from the USA to Taiwan declined by
some US$ 20 per tonne in the space of
a week and was down towards the
US$ 320 mark by the month’s end.
Tokyo Steel, Japan’s leading consumer
of scrap, is offering the market some
stability by holding its domestic steel
prices for October deliveries despite the
adverse impact on costs from a depre-
ciating local currency; from a level of
just above Yen 100 to the US dollar

early in August, the exchange rate has
since slid to almost Yen 110 to the
greenback at times. As for the com-
pany’s scrap purchasing prices, three
rapid-fire increases earlier in Septem-
ber were followed by a drop of US$ 5
per tonne late in the month.

Go-to supplier
Japan’s dominance as China’s go-to
overseas supplier of ferrous scrap was
again apparent in August despite a
16.5% year-on-year decline in the vol-
umes supplied by the former to the
latter. Japan provided 163 689 tonnes
of the 206 253 tonnes that China
imported from all sources during the
course of the month; the grand total
represents a fall of almost 40% from
the 335 922 tonnes of ferrous scrap
imported by China in the eighth month
of 2013 and a drop of 17% from July
this year. Retreating iron ore values
have been widely identified as the main
reason for China’s reduced appetite for
scrap imports (see the ‘Competing com-
modities’ section of this report).
Philip Bell, president of the US Steel
Manufacturers Association (SMA), told
the 7th China International Metal
Recycling Conference in Beijing that
the projected growth in China’s scrap

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