WEAK GLOBAL STEEL DEMAND HAS NEGATIVE
IMPACT ON INTERNATIONAL FERROUS SCRAP PRICES - MEPS
Brokers remain divided over when the current scrap price
cycle will bottom out. The majority plan to limit purchase tonnages and observe
market developments in key steelmaking raw material markets – particularly, iron
ore and metallurgical coking coal.
In China, provincial quotations fell on average by 2.3 percent in May. Low
trading volumes and rising finished steel inventory levels have highlighted the
necessity for domestic steelmakers to scale back production. MEPS’ sources do
not expect to witness a significant recovery in scrap transaction values in the
Negative price movements were witnessed in three of the four Indian regions
researched by MEPS. The Metal Recycling Association of India (MRAI) has
criticised the Ministry of Finance’s decision to impose a 2.5 percent custom
duty on imported ferrous scrap material. The trade association contends that the
de facto protection given to the direct-reduced iron (DRI) sector is short
sighted and will only result in higher finished steel quotations. Currently,
Indian scrap collectors and processors are unable to satisfy the requirements of
the domestic steel industry. Importers have begun to cut back their procurement
targets for foreign material.
Effective price settlements for the three bellwether cut grades tracked in the
United States declined in May. Brokers remain bearish over the prospect, that
the month of June, will be the bottom of the current scrap price cycle. Local
steelmakers have downgraded their scrap buying programs and undertaken scheduled
maintenance downtime. Additionally, no serious shortages are foreseen.
Favourable weather conditions have led to healthy flow of material to yards.
Exporters, operating out of East and West Coast ports, report that trading
volumes to their main offshore customers have stagnated.
Negative price expectations developed in Turkey. Internal steel mills are
operating with minimal inventories, in view of the persistently weak domestic
orders for finished steel products and dull overseas demand. Several steel
producers have temporarily withdrawn from the offshore scrap market. Deliveries
to downstream steel consuming industries were weaker than forecast.
Taiwanese containerised scrap transaction values fell in May for the third
straight month, and have now reached their low point in 2013. Steel consumption
is expected to enter a seasonal lull in July and August as higher temperatures
will slow down activities in the construction sector. The price premium for
domestic scrap material relative to imports has remained negligible.
Negotiated settlement prices in South Korea declined for a second successive
month. Local steel mills plan to persevere with conservative scrap inventory
levels, due to weak order-books from key consuming industries and traders.
Japanese and North American scrap brokers are reluctant to offer further
concessions, fearing such measures would be counterproductive and only fuel more
price instability. Support from other global markets remains limited.
Effective transaction values in the European Union have softened for the three
grades surveyed by MEPS. Selling figures, in euro terms, last fell to current
levels in November 2012. Inventory rebuilding in this region has been postponed
due to weak underlying demand for finished steel and economic uncertainties in
the Mediterranean countries. The majority of active steel buyers are purchasing
hand-to-mouth, in anticipation that the price trend will remain negative in the
MEPS - Ferrous
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