Scrap prices jump with demand boom in key western markets

The CRUmpi rose by 11.1% m/m to 334.4 in December, which is the highest level since April 2022, when prices were still rising in reaction to the onset of the Ukraine war. The winter season held back scrap collection in northern hemisphere markets, while mills begun restocking in the lead up to the new year.

The demand surge was most noticeable in the US market, where orders from mills boomed while supply has been seasonally limited. Initially, mills were heard to be offering +$50 /l.ton m/m for #1 busheling but this grew to +$80 /l.ton as the market tightness became evident. Similar developments were seen for shredded scrap, which grew by $75 /l.ton m/m.

In Europe and Turkey, mills also started restocking recently, after holding off from purchasing for most of Q4. Idled BFs are expected to come back online and EAFs utilisation rates are expected to rise in early 2024, assuming that demand improves. Scrap supply is limited as collection is low seasonally, while the limitation was exacerbated by the fact that collection was also weak in previous months due to low prices. In Germany, prices rose additionally due to higher transport costs, specifically from higher demand for trucks, while Turkish imported HMS1/2 80:20 price increased by more than $50 /t m/m.

Turning to Asian markets, higher longs demand and prices supported scrap price increases. Pre-new year restocking demand in Southeast Asia was another supporting factor for higher regional prices. This restocking led to Vietnamese import prices jumping $15 /t m/m. Japanese export prices were supported by this increased demand, despite the neighbouring South Korean buying market being much less active. The higher export prices from western markets, particularly from US offers, further assisted Asian scrap sellers to raise prices, however, the increase was much less than that seen in the USA and Europe.

Additionally, Chinese scrap demand rose on the improved outlook following supportive macroeconomic policies from the government, which boosted steel prices and improved mills’ margins. The demand increase was particularly noticeable from the higher EAF utilisation rate and higher scrap rates in BOF operations, but increased domestic supply partially offset the rise in demand and Chinese scrap prices increased but this was limited to RMB50 /t m/m.

Ore-based metallics rise in tandem with scrap

Ore based metallics prices also rose m/m, with pig iron price increases closely following scrap’s. Support primarily came from the rise in scrap prices, but also from tightening pig iron supply. Brazilian domestic consumption decreased but slower outflow stemming from logistical issues extended lead times. In the CIS, Ukrainian exports decreased with higher domestic consumption. Ukrainian seaborne exports have returned, but this route is prone to risks due to the Russian navy presence in the Black Sea, and so could suddenly be reversed. Russian pig iron exports were weak in November due to soft demand in export markets, while relatively high domestic demand amid low availability is expected to keep exports low.  Inventories in the USA are currently sufficient, but extended lead times from exporters will likely result in higher prices and lower pig iron rates in steelmaking in the short term.