CRU: Scrap prices holding steady with both demand and supply down

With weather and holiday disruptions hitting major scrap markets, both demand and supply have been winding down. Demand was already weak, but falling steel prices have further reduced mills’ scrap restocking.

Scrap holds steady as market dynamics balance out

The CRU MPI edged up from 301.8 to 303.1 in July with scrap prices across major markets holding largely steady. The already weak demand for scrap weakened further, but this was largely offset by simultaneous reductions in supply, most notably in Asia.

In Asia, weak steel demand and declining prices weighed on scrap prices, but this was largely counteracted by reduced supply. This reduction was primarily due to heavy rainfall across much of the region, but the weakness for overall input demand overrode any price support from this. Chinese scrap prices held stable after a very moderate increase in the previous month. Weather-related disruptions hit collection rates in eastern China, but demand was also reduced with further constraints on profitability for steelmakers.

In east Asia, Japanese scrap prices have held steady in U.S. dollars, but rose slightly in Japanese yen as the currency continues to depreciate. Demand in Vietnam, a key export market for Japan, was subdued amid weak domestic demand for steel.

Turning to Europe, there was also stability for scrap prices. There have been indications of price falls from market participants, particularly in Italy, but these have not yet materialized. The market is readying itself for the upcoming summer holiday period, though there is less restocking than usual given the weak demand and plans to extend mill outages. Trade within the region is low with local supply generally satisfying demand, with relatively high transportation costs reinforcing this. Scrap prices have been on the rise in Turkey, with the slow increase in imports and reduced concerns over geopolitical issues adding support. However, this is yet to feed through to EU prices.

In the U.S., price changes varied from stable to down depending on region, but the overall story is similar to other regions, weak demand and supply. Steel prices have been under pressure over recent weeks, which has prevented any notable upward movement for scrap. There is some level of optimism in the market however, contrary to other regions, given that mills in Detroit and the Midwest have reported larger deals in the previous month, fueling speculation for a market turnaround.