Scrap Metal Prices and Scrap Metal Auctions

How far will the stimulus packages announced by various countries impact the consumption of steel as steel prices recovered prices recovered in Asia which was attributed to seasonal recovery.

The outlook still remains uncertain on the demand front, given the concerns over the implementation of the packages and persistent deterioration in the consumer confidence, coupled with the worsening job market, Prabhudas Leeladhar said in a steel sector update.

Hot Rolled Coil (HRC) prices plummeted sharply in the European and American markets due to continuing decline in demand. Leading steel producers expect the prices would once again slide given the increased liquidity requirement of the mills to redeem the loans and made incremental spring festival payrolls before the year end. The fall would be further substantiated by the resumption of the production at various mills coupled with no substantial improvement in demand.

Production cuts would undoubtedly bring normalcy in the steel prices and inventory levels. However, much would depend on the future demand outlook because various data points suggest sharp contraction in demand, Prabhudas Leeladhar pointed out in its report.

Last week the Benchmark HRC prices in China rebounded ~20% to US$515 per tonne from the lows of US$429 witnessed in the week ended November 18, 2008 (33month low) based on the weekly SBB price data for the week ended December 16,
2008.

While the long product prices (Bar) have stabilized in the range of US$500-514, they are up ~11% from the lows of US$462 made on October 21, 2008. The rise in the Chinese prices is primarily led by increased seasonal activity ahead of spring festival and reduced supply coupled with production cuts. Chinese producers expect the steel as well as raw
material prices to fall once again on the premise that mills and iron ore suppliers may dilute their inventory in the market for cash to redeem their loan and made incremental spring festival payrolls before the year end.

On the other hand Flat product prices in US and Europe haven’t bottomed out. Prices in
Flat product prices in US are quoting at ~12-month low of US$605 while prices in northern Europe markets are ruling at 10-month low of US$750.

Prabhudas Leeladhar has recommended maintaining Underweight on steel sector in view of demand fall in auto, housing sectors apart from infrastructure and liquidity crunch.

Indian ore (63.5% Fe) price, CNF the Chinese port, recovered sharply ~10% during the week ended 16th December 2008 to seven-week high of US$81 per tonne. This was in the wake of Chinese producers switching gradually from contracts to spot market, since the differential between both the routes have widened by ~30-35% (on CIF) in the favour of spot prices. But traders believe that the rebound is more to do with the tactics applied by the Chinese producers to bring the leading miners on their desirable terms, with
a reduction of 40% in the contract prices from the previous contract price of
US$86.

The brokerage has given a Reduce rating for JSW Steel with a target price of Rs 217, Jindal Steel with a target price of 853 and Sell for Monnet Ispat with a target of Rs 114.

Courtesy: www.commodityonline.com

Filed under: Steel Prices, Steel Scrap