Current Scrap Metal Prices

Metallurgical companies from China and other East Asian countries are returning to the market after the two-week New Year vacation by Chinese calendar. During the vacation flat steel prices in the USA and Middle East countries significantly grew and European manufacturers announced the increase in the Q2. At the same time, just before the holiday (Feb. 14) HRC prices in Asia fell below the average global level due to cheap products supplies from China. In the first half of Feb. Chinese companies offered HRC and plate averagely at $540-550 per ton FOB. If these quotations remain, Chinese products would be competitive now in the Gulf countries and even in Europe, which would worry the local manufacturers.

However, today this situation looks hardly possible. Asian steel melting companies, having returned to the market after the holidays, started the prices increase. In particular, Japanese metallurgists offer HR sheet for automotive at $700 per ton FOB on March contracts and JFE Steel announced its intention to increase HR and CR steel quotations by $200 per ton in the Q2. Ordinary commercial products prices do not increase as much, however, Korean POSCO and Taiwanese China Steel have already announced HRC and plate prices increase by $20-30 per ton. Obviously, in March HRC export quotations of the leader Asian manufacturers will amount about $600-630 per ton FOB.

At that all suppliers are patterned to the growth continuation. Among the main reasons there is activity growth in all countries of the region and raw materials prices increase. Obviously, in April the expenses of Asian metallurgical companies for iron ore and coking coal are to boost. According to the estimations of some experts iron ore price will increase by at least 40%, and coal will grow at least by 45%. Recently Japanese metallurgists rejected the offer of Australian BHP Billiton about the increase of coking coal prices by 55%. However, the specialists believe that the suppliers are unlikely to yield and it is steel manufacturers who will have to accept their conditions.

The necessary condition of steel products prices increase in Asia is the absence of the slow down in China. However, the situation in China is rather indefinite. Before the holidays Baosteel determined the direction for all market participants having announced March quotations increase for its steel products by 200-700 yuan ($29-102.5) per ton, including HRC (by 300 yuan or $44 per ton). Other companies followed the example of the recognized leader of the market; however, the announced increase was more moderate. This week, after the resumption of the operation in spot market flat steel domestic prices somewhat increased as well. Average level of HRC quotations, in particular, exceeded 3800 yuan ($556) per ton from the stock. The majority of the manufacturers count on the continuation of the prices growth which is necessary to cover the increasing raw materials expenses.

However, at the same time new slump threatens Chinese market due to excessive supply. National metallurgical companies, as a rule, did not stop the production process during the holidays. As the result, steel products stockpiles, which exceeded normal demand before, increased even more. At that almost all traders are planning to force the sales in March hoping for the spring rally. This can cause the products overflow in the market.

Meanwhile the perspective of acute demand increase after the holidays looks rather indefinite. Chinese government, concerned by the uncontrolled crediting volume, gradually tightens monetary policy. This can restrict the main sectors of the economy, first of all, construction sector. That is why the primary increase in the Chinese steel market can be followed by new slump for several weeks.

However, afterwards the prices will resume the growth. Raw materials prices growth is the objective factor, and the metallurgists will merely not be able to keep from the response. However, in March and April big volumes of rather cheap Chinese HR steel and plate can appear in the market. In case of serious sales problems in domestic market, excessive steel in China will inevitably sold abroad.

Source: Rusmet.ru, Victor Tarnavskiy