The US dollar denominated ferrous scrap selling prices declined in October as the global steel market turned down. The uncertain economic climate has created doubt in the minds of steel buyers about the short term prospects for the industry. Very few are prepared to build inventories. Mill order books are weakening. This has translated into lower demand for ferrous scrap.
According to UK based MEPS, ferrous scrap prices are at their lowest figures for almost a year in most parts of the world. Underlying steel demand is clearly a factor. However, the appreciation of the US dollar in recent weeks against most other currencies has also been a key element in the ferrous scrap price declining.
Other steelmaking raw material costs have been slipping over the past six months. Coking coal and coke prices have been trending downwards in the EU. A similar picture has been noted for Canadian and Australian FOB hard coking coal export prices over the same period.
The same can be said for Japanese iron ore benchmark prices. Iron ore prices in other regions are also in decline.
The current situation is likely to extend until near the end of the year. Scrap collection rates are not expected to improve in the short term. However, there is the prospect of a return to inventory rebuilding in the steel sector around the turn of the year in many parts of the world. Improved mill order books and tight supply of ferrous scrap is predicted to lead to a revival in the market and increasing input costs for steelmakers. Moreover, the appreciation of the US dollar may be short lived if the euro zone sovereign debt problem is addressed in the next few weeks.
Source MEPS www.meps.co.uk