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Ferrous market report - July 6 2013

A continued drop in prices over the last few weeks has served to further embed a general mood of doom and gloom in the UK ferrous market.

All the merchants that MRW spoke to reported a drop more or less across all categories, with an average fall of £10 to £15 per tonne in the early part of June becoming a £20 plus fall towards the end of June, compared to the same period the previous month.

Much of the stagnation has been traced back to the international markets where demand for imported scrap has been weakening.

At the recent meeting of the Bureau of International Recycling Ferrous Division in Singapore, president Christian Rubach observed that the prosperity of two years ago has been replaced by increased pessimism, austerity programmes, low consumption and protectionist measures.

Other industry news was mixed. Tata Steel reported a loss for the final quarter of the financial year, with a near 30% drop in European demand since 2008 to blame, according to the firm.

However, the firm also announced a five-year deal, worth £9 million annually, to supply aerospace steel to aircraft manufacturer Safran Group, following the commissioning last year of two Vacuum Arc Remelting furnaces at Tata Steel’s Stocksbridge works in South Yorkshire.

SSI unveiled its new pulverized coal injection plant, which uses cheaper coal to fuel the furnace. It is hoped the £38 million investment will improve profitability at the Redcar operation.

Nevertheless most UK operators expect not much to change over the remainder of the summer as the impact of European operators shutting down for the holiday season filters through to their operations.

Merchants in the North East report erratic but overall slow trading, with demand low, although opinion is divided about whether prices would continue to drop.

One said: “Business has been terrible – it’s all fits and starts with no two days the same. Prices are down £20-£25 tonne, some people are talking about it going down even further.”

According to one Midlands merchant prices were down a similar amount, but business was deemed “OK” and on a par with last year. However an overarching uncertainty and lack of clarity about the future pervades.

One exporter in the North West said the export market had been hit by a triple whammy of unrest in Turkey, currency fluctuations and India’s new 2.5% duty on iron and steel scrap imports.

“We’re absorbing that, there’s nowhere else for it to come off. It has to come straight off our bottom line,” he said.

Global events meant trading was “really depressed”, according to one Scottish merchant.

“Usually the buying is the hard part, but now it’s the selling that’s the problem,” he said. “It’s harder getting a export market for the stuff.  The Chinese market is cooling off, demand is falling.”

The South follows the national trend of falling prices, quiet yards and a conviction that there would be no real change until the autumn, although rumours of possible further price decreases in coming weeks have been heard.

Some smaller operators appear to be stockpiling what material comes their way in the hope of an improvement in trade.

One merchant in South Wales said that he would hang on to scrap until September or October in the hope that prices will go up.

Another operator in the Wales reported that it had cut margins to keep hold of gate trade, and that some suppliers were now bypassing smaller yards and willing to transport material directly to the larger operators for a better price.

The cash ban is still a sore subject for several smaller merchants MRW spoke to across the UK who blamed it for scaring off “one man band” suppliers, and having a significant impact on trade in some cases. Meanwhile one merchant said that some operators were still flouting the ban.

The cost of meeting the new regulations, combined with increased diesel costs and low scrap prices is combining to make life increasingly difficult for smaller, more rural merchants.

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