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Ferrous metals - 23 November 2012

At last, after months of universally bad news, ferrous metal merchants in the UK are daring to hope. It is a cautious and probably fleeting optimism based on nothing more than a few bits and pieces of good news filtering down from the global marketplace, but it is the best we have seen for some time.

Despite this, nobody really expects Spain and Italy to re-enter the market with any strength; Turkey, on the other hand, has shown strong signs of an upturn, and with UK mills still buying at prices marginally above October levels, the outlook in the EU is looking up. Market trends and price changes in India and China are mixed and hard to decipher, but there is encouraging news from Pakistan and Japan. Other countries in the Far East are at least holding their own.

Primarily driven by the need to restock and the aggressive pricing policy of exporters, prices for steel scrap imports into Turkish mills have been climbing since 1 November. Also helped by hurricane Sandy and the subsequent storms, which temporarily drove traders in the US out of the global market, the price upturn has been justified by limited availability of scrap at the yards in tandem with growing demand from Turkish steelmakers. Russian suppliers were the first to benefit with one firm getting $386 (£242) per tonne carriage and freight (C&F) to Turkey for 20,000 tonnes of A3 steel scrap. But EU suppliers were not far behind and they had the advantage by the end of the first week in November. First off the mark, a Belgian merchant closed a sale of 25,000 tonnes of HMS 1&2 (70:30), 5,000 tonnes of shredded scrap and 5,000 tonnes of plate and structural (P&S) at $373/tonne C&F. This was followed by a UK sale of 25,000 tonnes of HMS 1&2 (80:20) and 5,000 tonnes of shredded scrap at $387/tonnes C&F and $392/tonne C&F. Only a week earlier, HMS 1&2 (80:20) had been $370-375/tonne C&F.

Turkish mills were actively negotiating with steel scrap suppliers during the second week in November, but by this time, fewer contracts were being finalised. This was mainly because both sides were finding it hard to reach a consensus, with exporters pushing for price increases with limited supplies, while buyers were finding it difficult to book material at higher tags while being unable to make comparable rises in finished product prices. The position then eased and, by the end of the week, Turkey had signed additional contracts with EU traders. In particular, one of the UK’s largest firms sold a 32,000 tonnes mixed lot, in which can bales were priced at $326/tonne C&F for Turkey, HMS 1&2 (80:20) at $396.5/tonne C&F and shredded scrap at $406.5/tonne C&F. At this time, traders in the US were still not selling and nominal prices stayed at $400-405/tonne C&F for Turkey for HMS 1&2 (80:20) and $405‑410/tonne C&F for shredded scrap.

By 10 November, Turkish mills were only signing contracts with scrap traders who were offering the lowest prices and best quality. This did not include scrap firms from the US east coast, which were by now trying to push export offers up due to limited supply and stronger prices for some scrap grades in the their home market. As a result, US suppliers offering HMS 1&2 (80:20) at $405-415/tonne C&F for Turkey, shredded scrap at $405-415/tonne C&F and P&S at $410-420/tonne C&F found their prices too high for Turkish mills, which continued giving preference to EU sourced steel scrap. However, this had all changed by the 12th when Turkish mills resumed buying from suppliers in the US purchasing a mixed lot of HMS 1&2 (80:20), shredded scrap and P&S at $410/tonne C&F for Turkey, $415/tonne C&F and $420/tonne C&F. By the 15th, there were no reports of new deals with EU exporters as Turkish mills reacted to the price hikes and reduced demand. As a result, EU quotations are nominal, but HMS 1&2 (80:20) is still estimated at $400-405/tonne C&F for Turkey; though HMS 1&2 (70:30) has now gained $1 - 6/tonne, reaching $380-385/tonne C&F given reports of new contracts.

During the past month, little has changed in Spain, once one of the UK’s main outlets, or less significantly in Italy, but both countries have successfully increased their selling prices for rebar and other finished steel products to compensate for the rise in scrap prices. Spain has also managed to sign a number of small deals with buyers from other countries, but demand from their main outlets in Algeria are slack because no one needs to restock. Nonetheless, they have raised the official price for rebar by E15-20 (£12-16) per tonne over the past two weeks. This now stands at E485-490/tonne and regional demand will almost certainly recover by the end of November. On 16 November, one of the largest Italian sections producers announced an immediate price rise of E20 per tonne on all new orders with January shipment. This was due to significant upward movements in scrap prices, which might continue for several weeks.

Other nuggets of good news emanating from the global market place include Tokyo Steel’s £8 per tonne increase in the purchase price of steel scrap at all its plants in Japan. In addition, India’s JSW Steel has announced it will modernise one of its two Corex furnaces at Vijayanagar in the state of Karnataka. To allow work on the project - designed to raise the unit’s steelmaking capacity from its current 10 megatonnes per year to 12 megatonnes per year by 2014 - the facility will shut down from October to January 2013.

Last month, JSW Steel melted 7.62 megatonnes of steel, up 34% year-on-year. The output of longs reached 1.65 megatonnes (up 78%) and that of flats 4.42 megatonnes (up 2%).

In Pakistan, the Abbas Steel Group has just started hot trials at its EAF shop No 1 (100,000 megatonnes per year). The new shop will provide billets for a 200,000 megatonnes per year rebar and wire rod mill, which is now running at 25% capacity due to a shortage of semis. When the second melt shop (100,000 megatonnes per year) scheduled for completion in 6-8 months is operational the company’s long product complex will be fully self-sufficient in feedstock.

This project also involves construction of a third EAF shop with a capacity of 500,000 megatonnes per year and a heavy-section mill with a capacity of 60,000 megatonnes per year; work is due to finish by the end of 2013.

In the UK, steelmaker SSI is to launch a share issue worth about £265 m in a move that will enhance its long-term financial stability. The Thailand based firm, which employs 1,500 workers in Redcar, Teesside, has been hit by a perfect storm of rising raw material costs and plummeting prices for steel slab on the global markets.

Phil Dryden, chief executive of SSI’s UK arm, said: “The approval of the plan is very good news for the SSI Group, and for SSI UK here on Teesside, particularly as it is on the back of what has been a very difficult period for steel markets since our operations restarted in April.

“We are now looking forward to a successful conclusion of the fundraising exercise during November which will give our business greater financial stability as we head in to the New Year.”

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