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Weak demand in both the UK domestic and export steel scrap markets has created a glut of supply and brought a raft of cheaper offer prices into British steelmakers for monthly delivery settlements in March, trade sources said in the week ended Tuesday March 12.
Demand has fallen from UK steel mills, some of which reckoned that the volume of orders for steel products has dropped by around 15% for sales in March and the second quarter, they said.
And the UK export market has also been affected by a combination of weaker demand into deep-sea destinations such as Turkey and the Indian subcontinent.
The fall in export demand has been exacerbated by observance of the Islamic holy month of Ramadan in countries such as Turkey and parts of the Indian subcontinent. The holy month started this week, resulting in slower trading activity, and is due to end around April 10.
The security issues in the Red Sea and weakening prices for iron ore also pointed to a negative near-term outlook for steel scrap exporters in Europe, trade sources said.
“Certain UK mills are now negotiating prices for weekly as opposed to monthly settlements,” one major steel scrap processor and exporter told Fastmarkets.
“On new production scrap grades, the market is down by ￡35-50 [$45-64] per tonne, depending on the consumer. UK demand for that grade is well below production levels and so, with container sales not being prevalent, it is forcing those scrap prices down [beyond] old steel scrap price levels,” the processor said.
“Container sales are sporadic and not at the levels we have seen previously,” the processor added. “Disengagement and reductions in Turkish pricing have also played their part in pushing prices down, and we have seen dockside pricing follow suit, with sharp declines in cut grades from [the prices heard in] early February.”
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The UK steel scrap monthly delivery markets into domestic consumers were now down to a level last seen in October 2023.
Fastmarkets’ monthly price assessment for steel scrap, 1&2 old steel, domestic, delivered consumer UK, was ￡200-215 ($257-276) per tonne on March 11, down by ￡30 per tonne, 12.63%, from ￡230-245 per tonne in February.
The monthly price assessment for steel scrap, OA plate and structural, domestic, delivered consumer UK, was ￡220-235 per tonne on the same day, also down by ￡30 per tonne from February. In April 2022, this assessment was at a 29-year high of ￡335-350 per tonne.
UK low residual scrap grade prices fell by about ￡40 per tonne, while cylinder block steel scrap dropped by ￡20 per tonne, from price assessments made in February.
“The container market has all but shut down, meaning cashflow has shut down and exports have slumped,” another scrap processor said.
“Shipping costs are high, too high, so the market is saying, ‘why buy scrap now when it may be even cheaper next week?’ Iron ore pricing is our market thermometer, and that market is dropping due to weaker Chinese demand,” the second processor said.
Steel scrap generation and demand weaker than usual
UK steel scrap prices typically go up in the winter months, with scrap generation declining in the colder weather because there are fewer demolition projects and weaker automotive sales. But prices generally drift downward in March when temperatures rise, encouraging more scrap generation and deliveries into yards.
The scrap market usually prepares for renewed consumer demand in the steel sector ahead of the second quarter, typically the busiest period of the year for steelmakers, while they look to supply products into the construction and automotive sectors.
But the strength of that expected renewed demand looked doubtful this year because some steel mills have noted weaker demand than usual.
“We have seen a reduction in demand for the coming weeks, probably by as much as 15%,” one steelmaker told Fastmarkets. “The cost-of-living crises across Europe are starting to bite. We have only had one scrap merchant engage on price so far, and suppliers reckon that there will be a considerable price reduction for March deliveries.”
Steel scrap exports
UK steel scrap export sales usually take up at least 80% of the country’s 10 million tonnes per year of scrap. The country exported 7.44 million tonnes of steel scrap in 2021, according to data from the container shipment industry.
The export market will be pivotal in the near term for the direction of British scrap pricing through June, when the European markets typically become quieter ahead of seasonal slowdowns in heavy industry in July and August.
“This is all starting to look like what happened in 2008, during the financial and economic crisis, when European steel scrap export prices in general crashed to around $200 per tonne, from about $500 per tonne, in only two or three months,” a third scrap processor and exporter said.
“With virtually no container export business because of security issues in the Red Sea, as well as Ramadan, the UK is full of steel scrap and the British steel mills are not requesting big volumes,” the third processor said.
The cost per container for shredded steel scrap sent to India from the UK was currently around $1,650, according to UK-based trade sources.
Light iron scrap prices in the UK also fell in the week ended March 8, marking the first considerable change since the start of December against weaker offer prices between scrap traders and with a sudden glut of supply, industry sources told Fastmarkets.
Fastmarkets’ weekly price assessment for steel scrap, 5C, loose old light, domestic, delivered inter-merchant UK, was ￡145-160 per tonne on March 8, falling by more than 15% from ￡170-190 per tonne a week before. fastmarkets
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