Home > Metal News > STEEL SCRAP: Will The Dark Clouds Clear?

STEEL SCRAP: Will The Dark Clouds Clear?

Pin It DMCA.com

by - 10/29/2015 5888 Views

The Global Dilemma!

Have you ever been on a roller coaster ride and experienced a “STEEP DOWNFALL”? Well, the Aluminium scrap market is experiencing the STEEP DOWNFALL. This has been the situation for several months for now. Standing at the threshold of November 2015, the popular consensus is that a host of unfavorable trends & winds – from weaker exports to low alternative iron prices to sufficient scrap supply – will bring down a decrease in ferrous scrap prices in Nov ’15. Based on my market research, I would say that it is unlikely that prices will make any meaningful recovery in secondary aluminium, and are in fact likely to make further, substantial falls.

The big picture is that China and India’s demand for raw materials has driven prices way up and I fear that we may be in a bubble right now. The world economy is terrible, as is the U.S., although if any country is going to survive it, it will most likely be China so there will still be a demand. But as the U.S. economy continues to tank and energy prices continue to rise, there will be less demand for Chinese products. Since the U.S. is major export destination for Chinese manufactured goods, Chinese production will slow and so will the demand for scrap from the U.S.

The World Steel Association forecasts that global steel demand will decrease by 1.7 percent in 2015, before growing by 0.7 percent in 2016. However Chinese demand is seen falling both this year and next, by 3.5 percent and 2 percent respectively. The steel industry in the spotlight this week, is in a pathetic condition with both China and the U.K. warning about the hit from the dramatic “no demand”, particularly from the world's second-biggest economy.

Steel prices have held at $170 per ton since October 8, having fallen sharply over the last year from above $400 per ton. (http://www.cnbc.com/2015/10/28/steel-demand-evaporating-at-unprecedented-speed.html )

On Wednesday the 28th Oct’15, the deputy head of the China Iron and Steel Association warned that demand for the ferrous metal was waning fast. "China's steel demand evaporated at unprecedented speed as the nation's economic growth slowed. As demand quickly contracted, steel mills are lowering prices in competition to get contracts," Zhu Jimin, deputy head of the China Iron & Steel Association, said on Wednesday at a briefing in Beijing, according to Bloomberg. His words came after U.K. parliament held a special committee on Tuesday to discuss how to support the British steel industry, which was described as "facing terminal decline."

"The U.K.'s steel industry has been dealt a series of major blows in recent weeks and months. It is facing terminal decline, even though it is an essential foundation for other parts of our economy like aerospace, construction and automotives," Iain Wright, the politician chairing the business, innovation and skills committee for the U.K. Parliament, said on Tuesday the 28th Oct ’15.

The slump in steel prices can be attributed to the broader rout in metals and other commodities over the last 12 months, as well as the ramp up in world steel production this millennium. Total world steel production almost doubled between 2000 and 2014, mostly driven by increases in Chinese output, according to a U.K. parliamentary briefing paper. Growth in production has slowed considerably since then, but this has proved insufficient to compensate for the slump in demand.

In the case of China, heavy investment in infrastructure in the last decade raised demand for industrial goods like cement and steel, encouraging manufacturers to expand production capacity. However, capacity now exceeds demand in several sectors, with steel, cement, aluminum, glass panels and shipping among those affected.

"Resolving overcapacity is not an easy task: It may be unfeasible to halt planned or in-progress projects and reducing capacity may mean job losses and risk social unrest," Alberto Gallo, head of macro credit research at Royal Bank of Scotland, said in a research note on Monday. ((http://www.recyclingsecrets.com/scrap-metal-e-waste-prices.htm)

The import market of steel scrap runs dim in India due to the high price and the sluggish steel market. At present, the prevailing import prices of HMS scrap 80:20 (1&2) are about US$470/t CFR Indian west coast.

Market participants predicted that the import market will not turn active in a short time. Currently, the Indian government carries out a lot of plans to curb the inflation; thus, the real estate market has remained soft. Accordingly, the steel demand has kept weak and the steel prices have run on a downward trend.

Keeping the eye brows raised & pondering as to why is the market behaving like it is? While John Ambrosia of scrap price bulletin had a talk with few dealers, “Scrap prices appear headed for another leg down as mill demand softens further in November. Destocking throughout the supply chain persists, leaving excess inventories across all metallic,” one dealer said.

Another dealer said that even bigger forces at work are helping to suppress prices this month. ““Mill scrap demand is lower and will only get worse. Integrated mills are announcing shutdowns. Imported steel continues to flood the US market,” he said. “We won't hit the bottom until we see signs of improvement in steel order books and production.” (http://www.scrappricebulletin.com/)

Most opinions heading into early November are that prices could drop more in the 5-10 percent range, or somewhere from $10-$20 depending on the grade.

Additionally, mill demand could be down this month, as steelmakers rely more on home and captive scrap as well as iron ore and other alternative metals. In a domestic market that has been reliant mostly on domestic demand throughout 2015, even a slight mill retreat could hurt.

In any case, judging the present scenario, I'm not vouching for the prices staying the same, or bothered about the market price oscillations. I would abruptly sell my scrap as soon as I have a good accumulation because to me, waiting means not having the capital available to invest in other deals and make more money. In my mind, the possibility of receiving $30 or $40 less per ton from the sale value now is more than made up for by having the cash from that sale to quickly use it to do the next deal. Studying the given global scenario I do not see any factor that would boost the market for a long period from now on, albeit except for some miracle.

 

Category : Metal

Tags : Steel Scrap, Steel Scrap Price, Metal Price, Metal Market, Steel Scrap Market Trend, Steel Scrap Current Price, Steel Scrap Market, T


Share this news
About Georgy Abraham

As the bright morning of 28th May dawned in the year 1972, in the fulfillment of time according to the plan & will of Almighty Godbrought me forth into this world and I was brought up & educated in Orissa. My parents provided me with the best of education in an English medium school with high standa .... more info

Comments


Be the first to post a comment.