The saying “Fools rush in where angels fear to tread” can aptly sum the meanderings in global scrap market.

Typically in the pre recession era scrap prices have trotted on the footprints of finished product prices. However the recessionary shock seems to have thrown all rational dynamics haywire. The ever sagging demand of finished products has left ample vacuum for entrants. Turkey has been the pathfinder in this dark alley being the consumption hub of this seed material.

Turkish mills have been ruling the roost during this recessionary morass waxing and waning the prices with its strategic consumption pattern. In April the catastrophe by almost USD 100 per tonne within a week was followed by an equally meteoric rise in July to August by USD 120 per tonne within a month.

Ever since the scrap levels have been inching towards record levels of USD 410 per tonne to USD 415 per tonne CNF Turkish port in the last few days .The prices for European and Russian scrap keep at USD 395 per tonne CFR. In ASEAN countries it reached USD 420 per tonne CFR. Japanese H2 scrap is offered at USD 375 per tonne to USD 385 per tonne CFR in Korea and China and at the prices up to USD 420 per tonne CFR in Taiwan.

The reasons for this unprecedented spike in scrap levels can be summed up as follows

The immediate reason for frenzied scrap purchases is acute shortage of scrap in global market. In summer the collecting volumes were rather small, and the demand grew significantly recently in Eastern Asia, Japan and the USA.

Turkish companies resumed purchases and thus gave the suppliers the opportunity to return the prices to the level of the H1 of August.

The gradual improvement in production as the global economy comes out of hibernation has led to hiked demand.

The coming weeks will see no let up in prices escalation as Middle East opens after Ramadan rearing to replenish stocks.

But as per latest reports, Europe which is warming up after the holidays is not responding well to the positive sentiments and in last 2 days price of scrap has gone down by about EUR 10 per tonne. The negative sentiment for scrap is arising out of weakness in long product market in Europe as nobody wants debars and mills have to decrease if they want to sell. Billets are reported to have gone down by EUR 20 per tonne.

In addition the wild card of Turkish steel mills withdrawing to pressurize traders and China vacillating some mild aberration cannot be ruled out towards end September.

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