The reduction in scrap generated in Australia is reducing the volume of material being offered for export from the country and raising prices for whatever material is being offered.
Covid-19 transmission in the country is affecting scrap supply in southeastern Australia - where strict lockdowns are in place - and in areas where outbreaks have been less prevalent, such as the country's West Coast.
“Scrap is becoming scarce, and so, I foresee prices going up further in September,” a major South Asian exporter source told Fastmarkets on Monday August 31.
“Even prices in Chennai, India, are going up because Australian scrap, which usually comes, is not being offered,” he said.
Australia and New Zealand have become more significant exporters of steel scrap to Asia in the last year. Oceania countries exported 250,016 tonnes of scrap to India in 2019, up 24.5% year on year, according to data from the International Bureau of Steel Statistics.
Australia-origin scrap was largely out of the Indian market during the past week, but a small quantity was offered in containers to India at $285 per tonne cfr Nhava Sheva on August 28. This was $5 per tonne more expensive than material from the United Kingdom and $5 per tonne less than offers for material from the United Arab Emirates.
Fastmarkets’ weekly price assessment for steel scrap, HMS 1&2 (80:20 mix), import, cfr Nhava Sheva, India was $280-290 per tonne on August 28, unchanged week on week, but sheared HMS was being sold at as much as $300 per tonne cfr Chennai by Monday, the exporter said.
In Bangladesh, the absence of containerized Australian scrap has given more market share to Brazilian exporters of scrap, with several deals closed from the country in the last few weeks.
Scrap generation suffocated
A scrap exporter on Australia's West Coast told Fastmarkets that there had been a gradual slowing in demolition projects in and around his area, thus choking off scrap supply.
“It is a snowball effect. I can see that, in another month, we will be scrambling around for scrap,” he said.
“We have to go further out of our area to get scrap, then we get to the point of no return, where that is uneconomical to do,” he added.
Conditions are even worse in the state of Victoria. The area entered a strict lockdown on August 6 following a sharp rise in Covid-19 infections largely clustered in Melbourne, the state capital.
“One scrap buyer in Victoria said he opened at 8am and closed at 2pm, and there was not one delivery in that time,” an Australian trader said.
“A lot of scrap is generated from [demolition], and the Australian government has also blocked construction and other non-essential work in Victoria,” he added.
The strengthening Australian dollar is also making scrap prices more expensive, the West Coast exporter said, partially due to rising prices for iron ore - of which Australia is a major producer.
The currency was trading at A$1 to US$0.736 on August 31, according to currency exchange website Oanda.com. That is its highest level since December 2018, and it is up from A$1 to US$0.718 one month earlier.
That means that steel scrap valued at A$400 per tonne cfr on August 31 is US$9 per tonne cfr more expensive than it would have been one month before.
“Our nemesis is the US dollar,” the exporter said. "It is rare that overseas demand for scrap goes up and the Australian dollar goes down. It happens once a year sometimes."
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Supply of steel scrap in Australia is being squeezed by regional Covid-19 lockdowns and a general decline in economic output, scrap market participants have told Fastmarkets.