Key takeaways from the latest Steel Scrap and Metallics Market Tracker

Coronavirus continues to shape scrap markets but tighter supply may partly offset lower demand

We have downwardly revised our ferrous scrap price forecasts for the following few months and, as a result, for the whole year of 2020, with the Covid-19 outbreak outside China stalling the markets. The Fastmarkets’ daily benchmark index for heavy melting scrap (HMS) 1&2 (80:20) scrap in Turkey declined by around $70 per tonne in the course of the month, including a $23.42-per-tonne drop to $201.13 per tonne cfr on Monday March 30 compared with the preceding Friday. The Turkish market is known to be capable of having a “domino effect” on ferrous scrap and iron metallics markets worldwide. With Turkish rebar struggling both domestically and on the export front, we will likely see price cuts in scrap markets across Europe and the United States.

To add to the downward pressures coming from Turkey, steel demand is hampered across the European Union. In Italy, for example, the government has ordered closures of all non-essential production operations in the country on March 21, with most steel operations closed according to market sources. The mill closures will further limit scrap consumption in the market, but tighter supply will likely partly offset weaker demand in the European scrap markets, we anticipate. While the collection of cut-grade scrap such as HMS may be obstructed by quarantine-related restrictions on the movement of people, we will also see lower availability of prime grades amid several temporary automotive production closures announced this month in both Italy and Germany.

Similar challenges are faced by the US scrap market with limited domestic demand and unfavorable situation on the export side. Turkey aside, demand from Asian buyers has also waned since the second half of last year. In particular, Southeast Asian buyers who source volumes from the US West Coast have benefited from the availability of lower-priced Japanese scrap, which has displaced some of the US volumes. US scrap prices are likely to fall in the short term due to a multitude of uncertain economic and geopolitical conditions threatening the market outlook, which include oil price drops, financial market uncertainty, and continued issues related to the spread of Covid-19.

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