RESEARCH: Key takeaways from the latest Steel Scrap, Metallics tracker

• Chinese steel scrap prices were supported by firm downstream steel prices earlier this year, but they fell sharply over the second half of May. The drop in scrap prices in the latter half of the month came after authorities signalled a wish to cool down commodity prices, including those for steel and steelmaking raw materials. In turn, Chinese scrap prices were not expected to return to the levels seen in late April and early May because authorities were likely to take further action if steel and steelmaking raw material prices surged in the way they did previously.
• Similarly, the Chinese authorities’ announcements helped domestic prices for steel billet in the country to fall over the second half of May, presenting downside risk for billet exporters in Turkey, and by extension, Turkish scrap import prices. Recently, the opportunity for Turkish long steel producers to sell into China, and also heavily into Southeast Asia, encouraged mills to source scrap, driving up the import price in Turkey for Northern Europe-origin HMS 1&2 (80:20) scrap, to more than $500 per tonne during May. The price has retreated below the $500 per tonne mark since then, and we expect prices to slide a little further this month.
• In turn, this should have a knock-on effect on prices in regions that are key scrap exporters to Turkey, with European and US obsolete scrap prices regularly following Turkish levels. Nevertheless, with prices still relatively high in Turkey, compared with earlier in the quarter, they should provide support to monthly settlements across Europe and the United States.
• Meanwhile, Chinese steel scrap import volumes have risen, hitting 76,250 tonnes in May, the highest monthly total since late 2018. Increasing Chinese imports present an upside risk to prices, albeit that volumes were still small relative to major importers such as Turkey and India. In the near and mid terms, Chinese import demand was expected to be filled predominantly from regions such as Japan. This would contrast with waning Chinese demand for imported metallics, which should give metallics buyers in other importing regions, such as the US, increased negotiating power over prices.

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