Global availability of deep-sea ferrous scrap bulk cargoes is poised to rise next week, adding to the growing pressure on the Turkish scrap import price over the past three days.
Higher availability follows a further drop in deep-sea scrap exporters' dockside purchasing prices, which are expected to fall to 2019 lows next week. Dockside prices in some regions, such as Boston in the US, have already fallen this week to the lowest in nearly two-and-a-half years.
The Argus daily HMS 1/2 80:20 cfr Turkey steel scrap assessment fell by $7.50/t to $270/t yesterday after consecutive sales by US suppliers at lower prices following the announcement on 23 August of China's retaliatory tariffs on around $75bn/yr of US goods. A UK supplier is also understood to have sold multiple cargoes at consecutively lower prices into Turkey since the middle of last week.
This initial dockside drop has been driven by the Turkish price fall, but there are now indications that US and European domestic scrap markets are likely to weaken in September, which would drive more material to export docks in both regions and swell the availability of deep-sea scrap cargoes.
Delivered-to-mill US and European domestic scrap prices for September delivery were highly dependent on seaborne price movements in the second half of August, which already indicated the fragility of demand in those domestic markets.
The HMS 1/2 80:20 cfr Turkey price has fallen by $14.40/t since 15 August, when most US and European domestic scrap markets finished settlements for August delivery. US and European domestic scrap market participants said this week that September delivery prices could now fall by a minimum of $10/t and €10/t from August.
The combination of lower seaborne and domestic prices is likely to see many deep-sea scrap exporters able to purchase dockside material on a delivered dock basis at the lowest levels this year by the middle of next week.
One US exporter is bidding $215/gt delivered to dock for #1 HMS this week, a Netherlands exporter bid €207/t delivered to dock for HMS 1/2 material yesterday, and UK exporters dropped dockside purchasing prices to £170-180/t delivered to dock this week.
Scrap flows are still slightly limited because collection rates are yet to ramp back up from the summer holiday lull. This means exporters can only request small price reductions this week to prevent scrap flows from drying up.
But by next week US and continental European domestic scrap market participants will have a much clearer understanding of how much of a domestic delivered mill price decrease will be implemented for September. Given that the Turkish scrap market will probably still be under pressure next week, sub-suppliers in scrap exporting regions are then expected to offer material at some of the lowest prices of the year.
Argus' ferrous scrap #1 HMS composite US price for August stood at $260/lt delivered-to-mill and Argus' ferrous scrap E1 delivered-to-mill Germany national average price stood at €218.84/t for August deliveries.
When accounting for freight rates and port charges for sales into Turkey, and combining them with the expected price falls on a delivered-to-US/European-mill basis at the start of September, it is clear there is a strong chance scrap suppliers will veer towards exports rather than domestic sales next month.
In the second half of May — the most recent time there was weakness in both the US domestic and seaborne scrap markets — eight different US scrap exporters sold into Turkey in the space of two weeks. So far on this occasion, two US exporters have sold into Turkey, one of which sold two cargoes.
