Written by: Damon Sun, Daido International

We heard domestic off west coast dropped $30/Gross ton, and heard SA Recycling did 3 price drops for a total of $40/GT ($30/GT for special dealers). Midwest heard down $10/GT but low grades actually went up. Premium grades down $10-$15/GT.

This matches with Sims offer prices into Taiwan down $30/MT recently (currently at $458/mt CFR for HMS via containers with no interest). The most recent bulk sales were by Schnitzer 3 bulk cargoes at $497/mt CFR China for HMS (down $5/mt) but those bulk shipments were about 2 weeks ago.

Again, there is too ways to look at the ferrous markets. While prices have been relatively stable for the entire year, some part of that stability is psychological with “suppliers” constantly talking up prices into a weak finished product market. The last 3-4 weeks of currency fluctuations eroded this psychological bullishness. Based on currency fluctuations, the average US dollar appreciated roughly 6% against major Asian currencies which translates to $25/mt weaker buying power. Asian mills are skittish about placing import orders until currency fluctuations stabilize, which will not happen until some firmer resolution to the Greece/Euro crisis in Europe. Essentially, Asian and including Turkey mills are on hold.

Asian mills instead have been relying on domestic scrap intakes which have been relatively good intakes as scrap dealers clean out their inventories to change to cash, during these uncertainties.

There will be downward pressure as USA Scrap Dealers need to generate sales for cash flow. For example, we normally take 5-6kmt/week on HMS grades, but in last 10 days, offers exceeded 30kmt/week. Part of these offers likely forward sales but any talk of scrap shortages at the moment would be a bit silly.

On the European side, scrap prices have been relatively stable. Turkey will have to exhaust European short haul supplies before buying from USA. I do caution against US East Coast suppliers awaiting the inevitable purchases from Turkey. EAF furnaces can reduce production rates especially in weak finished products environment. I do believe Turkish mills would reduce production rates than purchase USA scrap that is $40/mt higher than European offers.

It will take another 2 weeks for these situations to play out. Domestic Asian scrap supplies need to be cleaned out before they begin overseas purchases. By that time, I think there will be many scrap suppliers selling at whatever prices be at the moment to generate cash flow. I expect prices , and the psychological aspects to continue to decline with stability on prices in mid November. Prices likely have another $30/mt to go down lower with a total 2 month impact of roughly $60/mt. In this next round, China will not be a savior on scrap prices as governmental capital controls are playing out in the financial system, which impacts financial abilities to import.

Just my personal opinions.