Ferrous scrap prices settled in Detroit with prime grades (bundles/busheling) settling at $360 per gross ton. At the same time there is Chinese auto bundles for sale at very low prices FOB China. Chinese scrap exports are new for the Chinese and there are issues that need to be overcome before they become major suppliers of the product onto the world stage (including the United States).
SMU originally reported the Chinese as exporting ferrous scrap on April 19th. Chinese low residual auto bundles (prime grade) are being offered for export by traders at $210 per metric ton, FOB Chinese port. That price was shared with Steel Market Update last evening by one of the active traders in China who is shipping this material to Hong Kong and the Middle East.
We were told the Chinese are anxious to export ferrous scrap because of the shut-down of all of the induction furnaces and Electric Arc Furnaces (EAF) by the Chinese equivalent of the U.S. EPA. A number of the EAF’s are being retrofitted with pollution control equipment and will return to making steel. But, our sources are telling us only 20-30 percent of the 120-150 million metric tons that has been taken out of service will return.
This means the Chinese will become net exporters of ferrous scrap. Our source believes 20 million metric tons will be exported out of China over the balance of 2017. Longer term the number of tons is most likely to explode and there will be an impact to the international ferrous scrap trade (and the U.S. as the largest exporter of ferrous scrap).
We were told the Chinese are not supposed to export scrap and those sending it out of the country are getting it Customs cleared in small lots (3,000/MT here, 3,000MT there) and the vessels are taking between 10-15,000 metric tons of busheling out at a time.
What is hampering the Chinese right now is their lack of understanding as to the various “HS” codes (busheling, #1 HMS, shredded scrap, 80/20 mix, etc.) that have to be used when exporting scrap products and, what is allowed to be shipped under the various identifications. The Japanese and Koreans have been working with the traders in China to better understand how material is to be sorted and referenced.
SMU inquired to see if there were any American companies or steel mills interested in the Chinese scrap being offered. We were told “yes” there are a couple of traders in the U.S. looking for material to go to the East Coast. Our trading source is being very cautious about taking scrap orders for the U.S. market as they do not want the material to go to Nucor. This is due to the litigation on other carbon steel products and the anti-China language being used by past and present Nucor executives.
He told us other traders like Minmetals may be willing to ship here so we assume it is only a matter of time when mid-$200/MT prime cold rolled automotive bundles will be delivered to the United States (again, Detroit settled prime at $360 per gross ton delivered this week). Freight to the United States is $27-$30 per metric ton.
It is also just a matter of time before other Chinese scrap items will be able to be identified and shipped around the world. Our trading source told us of 8,000 tons of debars head and tails (rebar) out of an integrated mill (which means low residuals) that he has sold but there is not a HS code yet he can use to ship the material…
Stay tuned to Steel Market Update for more on this and other evolving issues that could impact steel prices in North America.
John PackardRead more from John Packard
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