Ferrous Scrap, Europe, including the UK

The best way to summarize the market conditions for ferrous scrap is that toward the end of 2011, mainly in December, we saw a shortage of material and an uplift in demand in the EU. We saw prices in the second half of December certainly improve. We did not have the bad weather like we experienced in Europe in the previous couple of years. That sort of caught people by surprise and business ran up until the last day of Christmas.

Turkey came into the market around this time and there was a period of weeks where there has been a standoff between buyers and sellers and a number of businesses were done for January shipment at levels of around $20 up or so. The dilemma for most of the sellers during this time was trying to decide whether to sell pre-Christmas or to wait until after the break in anticipation of further price increases. What actually happened was pre-Christmas business and business done during the break. East Coast business was done at $20-$25 up. And as far as the European side of the business is concerned, this coincided with yet more economic woes from Europe, with a weakening of the local currency and that in turn benefitted prices in the local currencies. And we also saw a weakening in the break-bulk freight, again helping FOB (freight on board) prices. So we finished 2011 on a more optimistic note running into January of 2012.

Container markets also picked up and were very active, helped by the combination favorable exchange and container rates. Southeast Asia came into the market and on the container side and was particularly active and India was consistent. Having said all of that, despite the increases, there was still a lot of uncertainty as to how long we would see these price increases. The local markets in Europe increased in January around €20-25. Most sellers made the right decision and settled relatively quickly based on an uncertainty of what was going to happen going forward.

The export business still remained pretty strong after the break with high quality scrap I think being fixed at the a peak of about $490. And that was on the previous market run, that proved to be the peak. In the last couple of weeks, prices have started to weaken. The European exchange rate has also settled down at high levels, which has had an adverse affect on local prices. At the moment, we are seeing reductions on most grades. As of the first week of February, I am not aware of any business having been settled yet for the month, but we are looking at lower levels. There is still uncertainty in the steel sector, with rebar and billet prices at $650 and $610, respectively. These really are close to where we were in November 2011. It is a difficult one to call but certainly there is anticipation of reduced buying levels. We’ve heard in the U.K. around £10-£15 drop in prices. We have heard about a €20 drop on the continent. This is not done business. I am not aware of anyone as of yet, having settled.

Spain, which is a very important market in Europe, has been very quiet. Again at the end of 2011, some interest came in from the Spanish. There was a small amount of business that was done at competitive levels, close to what could be obtained deep sea (Asia and Turkey). I think this is more in response to an immediate shortage and fears that there was going to be a higher market in January. It was an extremely short reentry into the market when they saw that prices were settling down. Spain is retreating and is once again very inactive.

Container business out of Europe has also quieted in the last week or so. It is a combination of a shortage of containers and higher rates forecasted for February has depressed price levels. Having said all of that, the general feeling is that the outlook is not pessimistic. There is still demand out there. Turkey is going to buy a number of cargoes for March. India and the rest of Asia, albeit quieter, are still in the market and still asking for prices. I think the exchange rate is going to play an important role in local prices, this is massively dependent on economic sentiment. I have said this time and time again that the last 18 months the market is operating within a $40-$50 band and it is happening again.

There is no doubt we are going to see reductions in the EU market for the short term, but I still think we could see a little bit of an upward correction in March.

In summary, we have seen a bit of a spike and a correction now and a weaker market, but it is not all doom and gloom.

Tom Bird can be contacted at T.Bird@vandalenrecycling.com.