E-Newsletter Exclusive: Tom Bird of Van Dalen Recycling UK, Provides an Exclusive Market Report on Ferrous Scrap

After the turmoil of the inclement weather at the end of 2010, 2011 started with a bang. The market was considerably firmer, prices were moving upward, and there was strong and healthy demand in the European domestic markets. We saw price increases on many grades of up to €60. Mills were keen to cover as much tonnage as possible and there was a very bullish feel to the market. Sentiment, however, changed dramatically toward the end of the month as the Turkish market, which had been the driver, pulled back. February saw mills across Europe looking to force price levels down. The uncertainty on the finished product market led mills in Turkey to pull back. We also saw, as a result, decreased activity in the European markets. Turmoil in the Middle East was at the forefront, this being an important market for Turkish finished products.

As we moved into February, we saw prices reduce by as much as €40 in the U.K., with similar levels on the continent. It would not be an overstatement to say that panic set into the market in the middle of February with a feeling of doom and gloom setting in. The crisis in the Middle East fueled uncertainty. The Spanish market had shown a bit of life in January, but stepped back and retreated. Certainly the U.K. mills at the beginning of the month were giving ultimatums on time, tonnage and price offers and at the first opportunity were renegotiating.

The sentiment for March then changed just as quickly. As the markets settled down, the carnage that people were incorrectly expecting did not materialize and the threats of cutting back production in Turkey never happened. Nevertheless, there was still uncertainty in the market and some mills managed to conclude tonnage for the beginning of March at lower levels, this despite clear signs that Turkey was in need of scrap and that it was re-entering the market. There also were pockets of healthy demand on the Continent, where we saw price increases for March.

Although having bought some limited tonnage in January, Spain still remains a little off the market, particularly for the HMS (heavy melting steel) grades. For some of the higher grades such as shred and LR (Lloyd’s Register), Spain has been competitive and has outweighed the Indian market in terms of pricing. The Indian container market has been patchy. Despite decent enough demand, prices have been below levels of those operators who have short sea access have been able to achieve. The exchange rate $/€ and £ has also had a big influence on the competitiveness of the Indian market.

March sees a much firmer outlook. During the early part on the month we have seen increased demand across the board. Southeast Asia has come into the market at more competitive levels putting pressure on Turkish buyers to match levels for EC USA scrap. This has had a knock on effect for European shippers. Demand for material remains healthy with stocks at mills at low levels. Turkey will continue to need to buy, putting a squeeze on supplies. The container market remains healthy in terms of demand.

To predict the market going forward is not easy. Scrap seems to be fluctuating in a $50/$60 band up and down. We have the continued uncertainty in the Middle East, which of course will influence sentiment. Let us also not forget the tragedy in Japan, where there is the potential at some stage of a major rebuilding program that will also influence demand. What we don’t have just yet is any real sign of stability, and the daily movement in exchange rate is adding to this instability.

The one thing that seems to be holding up is demand, but whether we see levels in the Turkish market maintain above $500 is a big question. In the heady days of 2008, when the price of scrap was at levels of $520-$530, rebar was trading at $900 per tonne. In recent scrap deals at these levels, rebar was trading at $700 per tonne – a big difference.

Stock levels on the export quays are quite high at the moment, particularly in the U.K., but there is no sense of concern. The general feeling is of healthy and consistent demand. This will hopefully bring a bit of stability to the market.

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