In this week Russian and Ukrainian exporters of ferrous scrap have witnessed a decline in business activity in their key sales market. Having left the market for New Year holidays, most of them failed to catch the best moment to sign deals with Turkish buyers. While Russian and Ukrainian exporters, like most their European counterparts, were out of the market for holidays believing that the market will be calm during this period, US exporters successfully implemented a substantial lift ($40/t up) in quotations in Turkey and started 2011 with new prices.
Such drastic changes in market conditions have confused traders, who have expected persistently firm demand in mid-January. However, CIS suppliers have failed to make a coordinated effort to hit the new price levels after returning to the market, thus causing oversupply. This has allowed Turkish steelmakers to slow their purchases down, expecting CIS exporters to reduce prices and at the same time resuming trading with European exporters.
Most of Russian exporters are ready to reduce their prices. For example, while last week some suppliers from Rostov-on-Don, who returned to the market earlier than others, managed to sign a number of contracts at $515/t C&F ($484/t FOB excluding freight rate of about $31/t), now deals are made mostly at $500-505/t C&F ($470-475/t). However, even in view of reductions, the current offers are still $30/t above the level of late December and completely cover the scrap collectors' expenses.
A3 scrap is quoted at $332/t CPT cash payment and $342/t CPT non-cash payment in Russian ports of Azov and Black Sea, just $12/t up in two weeks. Taking into account export duty (about $52/t) and port expenses, exporters need to sell the material at $480/t C&F ($445/t FOB) to have any profit.
In turn, Ukrainian scrap has been changing hands at $500/t C&F at most. After selling most of January offering back in late December at $450-460/t C&F ($420-430/t FOB), only a number of companies managed to hit the $480/t C&F level ($450/t FOB) by the end of the year. Currently, they have focused on fulfilling the contracts they signed. Nevertheless, the scrap collectors remain optimistic and expect to approach the $500/t C&F ($470/t FOB) mark by the end of January.
Prices in Ukrainian ports are also growing. In particular, A3 scrap is priced at $344/t CPT in Berdyansk, Ilyichevsk and Kherson now, against $325/t CPT in late December. Maximum price for local A3 scrap is quoted in Odessa – $349/t CPT. Exporters from Zaporizhya and Dnipropetrovsk are forced to sell in the domestic market due to ending of river navigation. Considering current purchase prices from local mills, A3 is bought at $300-305/t CPT at these ports.
As for Russian ports of the Baltic Sea, in spite of no new deals, estimated prices for scrap from St.-Petersburg have also increased on the back of higher quotations of European and US scrap. Metal Expert estimates, traders are ready to ship A3 scrap at least at $505-510/t C&F ($450-455/t FOB, excluding January freight rates) now.
In spite of slower business activity this week, CIS suppliers still can expect the quotations to return to their maximums. And though prices for import scrap may cease rising in Turkey by February already, local steelmakers will have to resume purchases of the material from abroad, as their stocks are not sufficient to sustain production in February amid rather favourable conditions in the steel product market.
by Metal Expert LLC
by Metal Expert LLC
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