China supports scrap prices, raises supply implications: Irepas
Posted on 13 January 2021
China’s permission of scrap imports will reset trade routes, directing Japanese and some US West Coast scrap to the country. This, along with Russia’s revision of the minimum tax on scrap exports and the healthy US local market, will help prop up scrap prices, says the International Rebar Exporters and Producers Association (Irepas).
Imported scrap may cool off domestic scrap pricing in China – which has traditionally been higher – and may also bring in higher quality material which is hard to find domestically. Chinese mills will not import if overseas scrap is more expensive than domestic material.
“Mills in the EU and the US will probably have to find new strategies for the time when there will be more competition for their domestic scrap,” Irepas says in its January short-range outlook seen by Kallanish. “Will they force their governments to take action on scrap exports as the Russians have done, which is clearly against WTO rules?”
Supply is still on the short side in the global long steel products market and this situation will probably not change until the second quarter.
“The spread between reinforcing bar and wire rod prices is probably at its highest level ever,” Irepas continues. “We are also observing the highest spread between raw material and steel product prices for years, which will surely motivate steel producers to ramp up production.” It adds: “Volumes in the market are fine, but market prices are unstable at lofty levels.”
US steel market supply remains tight. “Most exporting mills are fully booked and their next allocations are for arrival in the second quarter at best,” Irepas observes. Since import offers in the market are now for arrival 4-6 months later, buyers are opting instead to purchase domestically one week at a time. There are therefore worries over possible cancellations when prices come down from current high levels.Source : Kallanish