Domestic delivered to mill prices for ferrous scrap in Europe are set to rise in March because of strong demand from local and overseas steelmakers and sustained tight supply, but any increase may be limited by another surge in energy costs that could cause mills to cut production, particularly in Italy.
There was no consensus among suppliers on March target prices so far, as offer indications for March delivery were heard in a wide range between €10-50/t ($11-16/t) up from February over the past few days. Bid indications were also few and far between. Two German mills that typically settle their monthly procurement early were heard to have bought material at €5/t and €15/t above February levels. But most market participants said these increases are not reflective of the current market situation.
Scrap demand from many European mills is strong as some were unwilling to pay higher prices in February, when they only purchased small volumes. One mill even said that if it is unable to buy sufficient volumes it may be forced to halt production because its inventory is low.
“Some mills thought March prices will move down or stay at February levels but the war in Ukraine changed everything,” one scrap supplier said.
Since the start of the Russia-Ukraine conflict on 24 February, the Argus daily assessment for HMS 1/2 80:20 cfr Turkey increased by $15.50/t to $525/t on Monday. The assessment averaged $504.15/t in February, up $34.78/t from January. And there is little sign of a slowdown in the pace of increase as offers to Turkey were heard today above $550/t while bids for April and May contracts on the London Metal Exchange were registered at $570/t. The increase in scrap prices was predominately driven by higher steel prices caused by disruptions of Russian and Ukrainian exports.
“Mills are in a difficult position,” another scrap supplier said. “They did not buy enough [scrap] in February and some of them may not receive their semi-finished steel shipments from Russia and Ukraine, so they need even more scrap in March but availability is tight and at higher prices.”
Long steel prices in Europe are set to rise but many steelmakers have yet to give new offers. They today continued to monitor the developments in Ukraine and movements on electricity prices in Europe.
European steelmakers face renewed and increased pressure from the higher energy prices. European electricity prices have increased substantially in the past six months and they moved even higher in the past week following Russia’s action against Ukraine. The pressure is significantly higher for Italian mills as the country is typically the highest priced power market in Europe and most of its generators are gas-fired plants. This has led some Italian mills to warn their scrap suppliers that they may be forced to stop operations, and may therefore show no scrap demand if the rate of increase in scrap prices far exceeds the rate of increase in steel prices.
Hot-rolled coil (HRC) prices in northwest Europe have risen by around €40/t since mid-February while HRC prices in Italy increased by around €15/t. Italian rebar prices rose by €5/t to €810/t on 23 February and further increases are expected this week. Turkish rebar and billet offers were $50-100/t higher today compared to a week ago.
European mills and suppliers are expected to begin negotiations for March scrap deliveries by the end of this week or early next week. But it may take longer this month to conclude business because of the fast-changing market conditions resulting from the Ukraine crisis.
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