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Currency fluctuations, shaky markets impede scrap trade - 27 October 2011

Fewer operational mills in Europe and expected price falls for prime grades in the US in November are testament of the economic uncertainty gripping mature economies, a situation that is discouraging importers in Asian markets from buying scrap, Bureau of International Recycling Ferrous Board members said.

"Continued economic concerns in the USA and around the world, compounded by currency changes, have caused domestic scrap purchase and USA export activity to cool," said Blake Kelley of Sims Metal Management at the BIR Ferrous Board meeting in Munich, Platts Steel Markets Daily reports for Steel Business Briefing, also a Platts unit.

Buyers in Asia are on edge due to sizeable fluctuations in their own currency against the dollar - India's rupee has devalued 13% in recent months. Korea, Taiwan and other buyers are undergoing currency depreciation against the dollar, impeding trade, Kelley said.

"In China there are many concerns about excess inventories, falling steel prices, collapsing real estate prices and reluctance of banks to lend money," Kelley said. "However, GDP [growth] in Q3 was at 9.1% and raw steel production in recent weeks continues at a near record annual rate over 705m tonnes."

The fact that steel production has continued at near full-out is contributing to regional oversupplies: Turkey announced record output of 3m t in September as capacity on-line earlier this year started to be more utilized. Kelley noted a September world steel production increase of 2.7%, suggesting an annualized total of 1.5bn t.


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