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Scrap not yet at bottom in Europe, traders say - 10 November 2011

The scrap market has not yet bottomed in Europe, Russia and Turkey, as merchants are still making a profit at current price levels, scrap merchants tell Steel Business Briefing. Mills facing softening end-user demand are likely to put further downward pressure on scrap prices, market sources add.

A senior trader believes the breakeven should be considered to be $320-330/tonne CFR Turkey for HMS 1&2 (80:20). Below these levels, merchants in Russia and Europe may stop selling material. A Romanian agrees. “At $300/t CFR Turkey, you would have big problems to get merchants to bring material to yard,” the scrap processor said. “Over the last three years, the average sale price to Turkey has increased by $100/t to reach $450/t CFR this year: people are used to receiving higher prices.”

The break-even level has not been reached yet, a southern European merchant confirms, noting the market would need to remain above $330/t ex-yard to secure scrap merchants’ profits.

One source in the Western European market was more sceptical and believes the breakeven is getting closer. Russian suppliers of turnings were refusing to sell below $300-320/t ex-yard. “We offer now at €255/t CFR, below €250/t CFR our suppliers would refuse to sell,” the trader says.

“Past experience shows that the more scrap prices fall, the more volumes of collection and recycling decline,” Italian trader Ruggero Alocci summarises. “Scrap collection dries up when the cost of moving scrap to the processor is loss-making.”

Prices for HMS 1&2 (80:20) are currently around $415-425/t (€305-313/t) cfr Turkey, SBB understands.


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