Genoa, Italy — Walking through the hall of the last BIR Miami Conference, one of the most frequently asked questions addressed to the scrap dealers and traders from the media was: Is there a correlation between the current lower iron ore prices and the ferrous scrap prices? Or from a different point of view: Will the ferrous scrap prices follow the always more negative iron ore trend, or not? To answer this question, it is important to say that iron ore prices (but also coking coal) are about 40 percent lower (45 percent for coke) after previously being higher for some years.
There are two basic reasons for this situation: the weaker demand of the Chinese steel makers (do not forget that in China abt 80,5 percent of the steel is produced by BOF) and the higher worldwide availability of iron ore, due to the opening of several new mines. The sum of these two factors is the best explanation of the current situation and also the basis of the negative medium terms forecasts. Different is the situation of the ferrous scrap. The steel production by EAF is growing year by year. The 2013 figures confirmed the worldwide use of abt 580 mil tons of scrap (+1,75 percent y-o-y), abt 375mil tons of which are represented by the traded scrap (+1,35 percent y-o-y).
On the other hand, the worldwide scrap production is always more conditioned, in the main developed countries (where the scrap collection is higher) by the economic negative trend. The volumes available for the trade are not always enough to cover the steelmakers needs in those areas where the EAF production is stronger (e.g. Turkey abt 71 percent, EU28 abt 40 percent, USA abt 61 percent, MENA countries abt 87 percent). And the DRI/HBI contribution to the EAF production still limited. At the end of this simple explanation, it seems to be easy to say that the scrap prices will remain more or less on the current level, with the usual up and down movements due to periodic cycles, mills demand and fluctuation in the exchange rates. A better situation is foreseen from traders and dealers, in terms of demand and prices in Q3 and Q4.
The May market evolution has been characterised (also in Italy) starting the deals, by unconcealed tension between sellers and buyers, but after some days the quiet placated the situation and contracts have been settled at the same level of the previous month, excluding some very small reductions on the higher prices paid. On the domestic weekly market, the prices started to move slowly down during the second half of May, due to the lower mills demand. Deliveries from trucks and wagons have been regular according to the contracts. The arrivals at the Italian ports have been: abt 16 Kt for scrap, abt 145 Kt for pig iron and abt 52 Kt for HBI. Regular deliveries and strong arrivals at the ports maintained the Mills inventories at the current (improved) level. Always not satisfactorily: the steel products sales in term of volume and prices; consequently some other stops in production during June will follow.
Following the May official average prices reported (€/pmt delivered):
New arising E8:
Demolition scrap E3:
For June contracts, a further more stable situation is foreseen . Only small downward movements could be possible, always influenced by the activity of the Turkish buyers.
Some words have to be said about the Ilva Taranto, unfortunately not positively. The Public Commissioner presented the new business plan to the Italian Government, pointing out the urgent need of cash to cover the heavy negative operational results and to finance the environment revamping. It will also need to cover new investments in technology, targeting the use of HBI instead of coking coal and iron ore in blast furnace, to adhere to the new limits for air/water and noise emissions. All this seems to be very hard work. The continuity of the Public Commissioner management seems to be doubtful, with the imminent possibility of his replacement (just done) and consequently the presentation of a new business plan with less need for fresh cash and the availability of new shareholders.
PIG IRON – H.B.I.
The always high volume of pig iron arrivals reported are the best confirmation that the turmoil in Ukraine is not limiting the pig iron production and export from the Black Sea ports. The inventories at ports and mills are always well recovered. The last pig iron offers are quoted around $405/410 pmt CIF for June/July shipment. The HBI received in May has been delivered from Libya and Russia. The Venezuelan HBI is always out of the market as the Omani ones. Last offers are reported around $365 pmt CIF Italy.
Source: Alocci Rappresentanze Industriali