Asian Scrap Market: Near Bottom on Pricing?

Exchange rates have been volatile, but Japan Yen looks to be settling around 118-119: US1.

Let me reiterate, at the moment there is plenty of scrap going into Asia. Russia and Japan seem to be the first priority for the Asian mills, followed by Australia/New Zealand and USA origins.

However, I do believe we are near the bottom on pricing.  My rationale is still based on a rough estimated ratio of Iron Ore pricing x 3.5. At current “SPOT” iron ore pricing, the equivalent scrap pricing should be around $217/mt based on 62% Fe $62/dmt spot iron ore. Therefore, with pricing near parity with iron ore, blast furnaces traditionally use up to 20% scrap in their mix. The last few months iron ore has been much cheaper and consequently, blast furnaces have been reducing usage on scrap.

With scrap near parity, the blast furnaces may be able to return to 20% usage of scrap and the increase in scrap usage is rather significant.

I do point to “spot” pricing as the contract pricing likely is anywhere from $10-$15/dmt higher than the current spot numbers.

Also, after Lunar New Year, particularly in March, the rebar stockists see demand increases. This is based on more fluid credit and stockists tend to keep inventory lean before the long Lunar Holiday.

Regardless of the market, it seems first priority is getting the West Coast port congestion and labor issues solved.