CRU: Scrap Prices to Trend Further Down in May 2023

The degree to which prices fall in the European and US markets will depend on Turkey’s import appetite; that has disappointed this month and is not expected to pick up significantly next month. Movements in the Turkish market will also dictate the price direction of Japanese exports and other Asian import prices. Our base case is that these prices will fall further month-over-month.

In China, we expect rainy weather in the southern region to lower steel demand, while market sentiment is expected to deteriorate due to fall in second-hand housing sales. Given these factors, steel mills’ margins will continue under pressure and thus, mills are likely to cut their scrap usage and even production in the near term, leading to lower scrap demand and prices.

Demand sentiment in the Russian market is positive as construction activity is expected to gradually revive in Q2 and support longs demand and production. However, CRU forecasts scrap prices to remain stable or decrease slightly in the short term as supply will be seasonally higher and exports will continue to be limited by the quota system implemented by the government. In Ukraine, the local steel association has petitioned the government for a temporary ban on scrap exports to secure domestic supply. If this is implemented, scrap exports out of the CIS will be even more limited.

In the ore-based metallics market, CRU expects traders to wait and see the next move of scrap prices before moving their prices, which are likely to come down. Supply has improved with more exports from Ukraine, while demand is expected to hold high. US mills are expected to use more pig iron in their mix as pricing remains competitive relative to prime scrap.

By Thais Terzian, CRU senior analyst

This article was originally published on April 14 by CRU, SMU’s parent company.

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