Electric arc furnace steelmaking appeared more competitive Monday after a sharp increase in iron ore, the raw material for blast furnaces, into China on spot after buyers came back to the market following a week-long holiday.
In addition, negotiations in Europe and settlements in the US point to significant decreases in ferrous scrap for October, according to market participants and Platts’ latest assessments.
Platts daily IODEX soared more than 5% on a 62% Fe content, CFR China basis to take the raw material above ferrous scrap. Both steelmaking raw materials have lost significant percentage value since August 1, when they were almost on-par. However, following iron ore’s Monday surge, the mined raw material was only 4.25% lower compared with the start of August.
Only on September 19 was iron ore briefly less competitive than scrap, when the mined good spiked for one day above the recycled product. Otherwise, iron ore has tracked below scrap since July 20.
Scrap, meanwhile, on a CFR Turkey basis registering premium grade heavy melting scrap I/II (80/20 blend), remains 6.49% weaker than it was at the start of August. Moreover, talk in the West European market was for a drop of Eur30-40/mt ($38.9-51.8/mt) for October monthly settlements. In the US, shredded prices dropped by as much as $60-65/lt for October contracts.
These contracts are often negotiated at least partially on the back of where the spot market has moved in the preceding month, but in some cases these decreases overshoot the slide in export prices.
The price movements could aid Turkish producers, who mostly use scrap-metal consuming electric arc furnaces. They have been contending with lower prices offered by Chinese producers in Turkey’s traditional Middle East and North Africa export markets in August and September. Chinese producers mostly use iron ore in their blast furnaces,
Turkish producers not only suffered from scrap prices that failed to fall as quickly as iron ore in the last two months, but also from an 8% increase in scrap prices in early August. In addition, their finished steel prices have since slumped 3.71%, according to Platts daily rebar assessment.
In addition, Chinese mills were able to offer boron-added long-rolled steel that gave them a tax rebate for export from their government. This let them offer certain products up to $100/mt cheaper than Turkish exporters did.