SEATTLE (Scrap Monster): The government policy actions are likely to determine the future of ferrous scrap and steel prices. According to William Schmiedel, President, BIR Ferrous Division supply and demand fundamentals are likely to take backstage in the near future. The policy actions expected from countries including China- the world’s biggest steel producer are likely to determine the prices. Incidentally, the scrap prices continued to remain volatile during the last quarter of the previous year.

According to industry sources, China achieved significant results in curbing excess steel production in 2016. The yearly target of lowering steel output by 45 million tons for entire 2016 was reached in the October itself. The data released by China Iron and Steel Association (CISA) indicates that the cuts resulted in surge in profits for large and mid-sized steel mills in the country. The cut in production along with rise in demand had led to rise in steel prices during the previous year. Forecasts suggest slower demand growth and lower prices for steel in China through 2017. The government’s stand on reducing steel capacities is eagerly awaited, Schmiedel said.

In the US, relatively good winter weather has resulted in strong scrap flows. The domestic scrap market demand continued to remain weak in the country during early-February this year. However, export prices are expected to remain stable during the month. The US H1 scrap average prices were stable at $286.17 per long ton, as on 30^th January, 2017. The prices held steady upon comparison with the previous week. The H1 scrap average price in Pittsburg was $289.50 per long ton. In Chicago the prices averaged at $292.50 per long ton. The average price in Philadelphia was $276.50 per long ton.

The scrap demand remained relatively strong in the Europe, despite a sharp fall in prices into merchants’ yards. The market is likely to remain stable during the near term.

The scrap export prices from Japan are unlikely to drop, mainly on account of uptick in demand from Vietnam and Bangladesh. In addition, the anticipated rise in production by domestic electric arc furnaces may keep the demand stable, thus offering stability to scrap prices. The cumulative exports of ordinary steel scrap during the whole year 2016 by Japan totaled 58,062 metric tons. The export prices averaged at $159.68 per MT during the year.

Incidentally, Bangladesh continues to remain as one of the bright spots in the Asian region. The sharp rise in freight prices and port charges have led to reduced exports of scrap from Russian ports. The freight charges have almost doubled since November last year.

According to latest available data, the steel scrap usage for steel production witnessed decline across several steel producing nations during the initial three quarters of 2016. In most of the countries, the scrap usage decline ratio was bigger than the respective decline in crude steel production. For instance, scrap usage by the EU region totaled 66.021 million tonnes, down by 5.3% over the previous year. The steel scrap consumption by the US has declined by 4.4% year-on-year to around 35 million tonnes during Jan-Sep ’16. Also, scrap usage by Japanese mills fell by 2% to 24.59 million tonnes during the initial three quarters of 2016.

On the other hand, China recorded 3.5% jump in steel scrap usage. The consumption during the initial three quarters of the year totaled 64.7 million tonnes. Turkey too registered significant surge in scrap usage. The usage climbed higher by over 5% to 19.72 million tonnes.

The leading scrap importer during first nine months of 2016 was Turkey with 12.919 million tonnes. The EU-28 region remained the world’s leading scrap exporter with overseas shipments totaling 12.676 million tonnes.