Scrap prices: price setting factors, importance
Prices in the Russian scrap market are highly volatile, but average weighted purchase prices rarely fluctuate by over 5% per month.
As a rule, scrap purchase prices in districts usually follow the general trend, diverging from it by a mere 1-2%. However, since H2 2012 the gap between prices in different regions of the country has been bigger than usually, because of larger scrap volumes bought in the Southern Federal District, amid a decline in other districts.
Purchases by steelmakers and scrap price setting are strongly affected by the following factors:
- technological advantages of scrap as compared with pig iron
- steelmakers’ sensitivity to scrap prices
- scrap usage efficiency
- volumes of purchased scrap
- scrap stocks
- global scrap prices
- steel product prices to domestic and foreign buyers
- tariffs for scrap transportation to a mill.
According to our estimates, producers of BOF steel and those of OHF steel have comparable scrap expenses (RUB 2,000-2,500/t in 2012). The figure is much higher for EAF steel makers – roughly RUB 7,500/t.
Due to scrap demand growth attributable to launch of new steelmaking capacities, and limited availability of the material, competition has stiffened for deals on both scrap and finished steel.
It is mainly mini-mills focusing on longs production that depend on scrap greatly. At the same time, scrap costs of mills using BOF steel (mainly in flats rolling) take up a much smaller part of their finished product price.
|© 2004-2017 Metal Expert LLC, all rights reserved||Back to top|