Seaborne scrap prices rise as Blast Furnaces buy more scrap

 The Price gap between Coking coal and Scrap are lowest since 2011

Seaborne scrap price continue to rise due to bullish price sentiments prevailing in China, Turkey over rising coking coal prices. Several blast furnaces in China and Turkey have increased their scrap purchases in order to offset higher coking coal prices. Scrap prices have increased by $35-45/t across the globe in last few weeks.

Scrap prices in Turkey, which is the largest buyer of imported scrap, has increased by $ 44/t in last one month .Current prices for HMS 80:20 at $ 250-255/t CFR Turkey.There are fair chances that prices will cross $300 per tonne in coming weeks.

Today, about 80% of the total global steel production uses coking coal as a raw material and rest uses Scrap, DRI and Pig iron. The implications of a major shift in coking coal prices will make steel makers to switch to viable substitutes and scrap is one of them at the moment.

A scrap trader based in Singapore opinionated that “There will be huge demand for scrap in coming weeks as making steel from blast furnace has become too expensive. Lot of mills will either cut down their production or increase scrap feed. Also the upcoming winters in US and Europe the importers will want to pre-stock cargoes, which will give further push to demand†.

Difference between Coking coal and Scrap prices lowest since 2011

Since 2011, it is recorded that price difference between seaborne scrap (CFR Turkey) and coking coal (FOB Australia) has narrowed down sharply. Prior to recent hike in coking coal prices, maximum price difference between these two commodities was $273/t, minimum was $98/t and average was $185/t.

Now the difference has narrowed down to $5/t, which clearly indicates that either scrap prices will go up or coking coal prices will fall. As coking coal is a contractual business and most of the contracts have been signed at higher prices the chances of coking coal prices going less is limited.

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