Shane Mellor, director of Norfolk-based Mellor Metals, explained in a post on the BIR website that the UK ferrous scrap market has seen a mixed start to the year, with positive price movements in both home and export markets but also supply and demand issues and difficulties with letters of credit for export destinations.
Mr Mellor noted that both producers and merchants are facing higher production overheads due to global energy prices and inflation. While producers are striving for higher end-product prices, merchants are citing lower volumes of available raw material, resulting in a “stalemate on workable prices”.
However, in recent weeks the market outlook is now more bullish and outwardly sustainable, and the stalemate has eased somewhat as the market has reached levels at which business can be more readily concluded, he added.
Mr Mellor explained that the recent earthquake in Turkey and Syria has caused market activity to “all but cease” as attention is focused on humanitarian needs. The earthquake will undoubtedly have ramifications for Turkey, he added, as the largest net importer of secondary ferrous material, as well as for participants in the wider market.
Other destinations have also proved challenging for suppliers, traders and consumers, with issues over claims on cargoes in India, obtaining letters of credit in Pakistan and Bangladesh, and high freight rates for containerized consignments.
Some market participants have diverted their material from the container market to bulk deep-sea port operators in the short term, with better container freight rates “expected in the coming days”.
He added that while UK steel mills continue to secure all their domestic recycled raw material needs, the export market remains the major outlet for the UK, which is still the largest exporter within the European zone. UK merchants continue to face challenges such as lower levels of yard infeed and a lack of available staff, as well as high energy and inflationary costs.
The continuing uncertainty surrounding the situation in Ukraine, surging energy and labour costs, finance issues, and natural disasters are all having an impact on market sentiment. Mr Mellor remarked that he expects reactive markets to prevail, but in the short term, they are expected to continue trading in the upper echelons seen in recent days owing to the stronger demand for limited arisings.