Brazilian steel scrap market improves but still depressed by industrial stagnation

Story originally published on Fastmarkets.com

Published by: Ana Enis

Source: Fastmarkets' scrap

The Brazilian domestic market for steel scrap showed a degree of recovery in August and into the start of September, but economic stagnation and industrial downturns in Brazil were still keeping prices down, national scrap association Inesfa said on Tuesday September 5.

This meant that the market left behind the worst levels ever seen, but no improvement was expected in the Brazilian steel market in the final quarter of the year, according to Inesfa president Clineu Alvarenga.

“The market will remain stationary at these levels,” he said. “An improvement may be seen in 2024, depending on the performance of the economy.”

The association does not comment on market prices. But according to sources in the scrap market, the price of mixed HMS-grade material was in a range of 950-1,100 Reais ($192-222) per tonne delivered, or perhaps higher.

“About eight months ago, [the price of] mixed HMS was around 800-850 Reais per tonne [delivered]. This was the lowest level we had ever seen,” one source said. “Around 20 days ago, scrap prices were boosted because mills needed to buy material and restock, despite lower local steel production.”

The price of scrap has also been recovering in Turkey, one of the main global buying markets. Fastmarkets’ daily index for steel scrap, HMS 1&2 (80:20 mix), US origin, cfr Turkey, was $375.04 on September 4, compared with $349.76 per tonne on August 4.

Meanwhile, steel demand remained weak. Between January and July, long steel production came to 4.67 million tonnes, down by 8.4% from 5.10 million tonnes produced in the corresponding period of 2022, according to national steel association Aço Brasil.

“Brazilian manufacturing activity is slower than ever,” Alvarenga said. “Another big problem is the huge amount of steel imported into the country.”

In recent months, several mills have been slowing their production and reducing scrap processing, which will reduce the chances of a strong recovery in the scrap sector.

“The greatest generators of scrap are automotive parts producers,” Alvarenga said, “and because the carmakers are at a standstill, scrap generation is also paralyzed. This reduces production and demand at the same time.”

“The current scenario is very bad for scrap,” another source said. “If large scrap consumers continue to shut down furnaces, the situation will soon get worse.”

The price of rebar in Brazil has been decreasing so far this year, with low demand from most end-user sectors. Fastmarkets’ latest price assessment for steel reinforcing bar (rebar), domestic, monthly, delivered Brazil, was 3,760-3,960 Reais per tonne on August 11, down by 2.4% from 3,880-4,030 Reais per tonne a month earlier.

Exports

From January to July 2023, Brazil exported 411,762 tonnes of steel scrap, 73.6% more than in the first half of 2022, when exports were 237,113 tonnes.

In July alone, 58,376 tonnes of scrap were shipped, mainly to India and Bangladesh – 39,562 tonnes and 8,356 tonnes respectively, according to data from Brazil’s ministry of industry, development and trade, MDIC.

Fastmarkets’ sources noted that exports were keeping the sector alive, “allowing the industry to move and not suffocate the chain as a whole.”

“Around 10 years ago,” one source said, “when Brazil didn’t export, prices reached 100 Reais [per tonne]. Even though it was [a different market reality], prices fell too much, and exports set a minimum level for prices. So when prices start to drop, we turn to the export market and manage to keep prices steady. This is what has been keeping the scrap supply chain alive [in the current circumstances].”