As expected, both the home and export markets saw some positive price movements when they opened at the start of 2023. However, erratic supply and demand for both raw materials and finished products, coupled with letter of credit difficulties and with bulk deep-sea/containerized freight cost differentials for export destinations, resulted in new pricing considerations for market participants and created conditions with no real direction.
With global energy prices and inflation impacting suppliers and consumers alike, trying to accommodate higher production overheads is a major consideration. As producers strive for higher end-product prices and merchants cite lower volumes of available raw material, an impasse on workable prices has evolved. In recent days, though, the stalemate between suppliers and consumers has eased somewhat as the market has reached levels at which business can be more readily concluded. Indeed, the market outlook is seemingly now more bullish and outwardly sustainable.
Conversely, following the devastating earthquake in Turkey and Syria which has caused tens of thousands to lose their lives, market activity has all but ceased as attentions are rightly focused on the humanitarian need. Although the scale of the devastation has not yet been fully quantified, it will undoubtedly have ramifications for Turkey - the largest net importer of secondary ferrous material - as well as for participants in the wider market.
Other destinations have also proved challenging on an almost daily basis for suppliers, traders and consumers alike, whether involving issues over claims on cargoes in India or obtaining letters of credit, particularly in Pakistan and Bangladesh. The re-emergence of the latter in the marketplace over recent days is hopefully a sign of a more stable situation regarding funding in Bangladesh, although Pakistan may prove to be more testing for a little longer.
Freight rates for containerized consignments have also been an issue for many as the bulk deep-sea markets enjoy more favourable positions in terms of costs per tonne. This has led some to divert 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.
UK steel mills continue to secure all their domestic recycled raw material needs, but it is the export market that remains the major outlet for the UK - still the largest exporter within the European zone.
UK merchants continue to endure lower levels of yard infeed and a lack of available staff, as well as high energy and inflationary costs. Although latest data from UK government sources indicate better inflationary forecasts, the UK rate remains at a forty-year high. The cost-of-living crisis in the UK is fuelling demands for higher wages across all sectors, which in turn exacerbates inflationary pressures, with the cost of producing quality raw materials from recyclate being no exception.
The continuing uncertainty surrounding the situation in Ukraine, surging energy/labour costs, finance issues and natural disasters are all having an impact on market sentiment. I believe that reactive markets will prevail although, in the short term, it is expected that they will continue to trade in the upper echelons seen in recent days owing to the stronger demand for limited arisings.