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  • Writer's pictureAtlas Commodities Limited.

The Atlas Short Range Outlook - Metals: October 2020

The Ferrous market across the world has remained broadly similar into October, well underpinned with the expectations that the availability of scrap will continue to be limited across Europe and the UK owing to the ongoing Coronavirus impact of arisings.

Sellers are remaining firm and pushing for higher numbers – Demand continues to outstrip supply.

The UK domestic market largely rolled over with a no change basis and even achieved +£5 for some “in demand” grades. Metal Bulletin reflected a -£5 move, which is inaccurate and related to lower numbers being achieved by most UK-based bulk ferrous scrap exporters who have had to scale back FOB prices in response to firmer freight costs.

This is a good example of where our model adds value…Elsewhere scrap prices to Domestic mills across Europe ticked up €5 due to limited availability of material and relatively full melt schedules.

Export demand has significantly improved - Containerized ferrous scrap indices increased for the third consecutive week on strong demand from Asian buyers. Recovering activities in their domestic markets have prompted Asian buyers to continue buying imported scrap.

Although uncertainty around a potential second wave of COVID-19 shutdowns looms, Asian mills’ schedules are recovering as stimulus packages are rolled out and infrastructure projects gain focus.

Indian steel mills continued restocking imported ferrous scrap, aided by persisting demand in the auto sector, amidst an economic push by the country's government. Many mills booked substantial volumes in containers early in the week, but some buyers were still resisting current price levels due to global uncertainty – Strong purchases are expected to be made following on from Diwali festival in mid-November.

The current strength of the hot-rolled coil (HRC) and cold-rolled coil (CRC) prices in China, Turkey, and the CIS region is supporting expectations of limited dumping flows and overall dynamic demand throughout influential trade flows into Asia. Indian and Pakistani buyers remain active and Bangladeshi buyers will return to the market in November for January buys.

We therefore expect a strong market through November and December.

In China, Shagang Steel raised finished steel prices for November deliveries as well as semi-finished products like billets – China is a black hole at the moment for anything metallic!

Mills are ramping up production to meet demand from infra projects, following some restrictions on production to control air pollution, which has kept prices firm. The Chinese government also took steps in October to grade domestic steel scrap, which is expected to improve ferrous scrap supply and the market in the long run. China's GDP rose by 0.7pc in October after a slow growth amid the COVID-19 pandemic. ($1=CNY6.7)

The market feels bullish into November and demand for scrap is outstripping supply.

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