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Kallanish Kallanish

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August, 24th 2019

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Kallanish Steel Weekly: Iron ore/scrap differential drops, raw materials diverge (31 Jul 2018)

As anticipated, last week iron ore firmed further while scrap reached the lowest point registered so far in 2018. The diverging trends of the two raw materials has reduced the differential, this having been at record levels for most of the current year.

Iron ore once again rose above the $65/tonne cfr Qingdao level last week, mainly driven by the recovery in Chinese futures markets. The scrap market, on the other hand was hit by lower deals confirmed for US cargoes and fell below $340/t for the first time since the beginning of the year. While the outlook for iron ore remains uncertain, scrap is expected to fall further during the coming weeks as some traders are expressing the view it could soon touch $320/t cfr Turkey.

As a result of last week’s price movements, the differential between scrap and iron ore also lowered significantly, reaching the lowest point seen this year and returning to a level more in line with the recent years. Last week scrap was trading at a premium of some $270-275/t compared to iron ore; earlier this year the differential had reached levels above $300-310/t.