Chinese Renege on $1 Billion Scrap Steel Deals, Group Says
Chinese scrap-metal buyers have reneged on about $1 billion in contracts from U.S. merchants as the market for the steelmaking raw material collapses, the Institute of Scrap Recycling Industries said.
Steelmakers, foundries and traders, ranging in size from “small to very large” and some with partial state ownership, have canceled contracts, refused delivery of shipments or demanded lower prices, according to Robin Weiner, president of the Washington-based scrap merchants’ trade group.
Weiner is lobbying the U.S. government to help stop defaults on contracts between the institute’s members and clients in the second-largest market for U.S. scrap steel after Turkey. Scrap merchants worldwide face plummeting prices after mills slashed output amid a worsening global economic recession.
“Some steelmakers and traders did ask to renegotiate the price of lower-valued shipments,” said Wang Zhenwu, executive vice president of the China Association of Scrap Metal Utilization. “But the amount couldn’t be as much as $1 billion.”
The price of steel scrap No. 1 heavy melting, shipped from the U.S. East Coast, has slumped by 61 percent in the past two months and traded at $120 a metric ton on Nov. 13, according to Metal Bulletin. U.S. sales of scrap to 152 countries last year totaled $22 billion, making it the second-largest commodity export by value, according to the institute.
‘Hundreds of Millions’
“Based on conversations I’ve had with members throughout the country, we’re talking about hundreds of millions of dollars and could be over a billion dollars,” Weiner said yesterday by phone. The number in past years has been “insignificant.”
Contracts with steelmakers and brokers also have been broken in Europe, Canada, Vietnam and South Korea, Weiner said. Delinquencies in China have been most prevalent and extend beyond steel to other scrap markets like copper, fibers and plastics, she said.
Once demand steadies, U.S. buyers may seek stricter trade terms with their Chinese counterparts, including advance payments and letters of credit, said Bob Garino, the U.S. institute’s director of commodities.
China’s scrap steel imports will be less than 3 million tons this year compared with 3.3 million tons a year ago because mills are using more iron ore after prices fell, the China Association of Scrap Metal Utilization’s Wang said Nov. 3. He kept this estimate unchanged today.
Tags: export, steel, steel-maker, trade