Precautionary Procurement Prevents Price Plunge

In a bid to avert another nosedive in ferrous scrap prices, German steelmakers began stockpiling scrap early in June. This move was prompted by anticipated plant holidays in July and August, during which production operations slow or cease entirely. The pre-emptive purchasing served a dual purpose: it ensured adequate raw material inventory for post-holiday production schedules and buffered prices after the significant declines seen in May. Although no major rebound occurred, early deals in June included modest price mark-ups, indicating mild optimism.

Mediocre Momentum Mutes Market Miracles

Expectations of a strong price rebound in June were widespread among recyclers, many of whom were eyeing tightening supply conditions as a trigger. However, that hope proved misplaced. Despite signs of strong local demand, the overall price movement remained flat. The anticipated market “miracle” did not manifest, largely due to global headwinds. Traders managed to maintain sales volumes, but any potential price rally was effectively neutralised by weakening international trade activity and strategic caution from buyers.

Turkish Tapering Throttles Trade Turnover

A primary cause behind the stagnant pricing environment is the continued erosion of export demand, especially from Turkey. Historically one of the largest importers of European ferrous scrap, Turkish buying has been subdued amid currency volatility, domestic political uncertainty, and fluctuating steel output. Over the past month, dollar-denominated export prices dropped further, exacerbated by a stronger euro. This left German scrap exporters struggling to justify international shipments, thereby increasing dependence on domestic consumption to move inventory.

Domestic Demand Delivers Delicate Detour

Local steel mills proved to be the market’s saving grace in June. Anticipating upcoming production halts, they opted to stock up on scrap to ensure uninterrupted operations post-shutdown. This surge in procurement not only supported sales but also prevented a freefall in prices. Traders described this momentary equilibrium as “fragile but functional.” While it averted immediate collapse, they acknowledge that the market remains vulnerable, especially as demand is projected to fall off a cliff during the plant holidays.

Competitive Cannibalism Crushes Collection Margins

Even as mill demand buoyed sales, the fight to collect scrap on the supply side became intensely competitive. Traders across regions were forced into aggressive price negotiations to secure material from collection centres and industrial suppliers. This price war, described by one trader as “competitive cannibalism,” deeply squeezed margins. With every euro fiercely contested, several traders now face the prospect of selling at near-zero or negative margins just to retain clients and contracts. Many have voiced concern that such conditions are unsustainable.

Structural Strain Stifles Scrap Supply Stability

Underlying these short-term dynamics is a deeper structural concern within the German scrap ecosystem. The collection, classification, and transportation infrastructure, much of it fragmented and ageing, is struggling to keep pace with the demands of modern supply chain efficiency. Rising fuel costs, compliance requirements, and labour shortages have compounded logistical bottlenecks. During the monsoon months, outdoor storage also becomes a challenge, leading to quality degradation in material stock. Without systemic upgrades, market participants warn that these weaknesses could become chronic hindrances to long-term stability.

Summer Slump Syndrome Shadows Sector Sentiment

As July approaches, sentiment within the scrap sector is becoming increasingly cautious. Many mills are expected to halt production entirely for several weeks, leading to an abrupt drop in scrap demand. At the same time, supply volumes are also forecast to decline due to fewer industrial operations generating scrap material. However, the anticipated contraction in demand is likely to be sharper than the drop in supply. This imbalance could lead to a summer slump characterised by lower volumes, weaker prices, and stagnant trade activity, unless an unexpected uptick in exports intervenes.

Export Elusiveness Ensures Economic Erosion

The possibility of a turnaround hinges largely on global market dynamics, particularly any recovery in Turkish demand or emerging interest from other importers such as India or Southeast Asian countries. As of late June, however, there are no concrete signs of such an uplift. Export quotes remain weak, and the euro’s strength continues to erode competitiveness. Without export tailwinds, traders will have to rely solely on a fatigued domestic market, where mills are winding down operations. This creates a precarious landscape, where economic erosion seems imminent without intervention.

Key Takeaways:

• German steel mills stabilised domestic ferrous scrap prices in June by front-loading purchases before plant shutdowns.

• Exports to Turkey continued to decline, weakening international demand & suppressing euro-denominated prices.

• July-August production holidays are expected to drastically reduce demand, risking a sharp summer slump in prices.