Chinese Renege on $1 Billion of 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 today.
Steelmakers, foundries and traders, ranging in size from "small to very large'' and some with partial state ownership, have cancelled contracts, refused delivery of shipments or demanded lower prices, said Robin Weiner, president of the Washington-based scrap merchants' trade group.
"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 in a telephone interview. The number in past years has been "insignificant.'' 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 steelmakers slashed output amid a worsening global economic recession.
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 totalled $22 billion, making it the second-largest commodity export by value, according to the institute.
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, fibres 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 institute's director of commodities. Some Chinese firms have declined to receive goods unless prices are lowered, and others have been told that customs officials will object to shipments' quality unless they agree to charge less, Weiner said. (Bloomberg)
