Daily Market Note — 2026-08-07

Market commentary on the global ferrous scrap trade. Not trading advice.

The read

The most useful thing to come out of today is a correction to an assumption almost everyone in this trade has been carrying: a reopened Strait of Hormuz would not necessarily mean cheaper freight.

Reuters reported that a proposed transit arrangement remains disputed. Iran is considering fees of roughly 5–7% of cargo value; Oman around 3%; the United States is insisting on toll-free passage. Shipping and insurance sources described the current proposal as unworkable, because sanctions may make such a payment illegal and standard marine insurance clauses can terminate cover if a prohibited fee is paid.

Put a number on it. Five percent of a $400-a-tonne cargo is about $20 a tonne — larger than many congestion surcharges currently in force, and larger than the margin on a good deal of scrap business. A route that reopens with a toll attached is a different commercial proposition from a route that simply reopens, and the headlines will not distinguish between the two.

The second development is Pakistani, and it is a genuine change in the cost structure of that country’s mills.

Key moves

Pakistan’s Federal Board of Revenue issued Sales Tax General Order No. 16 of 2026 on 6 August, placing 31 registered steel melters, re-rollers and composite units under a sales-tax collection mechanism of five rupees per unit of electricity consumed, collected through electricity bills and effective retroactively from 1 July 2026. The Finance Act 2026 had already established that sales tax for these producers could be collected through electricity consumption, with refunds available to digitally integrated taxpayers where excess is collected.

Two features are worth separating. First, eligibility was tied partly to import behaviour — the order records that listed mills were identified in part because imported scrap exceeded 70% of their total scrap purchases over the preceding twelve months. Second, because refunds are available to compliant taxpayers, this is better understood as a cash-flow measure than as a straightforward new cost. The retroactive start date means several weeks of accrual arrive in a single billing cycle. That is a working-capital event, and it is not the same thing as a permanent margin loss.

The likely near-term effect is on flexibility rather than direction. It does not automatically raise or lower scrap bids. It does give mills with thin finished-steel spreads another reason to resist an increase — and, since the charge is levied per unit of electricity, it quietly favours higher-yield, cleaner scrap over contaminated material, because every kilowatt-hour spent melting impurities now carries a metered tax.

Turkey remains firm but is not accelerating. UK-origin HMS 1&2 80:20 continues to be referenced in the high $360s to around $370 a tonne CFR, with other European origins a few dollars higher depending on grade mix and freight, and late-July Scandinavian material in the mid $370s. No fresh deep-sea cargo emerged today that resets the market. The supporting factors are mostly supply-side: limited availability and freight cost. The demand-side factors — a contractionary Turkish manufacturing PMI and pressure on rebar margins — point the other way.

India weakened further. BigMint reported July month-on-month declines of roughly 7% in blast-furnace rebar and about 1% in hot-rolled coil, with coking coal and other raw materials also softer on weak demand, high inventories, monsoon disruption and maintenance shutdowns. Cheap domestic sponge iron remains a cap on imported scrap demand there.

Pakistan imported 323,896 tonnes of steel scrap in June, sharply higher year on year. That cuts both ways: it confirms real import demand, and it raises the odds that some mills are adequately covered for August. Domestic construction listings placed reinforcement steel broadly at PKR 235,000–252,000 per tonne in July, though these are indicative retail and construction-market references rather than mill wholesale assessments.

Freight and shipping

Hormuz traffic remains severely restricted. Reuters reported 33 transits from Monday through Thursday, against 50 in the same period a week earlier and roughly 130–140 vessels a day before the conflict. Only four vessels transited on Thursday. The daily count is off its lows, but the weekly trend is still deteriorating.

Bab el-Mandeb improved materially, recovering to around 26–28 vessels on Thursday after collapsing earlier in the week. That is real relief on one corridor, though a route that swings between one and twenty-seven vessels within three sessions is not one to price against on a single day’s reading. Overall Red Sea risk remains elevated.

Brent crude rose to about $83.24 a barrel as the market reassessed Hormuz reopening risk — notably, oil moved on the same news that drives freight risk, so the two are moving together again after diverging earlier in the week.

Published carrier measures currently in force on relevant trades:

• MSC — $500 per container congestion surcharge, Northern Europe to the Indian Subcontinent, until further notice.
• CMA CGM — Emergency Fuel Surcharge effective 1 August: $150/TEU on long-haul headhaul dry cargo, $75/TEU on long-haul backhaul and intra-regional dry cargo.
• Hapag-Lloyd — feeder-related emergency charges continue on affected services; the Great Britain, Northern Ireland and Ireland inland fuel surcharge expired 31 July, and the North Europe inland component is scheduled to expire 14 August. Inland relief is not the same as ocean relief.
• ONE — Persian Gulf emergency surcharge continues on affected Gulf trades.

For scale: at 25–27 tonnes to a container, $500 works out to roughly $18.50–$20.00 a tonne, and $150 to about $5.50–$6.00. Equipment matters as much as the rate — a low-payload box turns a competitive freight number into an uncompetitive per-tonne cost.

Supplier markets

No verified live dock buying sheets were published today for the United Kingdom, the US East Coast, Germany, the Netherlands, Belgium or the Baltics. A June Argus sample showed US sellers targeting at least $400 CFR Turkey when Handymax freight was around $47–48 a tonne — useful structurally, stale as a current reference.

A general point on counterparty risk that this market keeps relearning: UK scrap merchanting has seen significant corporate restructuring and at least one major insolvency since late 2025, so familiar trading names do not always sit behind the legal entity issuing a contract. Brand recognition is not a substitute for verifying the entity, its bank details and its current operating status.

Bangladesh remains subdued, with weak finished-steel demand, monsoon disruption and reports of export freight costs doubling on some trades with lead times up to three weeks longer. In ship recycling, Alang arrivals remain historically low, with owners extending vessel lives rather than scrapping — so demolition prices are firm while the volume of substitute material actually reaching mills stays thin.

Non-ferrous snapshot

Copper $14,260/t (+$205), aluminium $3,260/t (+$30.50), zinc $3,797/t (+$104) on the LME.

Copper set a fresh high, supported by low exchange availability, low Shanghai inventory, unusually concentrated US stocks, strong Chinese import premiums, deeply negative concentrate treatment charges, mine disruption and grid and data-centre demand. It remains the tightest metal in the complex.

Zinc’s $104 gain was its largest single-session move in recent weeks — worth noting because zinc is often treated as a passenger to copper in brass valuations, and today it was not. Aluminium is less tight than copper, with Chinese and Indonesian supply offsetting some Gulf disruption, though physical premiums remain a meaningful part of delivered cost. China’s refined lead imports continue to reflect tightness in secondary feed, but high exchange inventories — some of it financing-related — argue against reading that as straightforwardly bullish.

Glossary

• CFR — Cost and Freight: the seller covers the cost of the goods and shipping to the destination port.
• HMS 1&2 80:20 — Heavy Melting Scrap, a standard grade blend of 80% HMS 1 to 20% HMS 2.
• LDT — Light Displacement Tonnage, the weight measure used to price ships sold for demolition.
• TEU — Twenty-foot Equivalent Unit, the standard container measure.
• Sponge iron / DRI — Direct Reduced Iron, an alternative metallic feed that competes with scrap.
• STGO — Sales Tax General Order, an instrument issued by Pakistan’s Federal Board of Revenue.
• Backhaul / headhaul — the lighter and heavier directions of a trade lane; headhaul typically carries the higher rate.