London (Platts)--28Jan2013/1233 pm EST/1733 GMT

After Ukraine's largest scrap buyer Metinvest-Resource on Friday raised ferrous scrap prices by $3 to $4/mt, most other steelmakers brought their bids into line on Monday, market sources said.

Scrap in Ukraine is trading at 2,485-2,525 hryvnas/mt ($305-310 ex-yard for 3A grade (HMS 1&2 80:20)) with suppliers eligible for surcharges being paid 2,550-2,580/mt. Pipe billet and pipe producer Interpipe, which now accounts for roughly a quarter of the domestic scrap consumption, is offering some of the best rates, several merchants said.

A mid-January prices increase, which was the first in two-and-a-half months, was too small to ensure adequate scrap supply, but market sources believe the latest increase boost scrap collection given that tight supply has been more the result of severe winter conditions.

During the week that ended January 23, scrap shipments to steelworks were about 77,000 mt, well below the 118,000 mt of mills' combined demand. Scrap stocks have fallen to below 100,000 mt, an amount sufficient to maintain steel melting operations for 5.5 days, according to Yury Dobrovolsky from Kyiv-based industry analysts UkrPromZovnishEkspertiza.

That said, the achieved scrap prices are likely to hold for a while as mills cannot afford any further increase. If steel demand doesn't pick up and stocks dwindle further some of them may suspend electric arc furnace operations for 7-10 days.

In addition, the difference between Ukraine's billet and scrap price has already narrowed to a point where profits may suffer. Donetsk-based Elektrostal Kurakhovo, targeting $530/mt FOB Black Sea for its February billet output, has yet to receive bids above $515-520/mt, Platts heard from a source close to the mill.

--Katya Bouckley, katya_bouckley@platts.com --Edited by Jeff Barber, jeff_barber@platts.com