SCRAP - A new king is crowned

Lesedauer: min

The European Union has now surpassed the United States as a supplier of ferrous scrap to nations with scrap deficits.

to export more ferrous scrap than the United States for the first time in several years.

In the sixth edition of its “World Steel Recycling in Figures” booklet, released in May 2015, the Bureau of International Recycling (BIR) provides ferrous scrap trading figures from 2010 to 2014. In that time frame, only in 2014 did the EU export more ferrous scrap than the U.S.

A number of factors combined to allow the EU to assume the No. 1 spot in 2014, with the strengthening of the U.S. dollar cited by many recyclers and analysts as among the foremost.
New directions

The U.S. receding to second place in the export market after several years at No. 1 is just one of several changes occurring to how ferrous scrap makes its way from one country to another.

Scrap recyclers and traders who serve on the BIR’s Ferrous Division offered market updates at the 2015 World Recycling Convention & Exhibition in Dubai, United Arab Emirates (UAE), which included comments on where exported scrap is heading this year.

Ferrous Division President William Schmiedel, who trades ferrous scrap for Sims Metal Management on the Atlantic Coast in the U.S., remarked that continued excess production from Chinese basic oxygen furnace (BOF) mills is resulting in the creation of finished and semi-finished steel that is reducing demand at scrap-fed electric arc furnace (EAF) mills.

Ferrous scrap generated in the U.S., nonetheless, continues to find homes not only in the domestic market but also among export buyers. “We see potential growth in ferrous scrap demand in GCC (Gulf Cooperation Council) countries as well as [in] Egypt and India,” said Schmiedel.

Referring in part to the GCC nations (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE), Schmiedel said the scrap demand “is mostly due to construction projects along with oil and gas [sector demand] and other infrastructure development.”

George Adams of SA Recycling, Anaheim, California, which exports ferrous scrap from the U.S. Pacific coast, said China has been doing “little, if any” buying of U.S. ferrous scrap in 2015.

He said the South Korean market “has also been quiet recently due to increased exports from Japan and a recognizable movement away from container imports of ferrous material.”

Adams referred to Taiwan as “a steady buyer of ferrous scrap albeit at ever-decreasing prices.”

A potential growth market for Adams and other U.S. Pacific coast exporters is the ASEAN (Association of Southeast Asian Nations) region, which includes mills and foundries in Indonesia, Malaysia, Thailand and Vietnam.

“This market has been active recently, procuring several cargoes,” Adams said. “Their market re-entry has partially been aided by lower [steel] exports from China,” he added, referring to the ASEAN region as “a bright spot” for western U.S. exporters.

Zain Nathani of India’s Nathani Group of Cos. said Indian steel mills, foundries and induction furnace operators imported 4.4 million tonnes of ferrous scrap in the 10-month period from April 2014 through January 2015.

India buys containerized and bulk shipments from the U.S., Australia and the United Kingdom, Nathani said, adding that in 2015 “a lot of Japanese [ferrous scrap] exporters are beginning to focus on India.”

Hisatoshi Kojo of Japan’s Metz Corp. confirmed that Japanese exporters, like their counterparts in the U.S., are seeking new destinations for their scrap. “Crude steel production is stalling in Taiwan and South Korea, such that scrap purchasing momentum in these major importing countries is not like it was.”

As did Adams, Kojo pointed to the ASEAN region as being of growing importance. “Steel mills in Southeast Asia boosted their purchasing activity as soon as they saw the Japanese scrap market price reach the bottom in mid-March 2015,” he stated.
No. 1 on the charts

Now that the EU holds the crown as the world’s largest ferrous scrap exporter, how are things shaping up for its exporters in 2015?

Summing up the first quarter of 2015 for BIR delegates, Tom Bird of Mettalis Recycling Ltd. in the U.K. pointed to plenty of potential barriers the EU will have to overcome to retain its newly won crown.

“Iron ore prices continued to weaken and there was an abundance of Chinese finished product in the market, dampening [steel] product prices,” said Bird of the EU’s first quarter.

Those conditions caused EAF mills in Turkey to taper back their melting schedules, Bird said, adding “the EU short-sea market during the first quarter was extremely quiet, with prices also following suit.”

He continued, “The container market, although relatively active, saw significant reductions in price levels as weak sentiment prevailed in the Asian, Indian and Pakistan markets.”

The second quarter, Bird said, has brought stabilizing and then improving scrap prices but not necessarily an increase in overseas buying inquiries. “The short-sea market is still relatively quiet and is behind those [lower volume] levels currently being realized into Turkey,” he remarked.

“Container levels are considerably behind at the moment with the Indian and Pakistani market tempering enthusiasm,” Bird added.

The first quarter of 2015 was enough to temper enthusiasm for ferrous scrap recyclers in any part of the world. Recyclers in the EU could at least look back on the state of their export market the previous year for encouragement.

From 2010 through 2013, Turkey could be relied upon as the largest importer of ferrous scrap, and the U.S. held its place as the largest exporter. The two statistics tied into each other, as Turkish mills purchased considerable tonnage from shippers on the U.S. Atlantic coast.

Two things have happened to help weaken this link. Turkish mills have been putting in considerable effort to source more scrap domestically, so their overall import levels peaked in 2012. Then throughout 2014 the U.S. dollar strengthened, causing mill buyers in Turkey and throughout the world to explore the EU market as a first option for many purchases.

The result, according to the BIR’s “World Steel Recycling in Figures” publication, was an EU export volume in 2014 that closely matched that of the year before: 16.86 million tonnes in 2014 compared with 16.81 million tonnes in 2013 (up 0.3%).

Export levels from the U.S., meanwhile, dropped 17.1% to 15.3 million tonnes in 2014.

Additional figures gathered by BIR Ferrous Division Statistics Advisor Rolf Willeke show the U.S. was able to absorb much of this scrap, as its EAF-heavy mill sector consumed 5.1%, or 3 million tonnes, more scrap in 2014 compared with 2013, nearly equaling the 3.2 million tonne drop in exports.

In general, sellers benefit from having valid export options to consider against the domestic market. However, buyers in scrap import-dependent nations are watching currency fluctuations and levels of scrap arisings in 2015 who will make the decisions as to whether the U.S. can regain its export crown.

One London-based broker who supplies mills in Turkey and the GCC region has been years sourcing scrap out of Russia and the Ukraine for the past two, but the geopolitical turmoil in that part of the world has necessitated that he consider other options.

He says the time may be right for ferrous scrap processors in the U.S. East and South and Turkish mill buyers to reestablish their connections (or make new ones), as the strength of the U.S. dollar has potentially peaked.
Furnaces will stay hot

In 2014 more than 97 million tonnes of ferrous scrap moved across international borders, according to Willeke and the BIR publication. For scrap recyclers and brokers to continue to trade at that pace, the world’s steel industry will need to stay healthy and growing, as it has throughout the current decade.

Figures collected by the Brussels-based World Steel Association (Worldsteel) show global crude steel output rising over the past five years.

The increase from 2013 to 2014 was relatively small at 1%, owing mainly to the near stabilization of output in China, which has seen large annual increases in production in each of the past 15 years.

Worldsteel Director General Edwin Basson, who was a guest speaker at the BIR Ferrous Division meeting in Dubai, says the stabilization of output in China’s steel industry may not have a large impact on the global scrap market, nor does he see China becoming a net exporter of ferrous scrap.

Although China will generate more ferrous scrap through end-of-life vehicles and appliances and increased demolition activity, Basson says, Chinese BOF melt shop managers will be happy to have this scrap as part of their raw material mix.

China’s rapid urbanisation has affected long-term steel demand in the previous 15 years, and he says he sees urbanisation in other parts of the world boosting production in the next 25 years.

“I am quite positive about the health of the steel industry,” Basson said. He acknowledged that there will be challenges for steelmakers between 2015 and 2040, but added, “Our product is adaptable enough to address the challenges.”

Reducing dependence

Ferrous scrap continues to flow across national borders, but many of the importing nations that led the market earlier this decade are cutting back on their purchases.

According to the “World Steel Recycling in Figures” publication released in May 2015 by the Ferrous Division of the Brussels-based Bureau of International Recycling (BIR), the following nations scaled back their ferrous scrap imports in 2014:

  • China, down by more than 1.9 million tonnes (42.6%);
  • South Korea, down by more than 1.2 million tonnes (13.6%);
  • Turkey, down by more than 650,000 tonnes (3.2%); and
  • Taiwan, down by 180,000 tonnes (4.1%).

Of these four nations only Turkey’s steel production dropped in 2014, and its output fell by just 1.8%, not the 3.2% reflected in its scrap import drop-off. Each of the four nations is almost certainly narrowing its own scrap deficit by generating and collecting more ferrous scrap internally.