BIR Ferrous World Mirror October 2016

Global – Chinese exports of finished and semi-finished steel dropped from June’s very high level of 10.9 million tonnes to 9.1 million tonnes in August. And while this is a good sign, the latter total ‘still shows that China is more than willing to continue to export its excess production at levels that exceed sound business practices,’ says BIR ferrous division president William Schmiedel of Sims Group Global Trade Corporation.

However, he goes on to welcome the ‘mega merger’ between Chinese steelmakers Baosteel and Wuhan as ‘a positive step’ and a possible sign of a resolve within Beijing to rationalise steel production.

Also on the upside, he argues that the spike in coking coal prices ‘should eventually increase the percentage of scrap used within the integrated sector of the steel industry’, adding that an integrated mill in Turkey has already indicated it will switch to a 20% scrap charge from under 10%.

Japanese integrated mills are also planning to increase their scrap ratios to reduce the effects of an upturn in hot metal costs caused by the sharp rise in coking coal prices. With scrap generation and distribution quite slow globally, the scrap market in Japan is deemed unlikely to fall too far towards the end of 2016.

Elsewhere in Asia, scrap demand in Taiwan has continued to decrease such that ‘the only good news for scrap suppliers is that Chinese billet prices have remained high enough to keep scrap competitive in that market, although future demand and prices for scrap show no imminent signs of recovery’, it is noted in the Mirror.

Bulk sales into South Korea ‘continue to be few and far between’ as the overall market remains ‘in a weakened state’ with ‘no signs of an imminent increase in demand for this year’.

Meanwhile, Indian mills returned to the bulk scrap market in late September after an absence of almost six months by purchasing five deep-sea cargoes. Bangladesh has continued to be a regular importer from the USA, Australia and the UK, among others.

Feedback from Europe suggests the ferrous scrap market is expected to remain ‘relatively flat’ over the fourth quarter as demand for finished steel continues to be low and cheaper billet is continuing to put pressure on scrap prices.

‘There is considerable resistance to lower prices from suppliers, and with no real overhang in scrap supply we should see values continue to move in a tight range,’ it is concluded.

In September, meanwhile, Ukraine’s president gave final approval to a law that imposes a Euro 30 per tonne scrap export tax, effective for one year. The US market is facing the possibility of further price drops early in the fourth quarter. Lower prices have already reduced scrap flows at a time when inventories are traditionally being built ahead of the colder winter months. ‘If and when demand picks up, there may not be enough scrap in the pipeline to meet future demand,’ it is warned.

According to the latest World Steel Recycling in Figures update from BIR ferrous division statistics advisor Rolf Willeke, steel scrap usage for crude steel production was lower year on year in January-June 2016 in the EU-28 (-7.2% to 45.38 million tonnes), China (-1.2% to 42.6 million tonnes), Japan (-1% to 16.87 million tonnes), the Republic of Korea (-7.1% to 14.1 million tonnes) and Russia (-2.8% to 8.024 million tonnes).

In all cases, the percentage reduction in scrap usage was greater than the respective decline in crude steel production. However, the first half of the year did bring an increase in steel scrap usage in Turkey (+2.2% to 13.26 million tonnes) while the country’s steel scrap imports surged 8.3% year on year to 9.178 million tonnes.

The EU-28 retained its role as the world’s leading steel scrap exporter with a 15.2% increase in its overseas shipments to 8.593 million tonnes whereas the USA’s overseas shipments tumbled 14.5% year over year to 5.901 million tonnes in the January-June period.

This article is based on the BIR’s latest Ferrous World Mirror, produced for the benefit of its members.