Signs still strong for steel scrap

Steel production returns to pre-pandemic levels as demand picks up but higher energy costs worry industry watchers.

2021 was a good year for scrap dealers in international markets, even if they had to deal with challenges such as logistical shipping issues, soaring container rates, tariff changes and various regulatory hurdles. As all four tables in our regular chart on these pages show, prices have been sustained at healthy levels.

For example, shipments of HMS 1/2 (80:20) from Europe to Turkey were consistently over US$ 400 per tonne cfr throughout the year. In contrast, the average during 2020 was US$ 286.75 per tonne cfr. The rate indicated for shipments at the time of writing (late January) is US$ 459 per tonne cfr. S&P Global Platts noted that Turkish imports of premium HMS 1/2 (80:20) at around US$ 463 per tonnes cfr at the year-end was close to the average price for shipments throughout 2021. The highest trade noted last year was US$ 515.75 in late May. Industry watchers expect Turkish deep sea import scrap prices to remain at elevated levels through the first quarter of 2022.

Turkish concerns

Even so, the International Rebar Producers Association (Irepas) noted the weakened Turkish economy, including rampant inflation, was affecting trade. Platts also reported that US exports remained an important source of ferrous scrap for Turkish steel producers. Turkey imported 3.04 million tonnes of ferrous scrap from the US in the first 10 months of 2021, down from 3.75 million tonnes in the corresponding period of 2020.

Higher ferrous scrap export duties imposed in Russia and Ukraine, increasing the export price, means Turkish mills could look to competitors for their material. In early December 2021, Ukraine announced duties would rise threefold from EUR 58 per tonne to EUR 180. From 1 January, Russia’s new rate rose from EUR 70 per tonne to EUR 100. Russian customs data is already reflecting a decline, according to Davis Index, with exports of 3.71 million tonnes of ferrous scrap in the first 11 months of 2021 down 12% on the same period of 2020, according to Russian Customs data. Similarly, shipments of the material to Turkey fell 28% from January to November 2021.

US perspectives

In the US, the Institute for Supply Management reported that December’s manufacturing PMI was 58.7, down 2.4 percentage points from the November value of 61.1. Even so, this was 19^th month in a row indicating expansion in the overall economy after contraction in April 2020.

The latest trade data from the US Commerce Department shows US exports of all recycled commodities from January until November 2021 increased 10% year-on-year by quantity to 35.6 million tonnes and surged 53% in value to US$ 28.8 billion. Within the overall total, recycled iron and steel exports (excluding stainless and alloy steel) rose 64% year-on-year by value to US$ 6.4 billion and increased 7% by quantity to 15.7 million tonnes, again reflecting strong prices.

The US is in talks with UK officials to lift tariffs imposed on UK steel and aluminium exports during President Trump’s reign. The Trump administration introduced a 25% duty on foreign steel and 15% tax on foreign aluminium, prompting the UK to retaliate with tariffs on some US goods such as whisky. Under President Biden, a deal has since been agreed with the EU and talks are also underway with Japan. Officials representing the US and UK say they are committed to an ‘expeditious outcome’.

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