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Upturn in ferrous sentiment

The New Year brought firmer sentiment to ferrous scrap markets, according to BIR’s latest quarterly review of global trade in secondary materials.

Writing in the world recycling organisation’s Mirror, Dennis Reuter of TSR Recycling and president of the BIR ferrous board, recalls how the start of 2022’s fourth quarter had been dominated by China’s strict zero-Covid policy and a global cycle of interest rate hikes.

But an upturn in sentiment was seen within Asia in the final weeks of the quarter, triggered by the Chinese government deciding to support the ailing property sector and small and medium-sized enterprises with measures to stimulate the economy.

‘The Turkish market followed Asia, albeit with some delay, and importers had to increase their bids on the export market,’ Reuter says. ‘Limited availability of scrap and competition from Asia forced buyers to increase their offer prices. At the same time, rising finished steel prices put pressure on already weak domestic and foreign demand.’

However, official figures for November show Turkey imports had a year-on-year decline of almost 35%, outstripping the steep 30.7% drop in steel production. 

Easing Covid rules

In December, the Chinese government moved away from its strict Covid rules and also eased a housing policy that contributed to a historic property slump and hit steel demand. Reuter believes the impact is likely to be felt over the coming months. ‘The iron ore market continued its remarkable recovery, rising almost 50% to US$ 118 per tonne by the end of last year,’ he notes.

‘The fall in energy prices also had a positive impact on the international steel sector. Favourable weather conditions and well-filled natural gas storage facilities led to lower natural gas and electricity prices, which in turn stimulated demand for steelmaking raw materials.’

Resilient US

A contribution from board member George Adams of SA Recycling, notes that while initial indications had been for higher scrap prices in January, sheet mill orders did not support the high end of anticipated increases.

‘Subsequently, new steel buyers started to place the expected orders and, with that increase in demand, mills were quick to target more upside in new steel prices. While new steel sales are still being done at lower levels, mills did enjoy enough new business at higher levels to support additional scrap price increases in February.’

He says supply constraints warranted a third month of US ferrous scrap increases. ‘With a strong export market, rising new steel prices and a still-constrained availability of ferrous scrap, mills have now accepted those increases. Now the bigger question is where we go from here.’

Adams believes the US consumer is resilient and resistant to a market slowdown amid strong demand for vehicles, houses and appliances. ‘Anticipated additional demand caused by the recent US infrastructure bill should help to fuel US construction this year,’ he concludes. ‘All of that may be enough to keep the party going for a little while longer. Time will tell.’

Stainless steel Mirror

A few days earlier, BIR’s quarterly review of the stainless steel sector indicated a better start to the year than had been expected, although chairman Joost van Kleef believes demand could soften heading by the second quarter, putting price pressure on underlying raw materials.

‘A mild winter, sufficient stocks of gas, an increased production of French nuclear power and, last but not least, strong discipline in all areas with regard to energy consumption halted the upward trend in energy prices which, of course, is good news for an energy-intensive industry like stainless steel production,’ he wrote.

‘Furthermore, the order books of all leading industries remain above forecast and, despite the counter-pressure of high inflation rates, the effects of lower purchasing power are not as strong as feared.’

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