Volatility leaves ferrous markets in uncertain place

George Adams, ceo of SA Recycling, says a summer slowdown in scrap flows led some to believe that a price floor was in sight.

‘They were partially correct as the downside in scrap prices in July was not as bad as initially indicated. In addition, the export market in Turkey saw a significant but brief rally that supported a limit to the downside of US ferrous scrap prices.’

Adams, writing in the latest Ferrous Mirror from the Bureau of international Recycling as a member of the ferrous board, notes that prime was a different story with Busheling falling US$ 150 on lower pig iron prices and a continuing fall in HRC prices. Higher interest rates in the US are intended to fight inflation and slow excess growth with mill orders affected as a result, he adds.

‘Sheet mill orders are experiencing weakness on those economic headwinds, exacerbated by the slower summer months,’ says Adams, who recently made the Top 100. ‘Even a smaller availability of US ferrous scrap in August may not be enough to provide support to an already weaker new steel market. The question for August is which will be weaker, supply or demand? That will set the parameters of US ferrous scrap pricing in August and beyond.’

President of the division, Denis Reuter of TSR Recycling in Germany, writes of the continuing impact of the war in Ukraine. ‘Experts assume that, after a difficult first half of 2022, the economy in Europe will continue to develop only weakly in the next quarter and that the almost insoluble task of diverting from Russia’s natural gas could drag European economies further down than previously expected.’

Reuter noted the latest data from worldsteel on crude steel production (see box below). He said the 949.4 million tonnes produced in the first six months of the year was around 5.5% less than the corresponding period of 2021.

‘In January-June 2022, crude steel production was lower in almost all leading countries when compared to the same six months of last year, with the notable exception of India where production of 63.2 million tonnes represented an increase of 8.8% over January-June 2021,’ he points out.

Production in China was 6.5% lower than in the same period last year at 526.9 million tonnes owing to new lockdowns as part of the country’s zero-Covid strategy while the EU total was 73.8 million tonnes, a decrease of 6.2% from January-June 2021. Germany recorded a year-on-year decline of 5.5% to 19.6 million tonnes while Turkey’s crude steel production fell 4.6% to 19 million tonnes in the first half of 2022.

‘Demand for steel in Europe, as well as among other major economies, has cooled noticeably,’ Reuter writes. ‘Traditional customers for Turkey’s long steel have been noticeably reluctant to make purchases in recent times.’

‘In the first five months of this year, exports fell by 11.3% to 2.7 million tonnes after reaching 3.05 million tonnes in the same period of 2021. Domestic demand was similarly subdued as devaluation pressure on the Turkish lira and galloping inflation (78.6% in June) significantly reduced the hunger for reinforcing steel.’

June steel stats

World crude steel production for the 64 countries reporting to the World Steel Association was 158.1 million tonnes (Mt) in June 2022, down 5.9% on June 2021.

Of the top 10 steel-producing countries,China produced 90.7 Mt, down 3.3% while the Indian output was 10.0 Mt, up 6.3%. The remaining top producers were: Japan 7.4 Mt (-8.1%); United States 6.9 Mt (- 4.2%); Russia (estimated) 5.0 Mt (-22.2%); South Korea (est.) 5.6 Mt (-6.0%): Germany 3.2 Mt (-7.0%); Turkey 2.9 Mt (13.1%); Brazil (est.) 2.9 Mt (-6.1%); Iran (est) 2.2 Mt (-10.8%).