BIR Ferrous World Mirror July 2012

Global – The following article is based on the latest Ferrous World Mirror produced by the BIR world recycling organisation for the benefit of its members.

Overcapacity in the steel industry has become a topic of significant public debate for the first time in almost a decade, according to the President of the BIR Ferrous Division, Christian Rubach of TSR Recycling in Germany.

He points to a recent estimate from the European Confederation of Iron and Steel Industries (Eurofer) that overcapacity in the EU is up to 25% or 50 million tons per annum, whereas experts elsewhere calculate that excess capacity in China will be 300 million tons in the long run.

Mr Rubach goes on to highlight the fact that EU exports of steel scrap are running at an annualised rate of 25 million tons – ‘€˜a level which has never been seen before’€™ and an illustration, he adds, of ‘€˜the extreme importance of free and fair trade and of open markets’€™. In the January-March 2012 update of ‘€˜World Steel Recycling in Figures’€™, compiled by the BIR Ferrous Division’€™s Statistics Advisor Rolf Willeke, it has been revealed that the EU-27 overtook the USA as the world’€™s leading exporter of steel scrap. The EU’€™s total exports leapt 38.3% to 6.152 million tonnes in the first three months of this year whereas America’€™s overseas shipments climbed 7.7% to 5.439 million tonnes.

Turkey’€™s steel scrap consumption and its domestic steel production both jumped 13.8% in the first quarter of 2012, the former to 8.1 million tonnes. Over the same period, China’€™s steel scrap consumption dropped 10.1% to 21.3 million tonnes despite a 2.5% increase in the country’€™s crude steel production. Steel scrap usage in the EU-27 fell 5% to 24.7 million tonnes whereas steel output in the region was only 3.9% lower than it had been in the opening three months of last year.

Turkey, the world’€™s leading steel scrap importer, hiked its overseas purchases by 11.8% to 5.338 million tonnes in the first three months of 2012, but this performance was eclipsed in proportional terms by the 32.8% increase in the Republic of Korea’€™s outside purchases to 2.403 million tonnes. Meanwhile, Chinese scrap imports fell 4.2% year on year to 1.291 million tonnes while the figure for Taiwan slid 13.3% to 1.214 million tonnes.

An extrapolation of five months of World Steel Association data from Blake Kelley of Sims Group Global Trade Corporation revealed that the world is on course to produce 33 million tonnes more raw steel and 35 million tonnes more iron this year when compared to 2011, although apparent consumption of purchased scrap is in line to drop by 2 million tonnes.

Given concerns over, among other matters, energy cost increases, a weak Euro, China’€™s economic slow-down and ‘€˜sputtering’€™ growth in India, buyers and sellers of scrap will probably minimise inventory and other costs in the near term, leading to ‘€˜very tight’€™ supply lines, he says.

The European steel scrap market analysis from EFR President Tom Bird of Van Dalen Recycling in the UK highlights a US$ 5-10 per tonne ‘€˜mini-spike’€™ in late June, followed by a return to quiet trading conditions. He describes the current trading environment as the ‘€˜perfect storm’€™ of challenging market forces, including low scrap availability and freight complications. However, he adds, there is a widespread belief that the market is at the bottom and that there could be an upturn towards the end of the third quarter.

According to Hisatoshi Kojo of Metz Corporation in Japan, the domestic H-2 scrap price was approximately Yen 27 000 per tonne fob (US$ 341.77) at the end of June but can be expected to hover around Yen 26 000-26 500 (US$ 329.11-335.44) in the coming months – partly because electric arc furnace steelmakers tend to cut production over the summer. ‘€˜Once shipment of outstanding July/August contracts is completed, it might prove difficult to sustain the current market level,’€™ he adds.

Steel scrap prices in Russia spent the second quarter of 2012 in decline but scrap deliveries did not decrease despite the low values reached by June, observes Andrey Moiseenko of Ukrmet Ltd. Further erosion is anticipated until the end of the summer when steel mills usually start to build ‘€˜winter stock’€™. In the Ukraine, meanwhile, prices for June shipments slipped to US$ 320 per tonne DDU steel mill and appear likely to remain around the same level for July.

In India, the scrap market is weak and prices are around US$ 410-415 per tonne cfr Nhava Sheva for shredded scrap in containers, according to Zain Nathani of the Nathani Group of Companies. If the Indian rupee were to strengthen, however, the belief is that importers will return to the market ‘€˜in large numbers’€™. Meanwhile, India’€™s Joint Plant Committee and the Ministry of Steel have agreed to undertake a detailed study in order to build an understanding of domestic ferrous scrap arisings.