BIR Ferrous World Mirror September 2014

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.

China upped its steel scrap usage by close to 10% in the first half of 2014 despite tumbling imports, according to the latest ‘World Steel Recycling in Figures’ update. Consumption for crude steel production in China jumped 9.4% year on year to 47.5 million tonnes whereas purchases from overseas nosedived 49% to 1.305 million tonnes – a reflection of the country’s stated policy of buying more steel scrap from domestic sources and reducing imports.

Half-year growth in steel scrap usage was also recorded in the EU-28 (+3.4% to 47.7 million tonnes), Japan (+5% to 18.98 million tonnes) and South Korea (+2.1% to 16.9 million tonnes). In contrast, the January-June 2014 figures show small year-on-year declines in steel scrap consumption for the USA (-0.4% to 26 million tonnes), Turkey (-0.3% to 14.46 million tonnes) and Russia (-0.4% to 8.27 million tonnes).

Following a reduction of 12% for 2013 as a whole, the world’s foremost steel scrap importer Turkey increased its overseas purchases by 4.9% to 9.729 million tonnes in the first half of 2014. The EU-28 headed the list of steel scrap exporters with a year-on-year increase of 4.3% to 8.584 million tonnes whereas overseas shipments from the USA slid 23.5% to 7.595 million tonnes, thanks in large part to declines in deliveries of 34.6% to Turkey, 7.9% to Taiwan and 22.5% to South Korea.

Military actions in the eastern part of Ukraine have led to steel mill capacity being taken off line and a subsequent drop-off in scrap consumption. The country’s scrap exports have increased significantly this year but quotas are coming to an end and no new ones are expected to be distributed in the short term.

In Russia, meanwhile, steel mills have begun amassing winter stock and have maintained high purchasing prices at a time when the Russian government has further reduced the export duty such that, from September, exporters have been paying only US$ 30 per tonne.

In the USA, the steel scrap market moved basically sideways in September. The hope has been expressed that on-going transportation problems for consumers will help sustain prime scrap grade prices. At the same time, it is anticipated that the decline in iron ore values will keep continued pressure on the electric arc furnace sector and hence scrap prices.

Low iron ore values have considerably reduced product prices out of China, with billet being offered into Middle Eastern and Eastern Mediterranean markets at around US$ 480-485 per tonne cfr – or some US$ 35-40 less than Turkish domestic billet. This is applying downward pressure on scrap prices and making buyers in Turkey reluctant to commit.

According to feedback from the EU, steel scrap prices some US$ 15 per tonne down on previous levels are already being seen and further reductions are anticipated in October. For Japan, steel scrap export contracts have dried up despite the weakness of the Yen because buyers in South East Asia are also in no hurry to procure scrap, again partly because of the availability of low-priced Chinese billet throughout the region. In addition, South Korean mills are understood to be holding ample stocks of scrap at present.

Ferrous scrap imports into India are anticipated to be much lower in 2014 than in earlier years. At the same time, domestic crude steel production in 2014 is expected to fall some 26 million tonnes short of the initial target of 110 million tonnes set by the government five years ago, not least because of: a ban on the mining of coal and iron ore across the majority of mines throughout India owing to environmental and corruption concerns; the lack of natural gas supply to steel mills; and the reluctance of banks to lend to steel producers.