BIR World Mirror on Ferrous February 2012

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

With China producing 45.5% of the world’s crude steel last year, the course of its economy throughout 2012 will have a significant impact on the international scrap industry, notes Christian Rubach, President of the BIR Ferrous Division.

With global crude steel production set to grow again this year, scrap demand will be good and ferrous scrap will remain a potentially scarce raw material, he adds. While more negative recent projections from the International Monetary Fund cannot be ignored, scrap consumption will continue at high levels unless steel production decreases significantly, it is also argued in the Mirror.

The “World Steel Recycling in Figures” January-September 2011 update from divisional Statistics Advisor Rolf Willeke highlights that the increases in steel scrap usage in the EU-27 (+5.7% to 76.8 million tonnes), the USA (+10.3% to 41.6 million tonnes) and Turkey (+22.7% to 22.2 million tonnes) were greater than respective upturns in crude steel production of 4.3%, 6.2% and 18.9%. In contrast, scrap consumption in China (+9.6% to 72.9 million tonnes) was slightly lower in proportional terms than the 10.7% upturn in crude steel production, while Russia increased its crude steel output by 4.3% and yet used only 2.4% more scrap.

The 15.3% increase in Turkey’s overseas purchases of steel scrap to 15.65 million tonnes consolidated the country as the world’s top importer while the USA led the export rankings with an increase of 28.2% to 18.96 million tonnes in the first nine months of 2011, with Turkey (+44.4% to 4.32 million tonnes), China (+44.5% to 3.26 million tonnes), Taiwan (+35.9% to 2.65 million tonnes) and South Korea (+6% to 2.4 million tonnes) among the leading recipients. Shipments from Russia leapt 83.8% in the first nine months of 2011 to almost 2.77 million tonnes.

The EU’s total scrap exports edged 2.3% lower to 13.73 million tonnes when comparing the January-September periods in 2010 and 2011. And by the same comparison, scrap export volumes out of Japan slumped 23.1% to 3.76 million tonnes mainly as a result of exchange rate considerations and the earthquake/tsunami in March last year.

Among the country/regional market reports contained in the Mirror, it is suggested that the scrap market outlook for the EU is ‘not pessimistic’ despite weakness in the second half of January and an anticipated price drop in most EU markets for February; ‘strong’ demand still continues from Turkey, while South East Asia and India are also active, it is noted. Indeed, it is suggested that an upward correction in Europe cannot be ruled out for March.

Across in the USA, the consensus is that scrap prices will retreat in February – perhaps back to December levels. Domestic manufacturers of most steel products are thought to hold full order books for February and much of March. But at the same time, collections of obsolete grades of scrap have increased in line with the higher prices paid and the relatively mild winter weather, while generation of prompt industrial grades has climbed with improved manufacturing activity.

The rupee regained ground against the US dollar in January and this, coupled with a slight softening of ferrous scrap prices, could provide the inducement for Indian buyers to return to the market in the near term, it is suggested. Scrap demand from Japanese electric arc furnace mills is expected to remain stable in the first half of this year whereas orders from blast furnace mills are seen as likely to decrease. In South East Asia, meanwhile, steel prices have proved difficult to hike and so producers have restricted their raw materials purchases to what they need.

Harsh winter weather conditions in Russia over recent weeks have precipitated a sharp drop in scrap collection volumes and generated the potential for price increases. Last year’s total ferrous scrap exports from Russia amounted to 3.9 million tons, which is almost twice as much as in 2010, but a repeat is not expected for this year because scrap shipments from Russia’s Far East are to be restricted to the port of Magadan which is widely deemed impractical for logistical and economic reasons.

The Ukraine recorded total scrap consumption in 2011 similar to the level of the previous year at around 6.8 million tonnes. However, on-going investments in electric arc furnace capacity will alter the picture: at Dneprostal (Interpipe), for example, it has been announced that construction is almost complete and that shortly it will need around 1.5 million tonnes of scrap on an annual basis. Interpipe has also announced investments in the scrap collection industry in order to secure supply.

Based on an extrapolation of World Steel Association data, global production of raw steel was 96 million tonnes higher in 2011 than in the previous year while iron production advanced by 61 million tonnes over the same period. Apparent consumption of purchased scrap climbed 35 million tonnes last year.