BIR Ferrous World Mirror June 2015

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.

The steel ‘overhang’ in China – manifesting itself as cheap exports to many parts of the world – has become the new normal, according to Bill Schmiedel, president of the BIR ferrous division and also of Sims Group Global Trade Corporation. ‘Until trade barriers become effective or China’s domestic demand for steel increases, we must be one step ahead and adjust our business models accordingly,’ he recommends.

China is said to be exporting ‘huge’ quantities of billet, rebar and other steel products, including 9.2 million tons in May alone, and is thereby ‘affecting all markets around the world’, according to the Mirror. For example, prices for HMS in containers fell in Taiwan from US$ 235 per tonne in May to just US$ 210 by the end of June; local steel mills suggest HMS prices in the US$ 180-190 per tonne range are needed to compete with Chinese billet.

While acknowledging that Chinese billet has affected scrap purchases and prices on the international market, feedback from Japan suggests a decline in scrap generation should prevent a steep price fall. The view from Europe is that the post-Ramadan period normally brings heightened buying activity and healthier market conditions, but that the constant flow of cheap Chinese billet ‘does not bode well for the next two quarters’.

Meanwhile, new rules and regulations have occupied centre stage elsewhere in the world. Notably, ‘no real clarity’ is said to surround the revised pre-shipment inspection (PSI) rules for scrap imports into India, leading to a situation in which ‘most foreign suppliers have refrained from offering new material and inspection agencies have refused to carry out new inspections’.

Foreign suppliers now have the option of shipping certain grades of processed scrap – such as shredded, sheared, baled and briquetted – into India via self-certification, although this would be subject to: other terms and conditions being followed by the Indian importer; and the use of major ports in India where radiation detection equipment has been installed. In such a scenario, no PSI certificate would be required from an approved inspection agency, it is pointed out. Indian ferrous scrap imports totalled 4.9 million tonnes in the year to March 31 2015, a total higher than that for the previous year but short of the import figure for 2012/13.

In Russia, the local currency has started weakening again – to the benefit of exporters. And in Ukraine, meanwhile, there is draft legislation to set maximum export quota volumes for a year that will allow some companies – ‘most probably steel mill subsidiaries’ – to buy all the quotas at auction, ‘thus making exports impossible for other market participants’ and representing ‘a new approach to limiting exports’. Independent scrap processing companies are fighting the proposal.

When comparing the first quarter of this year with January-March 2014, steel scrap usage for crude steel production slumped 9.1% in China to 21 million tonnes, according to latest figures compiled by BIR ferrous division statistics advisor Rolf Willeke. The percentage declines were even steeper in Japan (-9.3% to 8.5 million tonnes), South Korea (-13.3% to 7.2 million tonnes) and Turkey (-11.5% to 6.4 million tonnes). Steel scrap consumption in the USA slid almost 7% year on year to 12 million tonnes whereas Russia posted an increase of 8.8% to 3.33 million tonnes even though its crude steel production increased by only 4.6%.

When comparing the first quarters of 2014 and 2015, Turkey remained the world’s leading steel scrap importer despite cutting its overseas purchases by 5.7% to 4.143 million tonnes. Imports were also sharply reduced into South Korea (-47.8% to 1.196 million tonnes), the USA (-7.8% to 964 000 tonnes), the EU-28 (-17.1% to 648 000 tonnes) and Indonesia (-46.1% to 322 000 tonnes). Conversely, there was a surge in overseas steel scrap purchases by India (+45.8% to 1.448 million tonnes), making it the world’s second-largest steel scrap importer in the first quarter of 2015.

EU-28 steel scrap exports fell 10.4% to 3.525 million tonnes in this year’s first quarter but remained just ahead of US overseas shipments, which totalled 3.259 million tonnes. Russia boosted its steel scrap exports by 8.6% to 1.115 million tonnes in January-March 2015, with the biggest buyer being Turkey on 487 000 tonnes.