Global – China’s continued exportation of its excess steel production in the form of semi and finished product has forced down ferrous scrap prices to levels ‘not seen in 11 years’, laments William Schmiedel, president of the BIR ferrous division. ‘Our industry needs to find new ways to compete,’ he insists. ‘We cannot look to the market to help us but should rather concentrate on the things we can control, like our costs and streamlining our production wherever we can.’
China’s finished steel exports in July and August combined for over 19m tonnes but even this figure was eclipsed by the record-breaking 11.3m tonnes shipped out in September alone, he points out. Among those countries feeling the impact, a number of steel mills in Taiwan are said to be in trouble ‘and might have to close’.
And in the USA, scrap inventories have exceeded mill demand for the last quarter and thus provided domestic steel mills with an opportunity to ‘continually reduce scrap prices month over month’. When consumers looked to lop US$ 50 off scrap prices in October, ‘most scrap sellers capitulated and took any orders they could find’. This weakness appears set to persist into November as many mills’ order books remain weak and scrap ‘continues to overhang the domestic market’.
The summary of the EU market puts Chinese billet at around US$ 260 per tonne – or a reduction of approximately US$ 80 since July. HMS into Turkey has duly dropped to US$ 165-170 per tonne, which is equivalent to a US$ 100 slump since the middle of 2015. These low scrap prices ‘have adversely affected arisings across the entire EU’, with some operators suggesting volumes are down as much as 40%.
Container trade out of the EU has brought a flurry of activity in response to the falling prices but also evidence of buyers ‘walking away’ from previously-concluded deals. While China maintains current production levels amid generally struggling commodity markets, then the immediate future ‘will certainly remain challenging’, it is argued.
The conclusion from Japan is similar: ‘Given the decline in demand for scrap from the two major importing countries of South Korea and Turkey, as well as the floundering US scrap export market, no price rebound in the scrap market can be expected before the end of this year.’
The same low prices have revived the Indian scrap market in recent weeks, with several bulk cargoes sold to traders. Indian ferrous scrap imports in the four months from April 1 to July 31 were higher than in the same period last year at 1.95 million tonnes.
Even though most mills in Russia have secured their winter stocks, it is argued that a further scrap price decrease will result in not much volume being exported from the country in the coming months because of ‘the more competitive domestic market’ as well as the general slowdown in collections.
In Ukraine, meanwhile, collections have reportedly slumped more than 40% year on year and only a few major scrap buyers remain on the market as some of the mills have either stopped production or have cut it to minimum levels. Scrap exports by sea and rail are continuing but quantities are limited because new quotas are not expected to be distributed until the end of the year.
In his ‘World Steel Recycling in Figures’ update covering the first half of 2015, BIR ferrous division statistics advisor Rolf Willeke highlights steep year-on-year steel scrap usage falls in China (-9.3% to 43.1 million tonnes), Japan (-10.3% to 17.03 million tonnes), South Korea (-10.1% to 15.17 million tonnes) and Turkey (-10.3% to 13.21 million tonnes).
In all cases, the drop in scrap usage was sharper than the decline in the individual country’s crude steel production. The world’s leading steel scrap importer Turkey reduced its overseas purchases by 12.9% to 8.472 million tonnes in January-June this year.
The EU-28 remained the top exporter – despite a 12.1% drop-off to 7.455 million tonnes – as US overseas shipments declined by 9.1% to 6.902 million tonnes. Japanese exports of steel scrap jumped 10.8% to 4.137 million tonnes.
This article is based on the latest Ferrous World Mirror produced by the BIR world recycling organisation for the benefit of its members.