Revived economies drive metal demand

Growing auto production and rebounding steel sector boost challenged markets.

A decline in prices reported in the previous issue continued into early February before climbing back strongly and then dropping back again in the second week of March. Specifically, this meant that shipments of the benchmark HMS 80/20 heavy steel scrap from Europe cfr Turkey fell from the US$ 475 per tonne reported in mid-January to just over US$ 380 per tonne by 9 February, according to Fastmarkets.

From that low point for 2021, US$ 404 per tonne was achieved a week later and US$ 453 per tonne in early March before declining to US$ 430 per tonne at the time of writing (12 March) as scrap flows increased.

All change

George Adams of SA Recycling in the US, commenting in the latest Mirror from the Bureau of International Recycling (BIR), said two main factors had been driving demand. ‘Firstly, the interruption of the supply chain last spring, the depletion of inventories and the reduced capacity to produce the raw materials to refill them. Secondly, the change in consumer behaviour that has created strong demand for products that are metals-intensive such as freezers – sales of which are up 50% in these times of a more stay-at-home culture.’

The US economy, in his view, had effectively been reset and was now the driver of demand and healthy steel prices in the USA with mills chasing scrap. ‘Add in the fact that China is now actively seeking imported ferrous scrap (after the ban was lifted on 1 January this year) and scrap dealers are optimistic about the market in coming months.’

Zain Nathani, of the Nathani Group and vice-president of the BIR ferrous division, reported on a cut in India’s import duty on ferrous scrap to 0%, effective until 31 March. ‘This encouraging move will benefit the hundreds of domestic secondary steel manufacturers who rely on imported scrap as a vital raw material,’ he said. ‘The long-awaited vehicle scrappage policy has been formally announced under the Union Budget and will be part of the government’s “Self-Reliant India” campaign. This will promote domestic car dismantling and shredding.’

Brigther prospects

Meanwhile, Alistair Field, Sims’ chief executive officer told investors in February that the expected return of global auto production to more normal levels and China’s recent opening up to imports of high-quality and recycled ferrous [scrap] were important trends, signalling favourable market conditions for the metal recycling industry.

Sims’ underlying share of results from SA Recycling, its Orange, California-based joint venture, was US$ 24.4 million (EUR 20 million) in contrast to a US$ 1.3 million loss during the corresponding period of 2020. The company attributed this reversal to exceptionally high ferrous scrap prices in December and January.

Malaysian restrictions

China’s import restrictions have prompted exporters to consider other outlets and Malaysia has proved to be a popular destination. However, the country’s ministry of international trade and industry announced in March that all metal scrap imports will have to be subject to pre-shipment inspection, require a certificate of approval (CoA) and undergo further inspection before the ship is unloaded.

These tighter guidelines, which have been highlighted by BIR, include quality criteria for metal scrap in terms of scheduled wastes and other impurities. They also set out the required purity levels of the different scrap materials and limits of contamination from other materials in the consignments. Ferrous, copper and aluminium consignments must all contain at least 94.75% of the target metal. Those failing the quality tests will have to be returned to the country of origin.

ISRI wrote to Sirim, the Malaysian testing, inspection and certification body, for clarification and was told the intent of the new import requirements is to ‘prevent Malaysia from being an e-waste dumping ground’ – hence 0.25% tolerance for plastics and 0% for any other non-metallics. Sirim added that pre- and post-shipment inspection is required because ‘past experience’ resulted in inconsistencies with the quality of arriving material from what was cleared by a pre-shipment inspector. 

Sirim said the post-shipment inspection would confirm that the pre-shipment inspection was carried out correctly. Sirim noted complaints about the impossibility of meeting a 0% tolerance and said it was reconsidering that aspect. 

US data

The jump in prices in the US at the turn of the year was underlined in data from the Bureau of Labor Statistics which reported iron and steel scrap rose 50.8% in January 2021 compared with January 2020. Compared to the December, the index increased 20.6%.

Latest trade data from the US Census Bureau shows US ferrous scrap exports (excluding stainless steel and alloy steel scrap) at 1.07 million tonnes in January 2021, down nearly 28% from shipments in Jan 2020. Scrap shipments to Turkey reportedly declined 22.8% year-on-year to below 265 000 tonnes in January.

The data also shows shipments to Malaysia declined 84% year-on-year to 60 000 tonnes but there is doubt over the January 2020 figure showing 365 000 tonnes of ferrous exports to that country. Excluding the questionable Malaysia figures, ferrous scrap exports were down 9%.

Curious about ferrous scrap? You can read the full market analysis in our new issue!