Page 75 from: April 2008

M A R K E T A N A L Y S I S

Turkey has already been paying
some US$ 550 per tonne cfr for 80/20
HMS I/II and prices in South Korea,
Taiwan and other South East Asian
countries have surpassed US$ 600
cfr. But for the greater part, these
Asian countries have switched to
containerised deliveries; container
costs are normally cheaper than
bulk shipping costs as they are usu-
ally quoted on a door-to-door basis.

South Korean steel, automobile
and shipbuilding giant Hyundai has
told journalists that it is now buying
50 000 to 60 000 tonnes of scrap per
month in containers. Meanwhile,
Malaysia recently bought large ton-
nages of 80/20 HMS I/II scrap in the
USA at an amazing US$ 630 per
tonne cfr.

Major scrap traders – and also the
steel mills – foresee another scrap
price increase of US$ 50 per tonne in
April/May, such that scrap could
reach US$ 600 per tonne cfr in
Turkey and Europe. This would rep-
resent an all-time high witnessed
previously only for pig iron imported
into the USA and Europe, and, as
mentioned above, for scrap delivered
into South East Asia.

Steel mills are seemingly not too
concerned as yet because, in percent-
age terms, their own product prices
have moved up even more sharply
than those of scrap. Hence, margins
on new steel are not yet in danger.
Prices have been rising everywhere,
with the exception of the Ukraine
where they have fallen marginally
because mills consider current price
levels to be excessive.

Falling freight rates

And the Ukrainian viewpoint
could carry some weight as Euro 1 is
now yielding US$ 1.57-1.575 com-
pared to US$ 1.59 in early March –
the greenback’s lowest value since
1973. And shipping rates have also
fallen: to around US$ 65-70 per tonne
from the US East Coast to Turkey; to
US$ 50-55 from Rotterdam to the
same destination; and to US$ 75-80
from the US West Coast to South Ko-
rea, China and Taiwan, depending as
usual on the speed of local discharg-
ing because congestion at some ports
plays an important role.

There are many reasons why scrap
prices have increased, including the

leap in iron ore and coke prices earli-
er this year. Meanwhile, world steel
production and consumption are con-
tinuing to climb, resulting in higher
demand for scrap. Furthermore,
there has been a sharp turn-around
in Russia: the world’s second largest
scrap exporter in recent years after
the USA, it is expected to become a
net scrap importer in the coming
years (see ‘Steel’ section).

Russia’s scrap purchases reached
24 million tonnes in 2007, which is
4 million tonnes or 20% more than
in 2006. This trend effectively re-
duces the volume available to export
elsewhere, such as to Turkey and, to
a lesser extent, South Korea and
some EU countries. US scrap ex-
ports are forecast to rise markedly
this year to 17 million tonnes from
an average of around 14 million in
the past three years.

Owing to the continuing shortage
of scrap, a number of mills in the
USA and elsewhere are buying scrap
companies. Nucor, the world’s largest
electric arc furnace (EAF) group
which produced 22.8 million tonnes
of steel in 2007, recently bought US
scrap giant David J Joseph from a
Dutch trading group for more than
US$ 1.4 billion. And Nucor is now set
to buy Metal Recycling Services
(MRS), a company which handles
around 200 000 tonnes of scrap each
year.

The merger of another scrap giant
Sims, which has its roots in Aus-
tralia, with one of the USA’s largest
scrap companies, Metal Manage-
ment, has now been completed.

Indispensable scrap

Scrap remains indispensable for
steelmaking, especially since steel
manufactured in EAFs is on the in-
crease around the world (see ‘Steel’ sec-
tion). Annual international trade in
steel scrap has been around 100 mil-
lion tonnes in recent years compared
to only 16 million tonnes for pig iron
and 14 million tonnes for other scrap
substitutes such as HBI and DRI.

In the last decade, EAF mills have
been able to manufacture more sheet
steel via the EAF-based thin slab ap-
proach. In the USA last year, produc-
tion reached 17 million tonnes. Also
in 2007, scrap exports from the EU to
‘third’ or non-EU countries totalled

9.5 million tonnes – an increase of
9.6% over 2006. The main export des-
tinations were: Turkey 5.3 million
tonnes (+18.5%); India 500 000 tonnes
(+36.6%); China 480 000 tonnes
(+12.6%); Switzerland 400 000 tonnes
(-2.8%); and Pakistan 360 000 tonnes
(+73.6%).

Imports from third countries into
the EU fell 30% to 4.7 million tonnes
last year, mainly as a result of a
drop of 1.5 million tonnes – or 48.5%
– in Russian exports destined mostly
for the EU. This decline was offset
in part by higher US exports of
690 000 tonnes (+54.1%).

The EU’s largest steel producer
Germany consumed 21.7 million

tonnes of scrap in 2007, of which 17.3
million tonnes was purchased scrap.
The scrap was used mainly in EAF
steel mills (15.6 million tonnes) but
also in BOF mills (6.1 million tonnes).
Specific scrap intake in Germany’s
steel mills equated to 183 kg per
tonne of steel (ie, 18.3%) in BOF mills
and 1041 kg in EAF mills (104.1%).
The latter figure is higher than 100%
owing to smelting losses.

Ship dismantling

There is still a great shortage of
ships for dismantling, with economic
and environmental factors hamper-
ing shipbreaking activities in Asia.
Firstly, larger – and still rising – vol-

Recycling International • April 2008 75

Italian scrap law revised
Italy has passed a new law which changes the legal basis for imports

of scrap metal.
The previous legal framework is said to have created a huge amount

of insecurity among steel mills and led to a reduction in the country’s
scrap imports. Scrap deliveries were declared as ‘secondary raw mate-
rials’ in other European countries and could be traded without obstacle.
However, Italian law blocked the intake of scrap which was declared to
be ‘waste’, with special permission to import made available only to a
few mills and foundries.

Scrap imports into Italy were hampered for weeks after the country
implemented its interpretation of the EU’s waste shipment regulations
of July 2007.

In the second week of February, however, Italy passed a new law
that will enable all mills to import scrap, according to the Italian scrap
association Assofermet. All potential scrap importers can now re-apply
for a permit to receive ‘waste scrap’.

The Italian government has been much stricter on this issue than its
EU colleagues, thus depriving its steel mills from purchasing indis-
pensable supplies. Partly as a result of transport problems, the domes-
tic scrap market is unable to satisfy the needs of its customers. As a
result, various Italian mills have been forced to idle their EAF units for
weeks and sometimes months at a time.

It should not be forgotten that Italy – the world’s second largest scrap
importing country, after Turkey and Spain – has one of the highest per-
centages of EAF-based steel production in Europe at almost 65%.

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