Page 42 from: November 2015

40 November 2015

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

Ferrous
Closed: November 4, 2015

A bounce – but no rebound
Ferrous scrap prices have bounced off the
floor – but not to levels that are getting
anyone overly excited. Furthermore,
there is persistent talk of the potential
for fresh declines. Latest cfr price indi-
cations for shipments from Europe to
Turkey are: US$ 185-190 per tonne
for standard quality HMS I/II 80/20
scrap; US$ 190-195 per tonne for
shredded; and US$ 160-165 per
tonne for the HMS I/II 70/30 mix.

At the BIR world recycling convention
in Prague late last month, experts were
suggesting the days of cheap Chinese
billet flooding the world market should
– and could – be numbered.
At the BIR ferrous division meeting (see
page 20 for full report), board member
Tom Bird of Mettalis Recycling in the UK
insisted that Chinese producers’ current
approach was ‘simply not sustainable

long term’ and that the huge losses
incurred by the state-owned steel sector
was already attracting the attention of
Beijing as well as the wrath of many of
China’s trading partners. And analyst
Becky E. Hites of US-based Steel-
Insights LLC told the same meeting
that, within the Chinese government,
‘the tide has turned against the accom-
modating policies for the steel industry’.

But for now, China’s billet exports are
maintaining their stranglehold on scrap
prices. BIR ferrous division president
William Schmiedel of Sims Metal Man-
agement said low iron ore prices (see
the ‘Competing commodities’ section
of this report) could be seen as the cul-
prit but he clearly regarded billet
exports from China as the true cause of
the collapse in ferrous scrap values.

Post-Prague, leading market analyst
World Steel Dynamics has made similar
noises in a communication with Ameri-
can Metal Market, arguing that there
would be no natural floor to Chinese
billet prices so long as producers could
keep financing their losses and utilising
loss-making capacity. If circumstances
do not change, the warning was that
‘raw material prices, especially scrap,
will continue to fall’.

Pressures bearing down
According to latest figures, China’s fin-
ished steel exports broke new ground
this September in soaring to a record
11.3 million tonnes. In the opening nine
months of this year, therefore, China
exported 83.1 million tonnes of finished
steel for an increase of more than 27%
over the 65.3 million tonnes shipped
abroad during the first three quarters of
2014. While exports have been increas-
ing, Chinese billet prices have been
heading rapidly in the opposite direc-
tion – reportedly to around US$ 250 per
tonne.
Such numbers have added to the pres-
sures bearing down on steelmakers in
many other parts of the world. In the
USA, for example, mills operated at an
average capacity utilisation rate of only
68.6% in the final week of October, a
figure almost eight percentage points
below that for the same period last year.

By Ian Martin

Scrap usage takes brunt of steel production dip
In the first six months of 2015, global
crude steel production fell around 2%
year on year to 813.05 million tonnes.
A large proportion of countries
recorded lower outputs – but for many
of them, the percentage decline in
steel scrap usage was even steeper,
according to the latest ‘World Steel
Recycling in Figures’ update present-
ed to last month’s BIR world recycling
convention in Prague by ferrous divi-
sion statistics advisor Rolf Willeke.
Notably in China, crude steel produc-
tion fell 1.3% to 409.97 million
tonnes whereas scrap usage tumbled
9.3% to 43.1 million tonnes. Simi-
larly in Japan, South Korea and Turkey,
crude steel output slid, in turn, 4.7%,
4.9% and 5.7% whereas the respec-
tive scrap usage declines were
10.3%, 10.1% and 10.3%.

In the EU-28, steel production and
scrap usage both edged 0.5% high-
er in January-June this year to,
respectively, 88.12 million tonnes
and 48.4 million tonnes. Bucking the
general trend, the USA recorded a
drop in crude steel production of
8.6% to 39.87 million tonnes
whereas scrap usage slipped ‘just’
7.7% to 24 million tonnes over the
same period.
The EU-28 and the USA continued
to battle it out over the first half of
this year for the title of leading steel
scrap exporter: the former registered
a year-on-year decline in overseas
shipments of 12.1% to 7.455 million
tonnes but remained ahead of the
USA whose exports dropped by
9.1% to 6.902 million tonnes,
despite Turkey upping its order by

10.2% to 1.963 million tonnes.
The world’s leading steel scrap
importer, Turkey slashed its purchas-
es from external suppliers as a whole
by 12.9% to 8.472 million tonnes
whereas second-placed India
increased its imports by a shade
under 30% to 3.168 million tonnes.
Japan’s overseas shipments of steel
scrap leapt 10.8% to 4.137 million
tonnes in the opening half of this
year while Russia (+0.8% to 2.757
mill ion tonnes) and Ukraine
(+59.3% to 739 000 tonnes) also
posted gains. Substantially lower
overseas shipments of steel scrap
were recorded in the first half of
2015 by Canada (-25.1% to 1.641
million tonnes), Australia (-14.6% to
1.03 million tonnes) and South
Africa (-9.4% to 658 000 tonnes).