Expecting big things

Urbanization and economic growth likely will keep steel consumption and steel production rising in South Asia, with economists and steel producers forecasting upward trends in the region. Those same trends also are providing opportunities for exporters of ferrous scrap.

The ASEAN (Association of Southeast Asian Nations) region, consisting of 10 nations that includes Indonesia, Malaysia, Thailand and Vietnam, represents one area of economic growth, while the Indian subcontinent represents another.

These regions, with favorable demographics in place and rapid urbanization underway, were the focus of presentations at India-based SteelMint’s Steel Scrap & Raw Materials Conference Asia, which took place in Bangkok in September 2017. Presenters from the Indian subcontinent and two ASEAN countries provided overviews of these favorable economic and metals production conditions at the event.

ASEAN anticipation

The 10 nations of the ASEAN region are far from uniform in their current economic conditions or in their near- and medium-term economic prospects. Economies and gross domestic product (GDP) figures range from that of prosperous Singapore down to still emerging Myanmar, Laos and Cambodia.

In between are nations with sizable populations and with urbanization and industrialization trends well underway. These “young tiger” nations include Indonesia, Malaysia, Thailand and Vietnam.

At the SteelMint event, Nghiem Xuan Da, the chairman of Vietnam Steel Corp., said new capacity installed in that nation allowed Vietnam’s steel billet production to leap by 118 percent in 2016. The nation’s steelmakers produced 7.8 million metric tons of steel in 2016 and used some 4 million metric tons of imported ferrous scrap as furnace charge.

Of that 7.8 million metric tons of steel produced, Nghiem said 4.7 million metric tons (60.2 percent) were made via the electric arc furnace (EAF) method; 2.3 million metric tons (29.5 percent) were made in basic oxygen furnaces (BOFs); and 0.8 million metric tons (10.3 percent) were produced in foundries and induction furnaces.

Nghiem said the nation’s production and consumption of steel has continued growing in 2017, with Vietnam on track for 10 million metric tons of crude steel output for the year (28.2 percent growth). He said about 60 percent of the ferrous scrap needed to make that steel will be imported, with Japan sending nearly half (48 percent) of the total. Hong Kong is listed as the next largest contributor at 19 percent, with some of that scrap likely originating in China or other nations before it is transloaded in Hong Kong.

Forecasts based on urbanization and economic growth have Vietnam’s steel output continuing to rise, Nghiem said. He added that mill projects in the pipeline alone could help Vietnam reach 20 million metric tons of output in 2020, in which case the nation would need some 8 million metric tons of imported ferrous scrap.

Thailand’s current steel industry growth is not as dynamic, said Rajiv Mangal, president and CEO of Tata Steel Thailand PLC; however, the nation’s steel sector does not include any integrated mill complexes, meaning its hunger for scrap is constant.

Thailand consumes about 18 million to 19 million metric tons of steel annually, Mangal said, and it is among the top three importers of finished steel globally. That is one of several factors in place that could help prompt further investment in steelmaking in Thailand, he said.

Thailand’s five-year plan includes a sizable infrastructure project called the Eastern Economic Corridor—a planned $43 billion project that includes a new airport, expanded port facilities, new and upgraded highways and a high-speed rail line— Mangal said. The nation also is the 12th largest producer of assembled automobiles in the world.

He characterized Thailand as having a “limited scrap supply” of its own, meaning it is likely to remain a significant net importer of ferrous scrap in the world market for the foreseeable future.

While scrap exporters in the United States are eager to see ASEAN scrap-fed steel production grow quickly, in the meantime steelmakers in other nations are happy to export finished steel instead.

Subhendu Bose, managing director of Singapore-based Duferco Asia, told attendees of the SteelMint event that despite recent investments in capacity, the ASEAN region overall still has “far less [output] compared to consumption,” creating an opportunity for steel exporters in China, India and other nations.

Bose said steel pricing had been strong in 2017 for a number of reasons, including capacity cuts in China, efforts in the first half of 2017 to shrink finished steel inventories, a shortage of graphite electrodes that put a ceiling on Asian EAF production and limited scrap flows in ASEAN nations, creating another lid on EAF production in the region.

By spring of 2018, he predicted, Chinese steel production would likely “ease back up,” and the shortage of electrodes for EAF furnaces will probably be resolved. “We should enjoy this as long as it lasts,” Bose said of the high steel prices.

Emerging energetically

Steel and scrap consumption conditions in the Indian subcontinent likewise are benefitting from the trend toward urbanization, with foreign direct investment (FDI) beginning to play a larger role in Bangladesh and Pakistan.

At the SteelMint event, Hussain Agha, executive director of Pakistan-based Agha Steel Industries, referred to Pakistan as a “rising star” in the global economy, adding that steel and ferrous scrap will be a crucial part of that nation’s current and anticipated GDP growth. Agha Steel, he noted, is undertaking an initial public offering (IPO) to help it expand its own EAF steelmaking capacity.

Agha said Pakistan would continue to require imported ferrous scrap as its economy grows and its steel consumption and production grow along with it. While the nation imported 900,000 metric tons of ferrous scrap in 2013, that figure increased to 2.4 million metric tons in 2016 and may hit 3.8 million metric tons in 2017.

The United Kingdom was the single-largest contributor to the 2016 figure, sending more than 700,000 metric tons of ferrous scrap to Pakistan that year. It was followed by the United Arab Emirates (UAE) at nearly 630,000 metric tons, South Africa at nearly 300,000 metric tons and the U.S. at slightly less than 200,000 metric tons.

Pakistan has no BOF mills, Agha said, so it melts close to “100 percent scrap” to feed its EAF and induction furnace facilities. He said his own company is in the midst of installing a 45-metric-ton EAF line supplied by Italy-based Danieli and also is working with Austria-based Primetals Technologies to boost its production.

Flanking India on its eastern border is Bangladesh, where Imtiaz Chowdhury said BSRM Group is among the steelmakers taking part in sustained economic growth similar to Pakistan’s. Chowdhury cited a recent magazine article that referred to Bangladesh as having undergone an “economic miracle in the past 20 years,” but “the world has taken so little notice.”

The growth would continue, predicted Chowdhury, with the nation setting up more special economic zones to attract FDI. For the world’s ferrous scrap suppliers, this has meant Bangladesh has moved from importing 680,000 metric tons of scrap in 2012 to nearly 2.3 million metric tons in 2016.

Based on current and anticipated steelmaking investments, Chowdhury said that figure could grow to more than 10 million metric tons of imported ferrous scrap needed in 2022, provided the nation’s port facilities can handle that much scrap.

The American angle

American scrap recyclers invariably benefit when new buyers for ferrous scrap emerge anywhere on the globe. The positive aspects of the emergence of South and Southeast Asia can be seen in figures collected by the U.S. Census Bureau and tracked by the U.S. Geological Survey (USGS).

In the first seven months of 2017, the increased pace of ferrous scrap buying from Pakistan and Bangladesh is evident in the numbers. In that time frame, Pakistan brought in 145,000 metric tons of ferrous scrap from the United States, representing a 63 percent increase from the 89,600 metric tons shipped there in the first seven months of 2016.

Bangladesh’s pace of growth has been even more rapid. From a modest base of 24,400 metric tons purchased in the first seven months of 2016, that nation’s buyers increased purchases by 163 percent, buying 73,700 metric tons of U.S. scrap from January to July 2017.

In the ASEAN region, positive buying momentum in 2017 has been seen in Vietnam (from 108,000 metric tons in 2016 to 357,000 metric tons, up 230 percent), as well as in Thailand (from 231,000 metric tons in 2016 to 284,000 metric tons, up 23 percent).

At the SteelMint conference, Philip Hoffman of Houston-based Hoffman Iron and Steel said steelmakers in Vietnam now are importing some 5 million metric tons of ferrous scrap each year and that figure is poised to rise. The growth has been rapid, with Vietnam’s import figure rising from 3.5 million metric tons in 2013 to an anticipated 5.5 million metric tons in 2018.

Steelmaking projects in the pipeline mean that, even with much of the new capacity being BOF technology, Vietnam could need as much as 10 million metric tons of scrap per year by the next decade.

Where Vietnam’s scrap is coming from is a little bit murky, Hoffman said, with Japan and Australia listed as major contributors, but with the transshipment port of Hong Kong as a leading source of ferrous scrap. A growing contributor in 2017 appears to be China, he said, from where both containerized and small bulk cargo loads can be shipped easily.

Going forward, scrap recyclers in the U.S. are likely to pay attention to Vietnam and many of its neighbors in the quest to find more bidders and buyers in the global market.

The author is editor of Recycling Today and can be contacted at btaylor@gie.net.