Climbing up slowly

Scrap dealers and steelmakers alike have been coping with lower pricing in 2015, and panelists at the Ferrous Division meeting at the 2015 Bureau of International Recycling (BIR) World Recycling Convention in Dubai, United Arab Emirates, in May pointed to several reasons for the slump.

“We’ve seen a rough start to this year,” said Ferrous Division President William Schmiedel of Sims Metal Management, New York.

“Turkish prices fell from around $320 per ton for heavy melting steel (HMS) in January to the $230 level in a relatively short space of time,” said Tom Bird of Mettalis Recycling Ltd. in the United Kingdom. “It is always very difficult to legislate for this magnitude of reduction and, therefore, the impact on the [sector] was significant.”

Although prices in Europe have subsequently bounced back a little, “material arisings are still under pressure across EU regions, with yards still significantly down on optimum levels,” Bird said.

Reporting on the U.S. market, George Adams of SA Recycling, Anaheim, California, said, “A common lament among scrap processors is a continued shortage of raw materials despite the advent of spring.” He added, “No matter who you talk to, there isn’t any scrap around; there’s just a huge shortage.”

Regarding the export market for West Coast processors, Adams said in 2015 China has been doing “little, if any” buying of U.S. ferrous scrap.

He said the South Korean market “has also been quiet recently due to increased exports from Japan and a recognizable movement away from container imports of ferrous material.”

Adams referred to Taiwan as “a steady buyer of ferrous scrap albeit at ever-decreasing prices.”

A potential growth market for Adams and other West Coast exporters is the ASEAN (Association of Southeast Asian Nations) region, which includes mills and foundries in Indonesia, Malaysia, Thailand and Vietnam.

“This market has been active recently, procuring several cargoes,” Adams said. “Their market re-entry has partially been aided by lower [steel] exports from China,” he said, referring to the region as “a bright spot” for western U.S. exporters.

Zain Nathani of India’s Nathani Group of Cos. said Indian steel mills, foundries and induction furnace operators imported 4.4 million metric tons of ferrous scrap in the 10-month period from April 2014 through January 2015.

India buys containerized and bulk shipments from the U.S., Australia and the United Kingdom, Nathani said, adding that in 2015 “a lot of Japanese [ferrous scrap] exporters are beginning to focus on India.”

Hisatoshi Kojo of Japan’s Metz Corp. confirmed that Japanese exporters, like their counterparts in the U.S., are seeking new destinations for their scrap. “Crude steel production is stalling in Taiwan and South Korea, such that scrap purchasing momentum in these major importing countries is not like it was,” he stated.

Kojo reported improved scrap pricing in the second quarter of 2015 in his part of the world. “The price rebounded [in April] as loading advanced for remaining export contracts, while [scrap] generation by manufacturers and wholesale dealers declined,” Kojo said.

Guest speaker Edwin Basson, director general of the World Steel Association (Worldsteel), Brussels, said increasing urbanization is a “major megatrend driver” for the steel industry globally. The higher a nation’s rate of urbanization, he said, “you’ll find per-person steel use grows.”

China’s rapid urbanization has tied into its rise as the world’s largest steelmaker, with mills in China now producing more than half of the world’s steel.

A Worldsteel forecast sees Asia’s per-person steel use rising from 264 kilograms (582 pounds) annually in 2020 to 303 kilograms (867 pounds) by 2040. This is one major factor why Worldsteel sees global production growing from 1.53 billion metric tons (1.68 short tons) in 2014 to more than 2.1 billion metric tons (2.31 short tons) in 2040.

In the short-term on the demand side, many scrap recyclers in the U.S. are rooting for domestic steel production to bounce back beyond the 75 percent steel mill capacity rate heading into the second half of the year.

In the week ending May 23, 2015, U.S. steel production stood at 1.73 million tons at a capacity utilization rate of 73.3 percent. That was up 1.6 percent from the previous week, when output of 1.71 million tons was produced with a capacity utilization rate of just 72 percent.

However, production was 6.9 percent greater one year earlier in the week ending May 23, 2014, when 1.86 million tons were produced at a 77.3 percent capacity utilization rate.

Heading into June, year-to-date domestic steel production through May 23, 2015, was 34.94 million tons at an average mill capacity utilization rate of 72.3 percent. That is down 7.2 percent from the 37.65 million tons made during the same period last year, when the capacity utilization rate was 77 percent.