Poised to purchase

Scrap recyclers rightfully can pat themselves on the back for their abilities to adjust to new circumstances and to seek out new markets when old ones begin to fade. In recent months, ferrous scrap traders have encountered several circumstances that have caused them to deploy these talents.

China’s government has severely disrupted global nonferrous scrap trade, in addition to global markets for scrap paper and scrap plastic. Its restrictions on imported scrap include several ferrous grades. This, combined with a massive boost in its own steel scrap reservoir and tariffs, caused its ferrous scrap imports to dwindle in 2019.

Turkish mills—by volume the largest importer of ferrous scrap from the U.S.—have struggled to retain their output, causing them to spend occasional stretches on the scrap purchasing sidelines.

Fortunately for scrap processors in the United States, a life raft full of developing nations has emerged to keep pace with or increase their annual buying volumes, keeping the spigot open for outbound ferrous grades.

A subcontinent’s substantial appetite

On the Indian subcontinent, steelmakers in India, Bangladesh and Pakistan have added significant new capacity because of an infrastructure-fueled boom. This likely will result in needing more imported scrap as feedstock for the next several years.

Presenters at India-based SteelMint’s 4th Steel Scrap, Billet & DRI Trade Summit, held in August 2019 in Bangkok, said foreign direct investment from around the world is boosting the need for steel in those nations, with producers responding by adding capacity. Much of that new capacity, they noted, is coming in the form of scrap-fed electric arc furnace (EAF) or induction furnace production.

Sanjoy Ghosh, senior manager of supply chain management at Bangladesh-based steelmaker BSRM, said the “40 active mills” producing steel in his nation imported 19 percent more ferrous scrap in the first half of 2019 compared with 2018.

Ghosh said, thanks to its status “among the five fastest growing economies in the world,” Bangladesh is likely to see its steel consumption rise from 45 kilograms (99 pounds) per person in 2018 to 73 kilograms (161 pounds) per person in 2022.

Gross domestic product growth of some 8 percent annually has led Bangladesh’s steel output to grow 37.5 percent per year recently, he added. Some of the 8 million metric tons of steel produced annually in Bangladesh is heading toward “a lot of infrastructure work,” Ghosh said.

Photo courtesy of SteelMint Group

The U.S. is the largest ferrous scrap supplier to Bangladesh, he said, followed by the United Kingdom, South Africa, Australia and Singapore.

Shipbreaking provides another source of ferrous scrap and used steel, Ghosh added, with the number of vessels scrapped in Bangladesh rising 36 percent in the most recent fiscal year (from 196 ships to 255 ships). Singapore, Japan and South Korea are the largest providers of obsolete ships to the nation.

Economic cooperation with China has provided much of the boost in Pakistan, according to a video presentation provided by Fahad Javaid of Pakistan-based Mughal Iron & Steel Industries Ltd. That nation currently has some 350 mills with 6 million tons of annual capacity, with many of these mills of the smaller, scrap-fed induction furnace variety.

Scrap imported to Pakistan “has positive prospects,” Javaid said, describing Pakistan’s ferrous scrap supplies as “limited.” He estimated that 80 percent of the ferrous scrap consumed in the country is imported, with import volumes having risen 24 percent in 2017 and 38 percent in 2018.

Ongoing infrastructure projects stemming from cooperation with China’s government, combined with a new housing policy in Pakistan, help provide “the backbone of the country’s economy and have increased steel demand” in Pakistan, Javaid said. His message to overseas scrap suppliers was “to keep Pakistan on your radar.”

In India, the national Ministry of Steel policy has set ambitious targets for steel production and ferrous scrap recycling activity. Vijay Arora of Mumbai-based Mahindra Group Accelo gave an overview of that company’s efforts to collect and recycle end-of-life vehicles (ELVs) to help make progress toward both goals.

Arora said the effort has been challenging in part because older vehicles tend to meet their end not in large cities but scattered widely in the Indian countryside. Mahindra and other companies are being encouraged to build ELV collection centers and shredders in large cities, but even obsolete vehicles there can be difficult to collect, he said, because an unregulated, informal sector can pay more for them.

Efforts to recycle more ELVs tie into a need for more scrap, with India having consumed some 16.8 million metric tons of ferrous scrap in 2017. That figure is expected to rise to 22.3 million metric tons in 2023 and (if Ministry of Steel goals are met) to some 40 million metric tons by 2030.

Arora said about 4.38 million metric tons of ferrous scrap were imported into India in 2017, with that figure potentially rising to 7.23 million metric tons by 2023. India’s Ministry of Steel, however, has stated it would like India to be self-sufficient for ferrous scrap by 2030, despite the fast-rising need.

An analysis by Kedar Joshi of SteelMint showed that 54 percent of India’s 112 million metric tons of current annual steel output is produced by basic oxygen furnaces, but scrap-fed electric arc furnaces (24 percent) and induction furnaces (22 percent) combined produce nearly half of that amount.

The United Arab Emirates, the leading ferrous scrap supplier to India, sends only containerized shipments. However, the United States, India’s second-largest supplier, sends 48 percent of the bulk ferrous scrap shipments booked into India. Also supplying scrap to the nation are the United Kingdom, Australia and the Netherlands.

Uneven prospects in the ASEAN region

At the same event, insight into the growing steel industry and ferrous scrap trade in the ASEAN (Association of Southeast Asian Nations) region revealed that some Southeast Asian nations, such as Vietnam, are adding scrap-melting capacity, while other nations in the region are importing more finished steel. The ASEAN region consists of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Pichsini Tepa-Apirak of Malaysia-based South East Asia Iron & Steel Institute (SEAISI) said Vietnam has been the rising steel consumption and production star in that region. The nation was the sixth-largest per capita consumer of steel in the ASEAN region in the 1990s but now ranks first.

As of 2018, Vietnam produces 45 percent of the steel made in the ASEAN region, far ahead of Thailand (19 percent) and Indonesia (18 percent). The remainder of crude steel or foundry iron produced comes from Malaysia (12 percent), the Philippines (4 percent) and Singapore (2 percent).

Photo courtesy of SteelMint Group

EAFs provide much of the region’s steelmaking capacity, with Tepa-Apirak referring to such production as “mostly scrap-based.” SEAISI estimated the region’s domestic ferrous scrap supply at 20.3 million metric tons in 2018, prompting ASEAN steelmakers to import some 10.4 million metric tons of scrap that year.

Vietnam and Indonesia are the largest scrap importers, with the United States and Japan acting as the largest scrap suppliers to the ASEAN region, he said.

While additional steelmaking capacity is being added throughout the region, particularly in Vietnam and Indonesia, Tepa-Apirak said several other ASEAN nations (including Thailand and the Philippines) seem content to import sizable amounts of finished steel and semifinished billets.

Rajiv Mangal, president and CEO of Tata Steel Thailand, said that nation has banned the installation of new steel rebar production capacity for the next five years, in part because its current mills are struggling with low capacity utilization.

The demand for steel in construction applications in Thailand dropped by 9 percent in the first half of 2019, Mangal said, but momentum could shift if several planned infrastructure projects begin in 2020. “I feel past 2020, we should see a boost in steel demand from Thailand,” he said.

R.S. (Raj) Vaidhyanathan of the United Arab Emirates-based scrap trading firm Indicaa Group Ltd. said the growing flow of ferrous scrap into the ASEAN region and the Indian subcontinent is prompting the question of when and how a new benchmark ferrous scrap export price would be established. Currently, prices to the largest global scrap importer, Turkey, most often serve as the benchmark prices.

Vaidhyanathan said Asian nations combined are now involved in 33.1 million metric tons of ferrous scrap trading, surpassing Turkey’s 20.7 million metric tons of activity.

However, that 33 million metric tons of trading is divided among several nations, including Vietnam in the ASEAN region as well as India and Pakistan on the Indian subcontinent and South Korea and Japan in East Asia.

That division makes finding an individual nation to replace Turkey as a “benchmark setter” difficult, Vaidhyanathan said. However, he pointed to Bangladesh and to Vietnam—which accept break-bulk and containerized scrap cargoes—as nations to watch.

No matter where the index setters look for guidance, the overall trend of ferrous scrap heading into Southeast Asia and the Indian subcontinent in South Asia seems poised to last for several more years.

The author is senior editor with the Recycling Today Media Group and can be contacted at btaylor@gie.net.