The Bureau of International Recycling (BIR) Ferrous Division heard how steel production was to increase and prices had rebounded in the steel market during the round table and trading session held in Brussels Oct. 26 during the organization’s fall convention. But that optimism was followed by picture of weak growth in the U.S. and Europe painted by an economist’s keynote address.
|Blake Kelley of Sims Metal Management, at right, provides a market report on ferrous metals in the U.S. during the BIR World Recycling Conference in Brussels.
|Blake Kelly of Sims Metal Management, New York, told attendees that the World Steel Association (Worldsteel) predicted world steel consumption would increase 13.1 percent in 2010 to 1.27 billion metric tons and by another 5.3 percent in 2011 to 1.34 billion metric tons, “so conditions seem to support the probability for a new production record.”
Based on a nine-month projection of Worldsteel data, Blake told attendees that in 2010 the WSA predicts the world will produce 201 million metric tons more raw steel, produce 139 million metric tons more iron and apparently consume 62 million metric tons more purchased scrap compared with 2009.
“If production continues at this rate through year end, 2010 will set a new annual record for raw steel production,” said Kelly.
As for current market conditions, he said prices were on the rebound from their $30 to $40 drop at the beginning of October. Prices were up $25 from these levels with additional gains expected for November, he said. He attributed inadequate supply and low collection rates as the most commonly cited reasons for the rebound.
“Steel producers simply did not initially buy all they wanted, and when they reentered the market for more–supplier attitudes changed,” he said. He noted that the U.S. economy was improving slowly and that the U.S. dollar was at a 15-year low against the yen. He said recent business had been at higher prices and that expectations that steel production in China would be reduced by a government edict to reduce electricity could be offset as new capacity and increased EAF (electric arc furnace) production offset the shutdown of older, less efficient plants.
Tom Bird, president of European Ferrous Recovery and Recycling Association (EFR), Brussels, said the market had been difficult to predict in Europe.
“We have experienced a lull in the market and over the last two weeks there has been a considerable amount of material available with buyers able to pick off requirements relatively easily,” he said. “Price levels have eased back accordingly.”
Another factor playing into the European market was the exchange rate fluctuation over the last few weeks, according to Bird. He pointed out that the euro/dollar exchange rate was 1.4, making it difficult for exporters in the European Union.
“This coupled with reduced demand, reducing steel product prices and ultimately price reductions on export markets has led to sharp decreases for October across EU markets,” he said.
BIR board member Andrey Moiseenko of Russia-based PJ Mair reported that scrap collection was still at a low level, with collection at 17 million tons in 2009 and an estimated 21 million tons collected in 2010 compared with 30 million tons for 2007. He said that scrap prices were on a high level. As winter approached, he said there would be tight competition between steel mills for scrap suppliers.
Ukraine, Moiseenko said, unlike Russia, had not suffered as much from the financial crisis. He predicted a “’more or less stable situation on the steel market.”
Hisatoshi Kojo of Japan-based Metz Corp. said that he expected the Japanese scrap market to soon “touch the bottom and then rebound.” It would depend, however, on how the exchange rate of major currencies moved; which direction the Chinese economy, which was an adjustment phase, should go; and when the U.S. and European economies recovered.
Ikbal Nathani of Nathani Group of Cos., Mumbai, India, said that buyers had once again been active in India in October in light of the recent downward correction in scrap prices along with better demand in the domestic steel market.
Following the market reports, economist Stephan Schilbe of Germany-based HSBC Trinkaus & Burkhardt, who just returned from a trip to Asia, provided his prospective on the global outlook for the major economies in 2011. Schilbe said, “The U.S. economy will not be the major economy of the world anymore.”
China’s economy had already overtaken the U.S., as incomes were rising and supporting private consumption, he said. Schilbe pointed out a correlation between China’s industrial production and the demand for commodities.
Shilbe said smaller U.S.-based companies were still very cautious and even more so than during the recession of the 1990s. He also said that U.S. households were stuck in a “balance-sheet recession,” noting that consumers in the U.S. would not have access to credit throughout the next couple of years and estimating a 17 percent unemployment rate.
In Europe he talked about the large sell-off of the euro and the indebtedness of the government in Spain. He predicted slower growth in Europe as well, but Germany, he said, “seems to be bucking the trend.”