A new report by the firm Global Industry Analysts Inc. forecasts the global ferrous scrap market to reach 631.5 million tons by 2015. The research group notes that the figure is expected to be driven by the rise in steel production following a lull in steel industry operations due to the global recession.
Improving sales in the automobile industry and enhanced construction activity, the hardest hit segments due to the global recession, are expected to fuel demand for ferrous scrap. Another area that will have a positive impact on the ferrous scrap market is its benefit to the environment.
The report, titled Steel Scrap: A Global Strategic Business Report, notes that while the ferrous scrap market was adversely affected by the global economic decline, the economic recovery of developed countries is likely to ensure greater availability of steel scrap. As western economies have traditionally driven the scrap generation, decline in steelmaking operations affects the global supply levels of steel scrap.
The report notes that rising demand for raw materials used in steel making industry from rapidly expanding emerging markets such as China, India and Brazil is expected to fuel demand for steel scrap.
Establishment and operational commencement of new steel mills using electric arc furnace (EAF) technology is also expected to fuel demand for steel scrap. EAFs use ferrous scrap as a raw material. The report notes that European companies using EAF technology account for more than 40 percent of all steel production. Further, more than 55 percent of the steel produced in the European Union uses ferrous scrap as a raw material. Meanwhile, the European steel industry is witnessing lower volumes of steel production, lower scrap consumption and lower levels of new scrap generation.
A major challenge facing the steel scrap market is the imposition of restrictions on export of steel scrap by several countries, which is expected to adversely affect countries that rely exclusively on imports for meeting domestic requirements. Such restrictions generally take the form of export prohibitions, taxes, administrative measures, and export quotas. The restrictions not only lead to price rise in the global markets, but also provide unfair competitive advantage to domestic manufacturers, and enhance cost of production.
China leads the world market in the production of steel. However, the country consumes a relatively smaller proportion of scrap steel for steel production. Robust Chinese demand, along with strong economic development, has been the driving force behind the growth in Chinese steel industry. However, the sector witnessed turbulent times in 2008 and 2009 with steep decline in external consumption leading to decrease in Chinese export of steel. The adverse economic conditions and the subsequent decline in steel demand led to cuts in the production at several domestic steel mills resulting in substantial decline in the steel output, which is also evident in the decreased consumption of steel scrap.
For more details about the market research report, visit http://www.strategyr.com/Steel_Scrap_Market_Report.asp.