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BIR Convention: Supply Strains on the Ferrous Front

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Along with prices that are falling, tight scrap supply remains a ferrous market concern.

Recycling Today Staff June 13, 2012

As delegates to the 2012 Bureau of International Recycling (BIR) World Recycling Convention headed back home in early June, they would be met by a falling ferrous scrap market that has left many traders reeling.

At the BIR Ferrous Division meeting in late May 2012, the sectors of the steel industry that consume ferrous scrap (such as structural steel mills) were characterized as weak but with other sectors remaining hungry for ferrous scrap.

On the supply side as of May, Blake Kelley, who works at the New York offices of Sims Metal Management, said there was “severe competition for unprepared scrap, as dealers are forced to reach out further to find supply volumes.”

On the demand side, Taiwanese steelmakers “are currently struggling to sell enough volume at prices sufficient to offset recent increases in electricity and natural gas prices,” said Kelley. This could hurt demand from a nation he characterized as “an active buyer of both bulk and containerized [ferrous] scrap cargoes.”

Tom Bird, who works for Van Dalen Recycling in the U.K., said purchases from Turkish mills in the first half of 2012 had at times occurred “at levels that disappointed.” Bird added, “The first five months of 2012 have been challenging,” but that “demand for scrap out of Europe remains strong, which is vitally important and a positive factor.”

Should ferrous prices continue to drop, that could increase buying by Chinese mills, as occurred in 2009. Kelley said Chinese mills tend to import deep sea cargoes of ferrous scrap “when necessary or advantageous,” but that in 2012 “material margins for steelmakers [in China] are insufficient.”

Andrey Moiseenko of Ukraine-based Ukrmet Ltd. told delegates that legal proceedings are creating the possibility that restrictions on ferrous scrap exports from Russia may soon ease. However, that scrap may not travel far. Moiseenko noted that there are around 5 million metric tons of new electric arc furnace steelmaking capacity being constructed in the Ukraine.

Ferrous Division meeting guest speaker Barbara Fliess (pictured at left) of the Organisation for Economic Cooperation and Development (OECD) referred to the steel industry as facing a “raw materials supply challenge” caused in part by export restrictions “that have become more frequent.”

The Trade and Agriculture office of the OECD, for which Fliess works, has been gathering information on the restrictions. The OECD has found that around 73 export restrictions exist for raw materials such as semi-finished steel, iron ore, pig iron, coking coal and ferrous scrap.

The OECD has begun a dialog with nations enacting these measures, says Fliess. The group’s position is that “trade policy is rarely an optimal instrument to address a domestic market failure; it is untargeted and has negative side effects.”

The 2012 BIR World Recycling Convention was May 30-June 1 at the Rome Cavalieri Hotel in Italy.

 

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