The steel and ferrous scrap industries are not likely to enjoy smooth sailing in the rest of 2013.
Market reports and guest presentations offered at the at the 2013 Bureau of International Recycling (BIR)
World Recycling Convention in Shanghai in late May revealed a mixture of resignation, concern and a few hints of optimism.
Steel industry analyst Peter Marcus of World Steel Dynamics, Englewood Cliffs, N.J., speaking at the BIR Ferrous Division meeting, predicted the steel industry would continue to travel the “rutted road” it started out on in 2008 through the rest of this year and into 2014.
Marcus is bearish about ferrous scrap and iron ore pricing during that stretch, declaring “Steel’s iron age is over.” He predicted, though, that raw material costs are swinging back in favor of scrap as a feedstock, with the pendulum moving in scrap’s favor by 2015.
China’s ferrous scrap reservoir has been building, said Marcus. He forecasted that by 2025 China will have a 145-million-ton-per-year ferrous scrap surplus, “given the same EAF (electric arc furnace) steelmaking and BOF (basic oxygen furnace) scrap usage figures.” Even if China adds EAF capacity and charges more scrap into its BOF mills, Marcus said he foresaw “75 million tons of surplus” scrap in China annually by 2025.
Division Chair Christian Rubach of Germany’s TSR Recycling remarked that “economists are starting the discussion [of] whether we are at the end of the commodity super cycle [that] fueled our steel recycling industry for the last [several] years.”
A report submitted by United Kingdom-based Tom Bird of Van Dalen Recycling noted that “prices have continued to weaken during the month [of May] and we could see further reductions for June across the board.”
Bird added, “Like 2012, 2013 is proving to be a difficult year. After a fairly positive start to the year, the market has gradually tightened though April and May.
Bird did refer to a positive scenario, saying, “If steel demand does recover in the second half of the year, then this will filter into the scrap market with a revival of sorts from mid-June onwards. We should also see a lift after Ramadan [which ends Aug. 7 in 2013].”
Summarizing the U.S. market, Blake Kelley of Sims Metal Management, New York, described declining prices in May and referred to “trade opinion” predicting declines of $10 per ton or more in June.
Prices for finished hot-rolled coil steel in the U.S., at from $606 to $639 per metric ton, are “the lowest since 2010, as steelmakers struggle to maintain order books where lead times are reportedly three-to-four weeks.”
Kelley noted that the world’s steel industry in 2013 continues to produce more steel than ever before and is on pace to produce 1.56 billion metric tons of steel—54 million more metric tons than in 2012.
However, with much of the growth occurring in China, where iron ore-fed basic oxygen furnaces predominate, the world in 2013 will “apparently consume 11 million metric tons less purchased scrap,” according to Kelley.
The 2013 BIR World Recycling Convention & Exposition was at the Pudong Shangri-La Hotel in Shanghai May 27-29.