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Market Reports - Ferrous

RTGE Staff April 28, 2014

China now produces roughly half of the world’s steel, and traders of most primary and secondary commodities have grown accustomed to that nation’s demand dictating the health of trading conditions.

Traders in the ferrous scrap sector have been among the few who have not necessarily been following China’s lead over the past several years, and they may be grateful for that in 2014. While China’s leaders endeavor to orchestrate 7% economic growth, nonferrous metals producers there are showing a clear pattern of reducing their demand for imported copper and aluminium scrap.

Meanwhile ferrous traders, who are less dependent on China’s urbanization and infrastructure investment momentum, may be on the cusp of market improvements driven in part by clear signals of a long-awaited economic recovery in Europe.

Although EUROFER (the European Steel Association) indexed ferrous scrap prices trended downward in February and March, an April rebound in North American pricing seemed likely to be followed by some upward momentum in Europe.

U.S. steel mill scrap purchases tracked by MSA Inc.’s RMDAS (Raw Material Data Aggregation Service) indicated average price boosts of $13 to $17 per ton in April, depending on the grade of scrap. The price increases lifted both prompt industrial (new arisings) and shredded grades above $400 per ton while the No. 1 Heavy Melting Steel grade rose to $380 per ton.
 

 

Among the many recent signs of economic recovery in Europe was the April purchasing managers index compiled by the Markit information service, which checked in at 54.0, its highest level since May 2011.

Household consumers in Europe may likewise be feeling more confident in the economy, judging by the 7.6% increase in new car registrations in February 2014 compared to one year ago. Europe’s Association des Constructeurs Europeens d’Automobiles reported the improved figures in late March.

Car buyers in five of the six nations tracked by Recycling Today Global Edition (see chart above) checked in with more new car sales this February compared with 2013.

Construction and industrial production activity has been slowly advancing in recent months. Germany’s industrial production index experienced four consecutive months of gains from November 2013 to February 2014.

European steelmakers are among the beneficiaries of the rebound measured in terms of output numbers reported by the Brussels-based WorldSteel Association. In March 2014, steelmakers in the EU 28 nations produced nearly 15.4 million tonnes of steel, a 6.8% increase compared with March 2013.

The ferrous scrap and steelmaking situation in North America was the focus of the Ferrous Spotlight session at the Institute of Scrap Recycling Industries Inc. (ISRI) 2014 Annual Convention, held in Las Vegas in April. Global trade issues were mentioned by Thomas Danjczek, past president of the U.S.-based Steel Manufacturers Association, who noted that in recent years the United States has been the No. 1 importer of finished steel while it is not even among the top 10 of steel-exporting nations.

Since 2003, said Danjczek, imported steel has accounted for an average of 26% of the steel consumed each year in the U.S. by its manufacturers. Although this open market may have cost the U.S. steel industry up to 87,000 jobs, Danjczek estimated, it has made the industry in the U.S. resilient and well positioned to compete.

Panelist John Harris, a former ArcelorMittal raw materials purchaser who is now CEO of Canada-based metals sector information service Aaristic Services Inc., characterized Turkey as being “in turmoil.” This, said Harris, could soon lead to trouble in the ferrous scrap markets, where Turkey serves as the single largest importer of globally traded ferrous scrap.

While some steel and scrap industry analysts are predicting that China could become a net exporter of ferrous scrap in the next 10 years, Harris is not convinced. Rather, Harris says the country’s steel mills will tap into the ferrous scrap supply. “They are looking at increasing their scrap consumption by 5%,” said Harris.

Considering China produces some 780 million tonnes of steel each year, Harris noted that just a 1% increase in scrap consumption by mills there amounts to the absorption of some 7 million tons of ferrous scrap.

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