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Figures for 2013 show a less vibrant transboundary ferrous scrap picture emerging as developing nations use more locally-generated scrap.

Brian Taylor July 7, 2014

Throughout 2013, companies and individuals involved in the export of ferrous scrap from North America or Europe to other parts of the world reported a decline in activity.

Statistics summarizing the year 2013 in ferrous scrap trading bear out the pattern of reduced export trading, and sources within the industry say they are not seeing a significant rebound in activity in the first half of 2014.

Operators of electric arc furnace (EAF) steel mills in Turkey in particular have declared that they are concentrating on finding scrap closer to home. This in and of itself has a noticeable effect on the ferrous scrap trade, as Turkey has been the single largest importer of ferrous scrap from 2008 to 2013, according to the Bureau of International Recycling (BIR) “World Steel Recycling in Figures” report put together annually by the Ferrous Division of the Brussels-based organisation.
 

Balancing act

The world’s steelmakers made more steel than ever in 2013, according to figures compiled by the World Steel Association (WorldSteel), Brussels, so it has not been a net loss in production that is pinching the cross-border ferrous scrap trade.

According to its “World Steel in Figures 2014” report, WorldSteel says the demand for finished steel globally rose by 3.6% in 2013. “World crude steel production totaled 1.6 billion tonnes for the year, a record high for our industry.”

Running aground

People unfamiliar with the commercial shipping industry may not appreciate the size or scale of commercial vessels until they see the space needed and the work involved in dismantling and decommissioning an obsolete vessel.

Dismantling old vessels involves considerable labour hours but yields impressive amounts of scrap metal.

Perhaps fittingly, the dismantling of cargo ships is among the sectors that has been most vigorously “offshored” by developed countries. According to Nikos Mikelis, a nonexecutive director of United States-based Global Marketing Systems (GMS), “Five countries—Bangladesh, China, India, Pakistan and Turkey—recycle 97% to 98% of all recycled tonnage.”

This offshoring has resulted in scrutiny and controversy, as non-governmental organisations have pointed to unsafe and environmentally unsound practices in some of these nations. (See the article “Conventional methods” in the January 2014 edition of Recycling Today or online at http://www.recyclingtoday.com/rt0114-environmentally-sound-ship-recycling.aspx.)

The nations hosting the dismantling have expressed much greater interest in upgrading their practices versus abandoning this sector, in part because shipbreaking yields desirable secondary commodities.

Mikelis told Recycling Today that South Asia in particular maximises the resources it harvests from ship dismantling. Steel mills, foundries and even rolling mills in South Asia have grown to rely on the metals harvested through ship dismantling, says Mikelis.

He says when dismantling a ship it is possible to separate steel by flat plates and lengths of girders, beams and angle bars. Steel plate in particular can be reused directly in construction applications or it can be rerolled into bars or rods at rolling mills. Mikelis says the rerolling process is simpler and demands less energy compared with melting steel scrap, helping keep costs down for Bangladeshi steel producers while allowing ship recyclers there to fetch a price about 10% higher for re-rollable scrap.

The industrial development of nations in Asia—and China in particular—is evident when considering that some 717 million tonnes of steel was being produced globally in 1980, before China’s economic reforms were enacted.

The global output figure soared past 1 billion in 2004, as China’s economy kicked into high gear, and had doubled from the 1980 figure by 2010, when 1.4 billion tonnes of global steel output was recorded.

For ferrous scrap processors and traders, economic development in the Middle East has been just as important, since many of the current infrastructure projects, office towers and apartment complexes in that region are being constructed with steel made at EAF mills in nearby Turkey.

Rolf Willeke, statistics advisor to the BIR’s Ferrous Division, points out that 2013 marks the first time in several years that Turkish mills imported less scrap from other nations, with its import total falling by about 12% from the 22.4 million tonnes Turkey imported in 2012.

This decline follows on the heels of Turkish steel mill operators and trade associations vowing to make a collective effort to source more ferrous scrap from within its own borders.

In a presentation at the 2014 Middle East Metals Recycling Conference, Adam Smith, who covers the steel industry in the Middle East for Platts, referred to the move by Turkey to source more of its ferrous scrap from domestic sources as likely to cut into its demand for scrap from outside the region.

Based on trade figures collected throughout 2013 and into early 2014, Turkish mill buyers seem to be having some success sourcing more material within Turkey’s borders. The BIR report coordinated by Willeke shows Turkey’s imported scrap volume falling from 22.4 million tonnes in 2012 to just 19.7 million tonnes in 2013, a 12% decrease.

Turkish mills produced about 1.2 million tonnes less steel in 2013 compared to 2012 (34.7 million tonnes, down from 35.9 million), acting as one reason for the damper on imported scrap demand.

However, Turkey imported 12% less scrap while producing about 6% less steel, meaning its percentage of domestic supply increased noticeably in 2013.

For the past several years, Turkey has been a bright spot in ferrous scrap demand for processors and brokers based in Europe and North America. While these recyclers and traders are eager to see Turkey remain a vigorous market, they likely are beginning to explore what future sources of demand have the potential to emerge next.
 

Uncertain scenarios

Statistics gathered in recent months as well as observations from industry analysts point to some factors that could reinvigorate the global ferrous scrap trade, but none of these scenarios can be guaranteed.

During his presentation at the 2014 Middle East Metals Recycling event, Smith pointed to Egypt as a nation where steelmakers have plans to boost production. There are as many as seven new steel mills scheduled to come online in Egypt to help supply its population of 83 million people, said Smith.

Smith said Egypt’s per capita steel use of 95 kilograms is low compared to the world average and many neighbouring countries. Working against Egypt’s growth plans, however, is government turmoil that most recently took the form of a newly-installed president who has assumed control of the office after an army coup d’état.

Among the nations that have typically followed Turkey as major ferrous scrap importers, none of them increased their import levels in 2013, with three of the four exhibiting purchase levels that, like Turkey, dropped by 10% or more compared with 2012.

The figures compiled by BIR and Willeke for these nations show India as having dropped its import buying in particular:

 

 


As measured by WorldSteel, only one of these nations (South Korea) decreased its steel output in 2013, while the others experienced increased output despite importing less ferrous scrap.

That circumstance points to China, India and Taiwan relying on a combination of greater amounts of internally-generated scrap or greater amounts of iron ore, pig iron or other metallics created from mined materials.

China’s stated intention to focus on cleaner air and resource conservation make it a candidate to divert some of its basic oxygen furnace (BOF) steelmaking to scrap-friendly EAF production, but little demonstrable investment has occurred to indicate such a switch is underway

On the internal scrap generation side, several nations in South Asia and East Asia have been boosting their ship dismantling activities. (See the sidebar “Running aground” on page 38.) Dismantling companies, non-governmental organisations and government agencies around the world have been cooperating to bring safer and environmentally sounder practices to dismantling activities around the world, providing a boost in ferrous scrap volumes to South Asia in particular.

On the ore side, the reliance of China’s steel industry in particular on BOF steelmaking and iron ore has meant a boost in global ore exploration and mining, causing iron ore and related materials to be an attractive option for many steelmakers.

The BIR’s statistical summary portrays a slight drop in scrap’s overall percentage of the steelmaking metallic mix in 2013. “Taking into account last year’s 3% increase in world crude steel output, the proportion of steel scrap used in crude steel production fell from 36.6% [in 2012] to 36.1% [in 2013].”

Despite the vigorous mining scene, Willeke says EAF steelmaking retains aspects of its growth momentum compared to the BOF process. “Last year, there was an increase in crude steel output in regions and countries with a high percentage of EAF production, such as the Middle East and Africa, as well as some Asian countries like India, Indonesia, Malaysia and Vietnam,” he comments.

And while ferrous scrap lost .5% of its market share—and despite the drop in trade between the world’s major ferrous scrap exporters and its traditionally largest importers—the overall use of ferrous scrap grew in 2013, according to the BIR’s report. “We have calculated steel scrap usage increase in world steel production at around 580 million tonnes in 2013, up 1.8% compared with the 570 million tonnes in 2012,” says the BIR.
 

A slow start

Global ferrous scrap trade statistics for 2014 are just emerging, but the early portion of the year is revealing a repeat performance of the disappointing trading environment of 2013.

Exporters in the United States, the world’s largest overseas shipper of ferrous scrap, experienced a dramatic 40% decrease in export volumes in the first two months of 2014 compared with January and February 2013.

While Turkish mills imported some 1 million tonnes of ferrous scrap from the U.S. in the first two months of 2013, a mere 353,000 tonnes was booked for shipment in the first two months of 2014, according to figures published by the United States Geological Survey (USGS).

Turkey’s lack of interest comprises the biggest single reason for the U.S. drop but is not the only factor. Taiwanese mills have decreased their purchases by 29.3% (from 532,000 tonnes to 376,000) and South Korean purchases are down 7.8% (by about 32,000 tonnes).

There were very few bright spots in early 2014 for U.S. exporters, as buyers in India remained almost completely on the sidelines, Egyptian mills purchased less scrap than in early 2013 and even neighbouring Mexico reduced its purchases by 49,000 tonnes (35%) in the first two months of the year.

In a June 2014 news release accompanying the results of the first half of its 2014 fiscal year, Sims Metal Management points to currency fluctuations as a factor harming U.S. exports in particular.

The company, based in New York and in Sydney, Australia, says a “steep deterioration in the currency of many emerging market economies impacted negatively on export demand early in the second half of fiscal year 2014. Most notably in Turkey the lira has fallen [about] 15% against the U.S. dollar since the start of fiscal year 2014, increasing steelmakers’ costs and decreasing the attractiveness of imports.”

For brokers who make their living on commissions resulting from overseas trades and for processors who benefit from being near an export yard, another factor working against ferrous scrap exports is decidedly unwelcome.

 


The
author is editor of Recycling Today Global Edition and can be contacted at btaylor@gie.net.

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