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A Stable Relationship

Market Reports - Ferrous

RTGE Staff September 10, 2013

It is a far cry from a resurgence, but economic indicators in Europe seem to be pointing towards stability and even modest growth in some regions and sectors of the economy.

Europe’s August holiday season was not likely to be a time when manufacturing orders or industrial output would soar, but some analysts as of July and August were seeing indicators of a healthier economy in the remaining four months of 2013.

The EU nations imported more goods from China in July 2013 than in any of the previous months, potentially a sign of improved consumer confidence.

On the industrial output side, Bloomberg News reported in August that manufacturing indices in July improved in several EU nations, including Poland and the Czech Republic.

Among the basic materials producers reporting better news out of Europe was India’s Tata Steel, which said its results for the April-to-June 2013 quarter indicated it was making steel profitably in Europe even if it was receiving less revenue per tonne. The results followed earlier speculation that Tata Steel was considering selling off its assets the EU region.

Finished steel prices were down in the EU in June, according to a BIR (Bureau of International Recycling) World Mirror report filed by Tom Bird of the European Ferrous Recovery & Recycling Federation (EFR), Brussels. Scrap prices likewise trended lower.

“Across the EU, June saw price reductions on most [ferrous] scrap grades of around ¤10 to ¤15 per tonne,” notes Bird, who adds that “low arisings contributed to keeping a floor on the market.”

Bird accurately predicted that a combination of lack of supply and renewed export demand would cause prices to rise in July. “There is no suggestion that the market will enjoy a continuous increase, but there is definitely resistance below a certain level,” writes Bird.

August pricing in the U.K. partially lent credence to Bird’s forecast, with Materials Recycling World (MRW) reporting steel mill bids as either flat or coming in at a £5 per tonne increase in the U.K.

While some scrap recyclers in the U.S. reported scrap flow volume increases in July, that scenario did not hold true in Europe. “General volumes of material across our sector are well down on previous periods. Some yards are operating at 50% of capacity as material is simply not flowing,” writes Bird.

August was unlikely to improve flows, though Bird says a mid-August post-Ramadan buying spree from producers in Turkey and other regions could improve export pricing in Europe.

Bird says he is pinning his hopes for the rest of 2013 not so much on a rebound within the EU but rather on vigorous export markets. “As far as the rest of the year is concerned,” he writes, “there is an expectation that steel demand will recover in the second half of 2013, with the strongest markets remaining the USA and China, where growth is expected to reach, respectively, 3% and 4.5%. It is currently much tougher for European steelmakers, with the price of raw materials other than scrap higher than in other parts of the world.”

On the export side, steel producers in some of the leading destinations are seeing drop-offs in activities that are not pointing to 2013 being a standout year.
 

 

According to figures for the first half of 2013 collected by Brussels-based World Steel Association, steel output in Turkey is down 2.9% compared with the first half of 2012, while output in South Korea is down 5.3%.

Steelmakers in China continue to produce as if the market knows no limits. In the first half of 2013, more than 389 million tonnes of steel were produced in China, up 7.9% from the world record 363 million tonnes produced in the first half of 2012.

Another net ferrous scrap importer, India, has produced 2.5% more steel in the first half of 2013 compared with 2012, growing from 38.7 million tonnes of output to 39.6 million.

Also writing for the BIR World Mirror, Zain Nathani of the Nathani Group of Cos., Mumbai, notes that “ferrous scrap imports [to India] from April 1, 2012, to March 30, 2013, amounted to approximately 6.9 million tonnes as compared to around 6.0 million tonnes in the previous 12-month period.

“Any benefit to Indian importers from a drop in international scrap prices was offset by the devaluation of the Indian rupee by close to 10% against the U.S. dollar,” Nathani adds.

In addition to the currency exchange rate issue, ferrous scrap buyers in India are dealing with a 2.5% import duty on scrap. “The Metal Recycling Association of India (MRAI) has had multiple meetings with the Indian government regarding the withdrawal of the recent notifications regarding the hike in import duties,” says Nathani.

More information on the Indian scrap market can be found in the feature “Low Gear,” starting on page 30 of this issue.

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