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An Improved Outlook

Market Reports - Ferrous

Forecasts call for increased steel output and demand.

RTGE Staff October 30, 2013

Recyclers in Europe and North America have experienced declining regional demand for scrap throughout much of 2013, but at least one steel industry forecast sees steel output growing in the developed world in 2014.

“In 2014 we expect to see continued recovery in global steel demand with the developed economies overall returning to positive growth,” says Hans Jürgen Kerkhoff, chairman of the Economics Committee at the World Steel Association (WorldSteel), Brussels.

“The key risks in the global economy—the eurozone crisis and a hard landing for the Chinese economy—which we identified in our last Short Range Outlook (SRO), issued in April, have continued to stabilise through the last six months,” adds Kerkhoff.

WorldSteel’s SRO for the remainder of 2013 and for 2014 forecasts that global apparent steel use will increase by 3.1% to 1.48 billion tonnes in 2013. That follows global growth of 2% in 2012. For 2014, WorldSteel is forecasting that steel demand will grow by another 3.3% and will reach 1.52 billion tonnes.

On the plus side, Kerkhoff predicts improved economic conditions in the European Union. “The correction in the eurozone has been more severe than we forecasted, but the improvement seen recently is now expected to continue for the rest of 2013,” he says. Some positive steel output and scrap demand numbers would be welcomed by ferrous scrap recyclers in the EU on the heels of two difficult years in the sector.

In the 27 EU nations, the contraction in steel consuming sectors continued in 2013, particularly during the first half of the year notes Worldsteel. Apparent steel use in the EU is expected to decline for the second straight year in 2013, falling by 3.8% this year after dropping by 9.5% in 2012.

“Apparent steel use in Italy and Spain is expected to contract by 8.1% and 4.3%, respectively, and even in Germany, it is expected to fall by 1.6% in 2013,” according to WorldSteel. “Signs of stabilisation in real steel use in the second half of 2013 bode well for recovery prospects in 2014,” adds WorldSteel, with the organization also noting that the recovery in the EU27 nations is expected to remain weak, with steel demand increasing by only 2.1% in 2014.

Steel production in some of the major emerging economies also has stalled. India and Brazil, in particular, have not performed as hoped, according to WorldSteel. In India, steel demand is expected to grow by 3.4% to 74 million tonnes in 2013 following 2.6% growth in 2012 “as high inflation and structural problems are constraining steel using sectors’ activities,” according to WorldSteel. In 2014, however, steel demand in India is expected to grow by 5.6%, helped by accelerated attempts to implement structural reforms.

Steel production and demand in China has continued unabated in 2013. Steel demand in the nation in 2013 is now forecast to grow by 6%. Thus, despite steel demand growing by only 0.7% in the rest of the world, total global steel demand will grow by 3.1% in 2013.

Despite analysts’ concerns about steel mill overcapacity in China, that nation produced 66.28 million tonnes of steel in August 2013, a 12.8% increase over its August 2012 output.

Global steel production year to date has increased 2.3% compared with the first eight months of 2012, even though production in the European Union is reportedly down 4.9% and output in North America is down 5.5%.

In addition to China, nations with increased output year to date include Taiwan (up 6.6%), Saudi Arabia (up 7.1%), India (up 2.5%) and the United Kingdom (up 17.4%).

As of mid-October ferrous scrap recyclers in the United States were fetching per-ton prices that were nearly identical to September prices, causing dealers to be optimistic that pricing will hold steady through the rest of 2014 as mills begin preparing for winter.

The American Metal Market (AMM) October indexes, reflecting U.S. midwest steel mill purchases in the first 10 days of the month, held steady or rose slightly, with the No. 1 busheling grade remaining just above $400 at $401.16 per ton.
 


Scrap generation remained steady through September in the U.S., according to a recycler in the Midwest. “Scrap from construction sites has kept coming in, probably a little stronger than I would have expected,” he says.

Another recycler in the Midwest says scrap flows were up about 4% in September 2013 compared with September 2012, but he was not as quick to credit construction or demolition activity. “We just don’t get the big demo jobs like we used to before the financial crisis,” he comments.

As of mid-October on the demand side, export activity in the United States remained subdued, with AMM reporting early October export prices falling slightly while freight costs were increasing.

In Europe, if the automotive sector is going to start generating more scrap, it was not apparent as of August sales figures.

European passenger car buyers stayed loyal to the traditional August holiday and stayed away from auto dealerships. Fewer than 690,000 new passenger vehicles were registered in Europe in August, according to the Association des Constructeurs Europeens d’Automobiles (ACEA), Brussels.

Although August is traditionally a slow sales month, the 2013 figure is down nearly 5% from the August 2012 EU passenger car registration figure. The August 2013 registration figure also was down compared with the month earlier. “In August, downturn prevailed across significant markets,” says the ACEA. “The U.K. was the only major market to expand (up 10.9%), while the German market contracted by 5.5%, the Italian by 6.6%, the French by 10.5% and the Spanish by 18.3% in the month of August.”

Year to date, most major economies in the European Union have “faced a downturn ranging from -3.6% in Spain to -6.6% in Germany, -9% in Italy and -9.8% in France,” according to ACEA. The U.K. has been the only major EU nation to perform better than in the first eight months of 2012, with a passenger vehicle registration increase of 10.4% year to date, the association says.

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