Rising tariffs hit Asian seaborne recycled steel market

Ongoing uncertainty around U.S. steel tariffs continues to dampen market sentiment, leading to contracted trade and heightened competition in already weak Asian markets.

Globally, steelmakers have come under renewed pressure following the levying of 50 percent tariffs on steel imports by U.S. President Donald Trump, which went into effect June 4.

In response to global trade conflict and political tensions, shipping lines have increased surcharges, forcing suppliers to hold asking rates firm and resulting in thin trade volumes for containerized recycled steel imports.

Chinese steel exports weaken East Asian trade

This challenging backdrop has set the tone for seaborne buying activity in key regions such as Taiwan, Vietnam and South Korea, where the second quarter was marked by sluggishness.

Steelmakers slashed bids for containerized imports of recycled steel, influenced by competitive offers from billet sellers. The ongoing strain is seen in operational decisions: Taiwanese producers have continued to curtail output, while South Korean steelmakers have suspended operations amid oversupply and limited buyer interest.

Meanwhile, in China, only marginal recovery was seen by June in spot and future ferrous markets. Yet, the first half of this year saw the country’s recycled steel imports decrease by 5.5 percent year on year, totaling 133,800 metric tons. Reflecting strategic priorities, in June the China Iron and Steel Association, Beijing, urged for recycled steel to be designated a strategically important resource and, in response, Chinese officials eased restrictions on recycled steel imports starting in August.

In Japan, the downward trend in recycled steel export prices has persisted through the second quarter amid a moderate appetite from East Asian importers. Tokyo Steel Manufacturing, the country’s leading electric arc furnace (EAF) producer, repeatedly lowered its purchase prices, paying around 38,000-40,500 Japanese yen ($252-$269) per metric ton at several plants. The company also saw a nearly 9 percent decline in quarterly finished steel sales volume in the first quarter of this year, reaching 746,000 metric tons.

Antidumping duties cut Chinese HRC exports

The availability of cost-effective billet and hot-rolled coil (HRC) imports from China, Pakistan and Europe was squeezed after major importers like India, Vietnam and South Korea enforced temporary antidumping duties.

For instance, Vietnam introduced an antidumping duty of up to 28 percent on Chinese steel products for 120 days starting Feb. 21.

In India, domestic HRC producers pushed to double safeguard duties to 12 percent for 200 days as of April 22, supplementing this move with stricter import documentation and revised procurement policies.

A seasonal downtrend in South Asia

As the second quarter went on, monsoon rains in India, Pakistan and Bangladesh further suppressed demand for imported recycled steel in South Asia.

In Bangladesh, small-scale steel furnaces in Dhaka have struggled with pricey imports and delayed letter of credit settlements, leading many to shift to domestic shipbreaking melting grades. The financial pressure escalated as Bangladeshi officials announced hikes in advance income tax and value-added tax of more than 40 percent at the import and production stages, replacing fixed import tariffs.

In Pakistan, policy uncertainty and seasonality have compounded the pullback. Large producers’ associations, such as the Pakistan Association of Large Steel Producers, raised concerns over ongoing tax exemptions in untaxed regions, while construction slowdowns and recent tariff reforms squeezed imports. These changes have shifted trade dynamics and weakened protection for local producers already facing high energy costs.

At the same time, the competitive environment for imported recycled steel in India has been transformed by the ample availability of domestically produced, low-cost direct-reduced iron, also known as sponge iron. This substitute material increasingly is preferred, particularly in EAFs and induction furnaces.

Additional alternatives, such as pig iron, imported iron ore pellets or hot-briquetted iron, also have limited the opportunity for imported recycled steel. As a result, the Davis Index for containerized shred cost and freight to Nhava Sheva (on the west coast of India) declined by 7 percent, or $28 per metric ton, to $357 per metric ton from April 1 to July 31.

Asian recycled steel import prices are expected to remain range-bound into the third quarter, hindered by persistently weak downstream demand fundamentals. Suboptimal buying interest in key countries likely will continue until the end of the third quarter at least, with global trade tensions intensifying and no clear resolution yet to tariff negotiations.

US exports drop

Looking at broader trade dynamics, the U.S., as the world’s largest exporter of ferrous scrap, has seen its overseas shipments decline this year, setting the tone for global recycled steel trade.

Data from the Census Bureau show that U.S. ferrous exports fell by 11 percent to 4.41 million metric tons January to May, while imports increased by 23 percent to 1.8 million metric tons compared with 1.46 million metric tons last year during the same time frame.

Market participants say that while heavy melting steel (HMS) is exported actively, an increasing share of shredded scrap is being consumed domestically.

These dynamics can be attributed to healthy domestic consumption following the increase in U.S. steel tariffs from 25 percent to 50 percent in June. Consumers and service centers shifted some orders from imported steel to domestically produced steel. As a result, mill capacity utilization rates are around 80 percent.

Notably, U.S. crude steel production increased 0.8 percent annually to about 40.2 million metric tons in the first half of this year, with a 4.6 percent increase this June compared with June 2024.

Turkish ferrous scrap imports mirrored this retreat, sliding 6 percent to about 9.4 million metric tons from January to June, while domestic crude steel production dipped 1.7 percent amid challenging conditions, wavering demand and currency fluctuations.

Consequently, consumption declined by 1.7 percent to 14.79 million metric tons, including 9.38 million metric tons and 5.41 million metric tons of imported and domestic material, respectively.

Domestic ferrous supply in Turkey rose by 6 percent in the period under review, driven by higher material generation following the 2023 earthquake.

In the time frame under review, Turkey’s ferrous scrap imports from the U.S. declined by 19 percent year on year to 1.72 million metric tons, attributed to reduced supply from the country. As a result, the share of U.S.-origin material in total imports fell to 18 percent in the first half of this year, down from 21 percent in January to June 2024.

U.S. ferrous scrap exports are expected to decrease further given the protectionist measures implemented by the current administration. Domestic steel production is expected to increase, driving higher ferrous scrap consumption. As a result, material availability for foreign markets is likely to decline further.

The European market

Global geopolitical tensions also are reflected in the European market.

European recyclers exported 6.99 million metric tons of ferrous material from January to May, down by 4 percent from 7.27 million metric tons in the same period last year, according to SteelData.

Shipments of HMS declined by 6 percent to 4.74 million metric tons in the first five months of the year, while exports of shredded scrap increased by 2 percent to 1.38 million metric tons.

Ferrous supplies from the European Union to Turkey rose by 7 percent to 4.8 million metric tons during the period under review, up from 4.5 million metric tons from January to May 2024. Turkey accounted for 69 percent of the region’s total exports.

The EU produced 65.4 million metric tons of steel between January and June, down 3.3 percent from the same period last year, while the output in the rest of Europe in the first half of this year fell by 7.1 percent to 20.8 million metric tons.

In June, EU production shrank about 8.2 percent to 10.4 million metric tons and 8.77 percent from the previous month’s 11.4 million metric tons, while the rest of Europe produced 3.3 million metric tons, an 8.4 percent decline annually and an 8.33 percent decline from the previous month’s 3.6 million metric tons, per the Brussels-based World Steel Association.

These production volumes are particularly concerning, especially since they follow a very weak 2024, according to a July market report by German organization Bundesverband Sekundärrohstoffe und Entsorgung (BVSE). Steelmakers especially are affected by low domestic demand, and extrapolated data suggest the output for the whole of this year will reach a record low of around 29 million tons.

As of press time, August continued to see shutdowns and factory closures. As a result, demand likely will remain subdued. Steel mills will have limited quantities of recycled steel available during the summer holiday period. Orders remain scarce, and low supply and demand are putting extra pressure on the recycled steel sector. Shrinking supply and narrowing trading margins require careful market analysis, and traders could reconsider whether they can sell recycled steel at current market rates, according to BVSE.

However, some market participants see a potential increase in steel demand coming from the construction sector, which is gradually stabilizing.

Aditya Sinha is an Asia ferrous analyst at Davis Index and can be reached at aditya.sinha@davisindex.com. Olga Yakymchuk is senior ferrous analyst at Davis Index and can be reached at olga.yakymchuk@davisindex.com.