The demand for and high price of ferrous scrap is likely to continue as long as the construction booms in the Middle East and China require a steady dose of steel.
Speaking to delegates at the Bureau of International Recycling (BIR) Ferrous Division session, Anton Van Genuchten of Germany’s TSR GmbH & Co. remarked, “Only one thing can stop this demand [for scrap], and that is an end in demand for steel products.”
Van Genuchten and other panelists pointed to the healthy operating environment for steelmakers as a key reason for record-high pricing. “This pricing is based on very firm worldwide demand,” said Van Genuchten.
The German recycler also showed a chart demonstrating that Turkish steelmakers have been able to maintain their margins and successfully charge more for their steel, despite their higher scrap costs. “I’m not hearing of anyone closing [steel mills] there,” he added.
On the supply side, Blake Kelley of SimsMetal Management noted that in the United States the slowdown in both construction and automotive production has strained the prompt scrap supply. That situation is not likely to improve in the summer when automakers switch production to the next model year.
Kelley remarked that Chrysler’s June auto bundles sold for an additional $70 per ton over the May prices. That trend is likely to hold, he said, “unless there is an increase in generation of this type of scrap.”
The obsolete grades have been lagging in price, but that could change if “domestic consumers begin to realize how much scrap has been lost to overseas consumers,” said Kelley.
Another trend in the United States has been integrated steelmakers buying more scrap, perhaps because of difficulties sourcing iron ore and pig iron as well to cut back on carbon emissions and energy use. “Each 1 percent of integrated supply switching causes an 8 percent growth in overall scrap consumption,” Kelley remarked.
Steelmakers seeking ferrous scrap will find less of it being exported from Russia and Ukraine, according to Roman Genkel of Russia’s PG Mair. Steelmakers there have invested in 4 million tons of new production capacity, half of which is coming online in 2008.
Russia is also increasing export tarrifs on ferrous scrap, contributing yet another factor to the world’s high prices and tight supply.
As high as prices have been, Van Genuchten believes they still have room to grow. “We believe the biggest prices for scrap will be in the second half of 2008,” he declared.
Guest speaker Mika Saariaho of the Brussels-based International Iron and Steel Institute (IISI) gave an overview of the health of the global steel industry, and remarked that the organization’s 180 member companies view recycling as critical. The organization’s vision is phrased, “A sustainable steel industry in a sustainable world.”
A shortage of scrap is Saariaho’s concern. “By 2012, arisings of scrap will eventually fall short of needs,” he stated.
Having heard the bullish remarks from panelists, BIR Ferrous Division President Christian Rubach of Germany’s Interseroh commented, “I think we’re all convinced we’re in the right industry. The future looks good.”
The BIR 2008 World Recycling Convention & Exhibition is taking place in early June in Monte Carlo.