
Ferrous scrap processors may have appreciated increased scrap flows and pricing in April and May 2016, but the president of the Ferrous Division of the Bureau of International Recycling (BIR), Brussels, has asked whether the price spike was boosted by investors in Shanghai. Schmiedel raised the question at the BIR’s 2016 World Recycling Convention in Berlin in late May.
William Schmiedel of Sims Metal Management noted that April 21, 2016, on the Shanghai Futures Exchange (SHFE), contracts for 220 million tons of steel rebar were traded on one day—more than the entire annual production of rebar in China.
As has long been in the case on the nonferrous side of the scrap recycling business, Schmiedel commented that speculation may now be “something we will have to contend with” in the ferrous scrap sector.
Calling the spring price spike, which followed a multimonth slump, a rollercoaster is “an understatement,” said Schmiedel.
The earlier steel and scrap price slump, largely caused by exported low-priced Chinese billet shipped to scrap importers such as Turkey, eventually drove scrap prices into a range that caused supply shortages, he added. The resulting ferrous scrap price increase in March, said Schmiedel, was an indication that when prices are below $200, “The basic [scrap] collection system of our industry breaks down.”
Ferrous Division board member Tom Bird of Mettalis Recycling Ltd. in the United Kingdom, pointed to temporary steel output cuts in Tianjin, China, as another reason for the spring price spike. Civic officials in that city asked steelmakers throughout the Tianjin region to idle their furnaces in the weeks leading up to a local flower festival held in April and May.
The resulting “reduction in billet for a while” helped mills in places like Turkey “turn back to scrap,” said Bird. The steel mills in Tianjin, however, are back online and “market dynamics have changed again,” he added.
Economist Jason Schenker of Prestige Economics, Austin, Texas, provided a global economic forecast that was not greatly encouraging for the scrap or steel industries.
Schenker said the economic indicators he looks at have convinced him that China and the United States are in manufacturing recessions. In China’s case, the company’s lengthening string of weak monthly purchasing managers index figures points to “a worsening recession,” he said.
In the United States, Schenker said the automotive sector is the only major manufacturing sector that currently has strong output. The construction sector, meanwhile, exhibits marginal activity and the energy sector is in a severe situation that includes considerable numbers of loans likely to go unpaid.
To the delegates assembled in Berlin, Schenker noted that some of the EU’s economic indicators have been strong in nine out of the last 10 months. But considering the energy sector woes in particular, he added, “If you think everything is great in the U.S., I have bad news—it’s not.”
The 2016 BIR World Recycling Convention was May 29-June 1 at the InterContinental Hotel in Berlin.
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