
The economic and steel industry contraction in the second quarter of 2020 in the United States, Europe, India and much of the rest of the world caused undeniable struggles for ferrous scrap processors and traders in that time frame.
A subsequent rebound has brought greater steel output, higher scrap volumes and overall better conditions, but ferrous scrap recyclers are far from convinced the next 15 months will bring uninterrupted good news.
At the Ferrous Division meeting of the Bureau of International Recycling (BIR) World Recycling Convention Week, held online Wednesday, Oct. 14, market reports from four BIR Ferrous Division board members pointed to industry improvements in the summer and early fall of 2020, but not a sharp rebound in volumes to pre-COVID-19 levels.
Zain Nathani of the Mumbai-based Nathani Group said India is now “pretty much open for business,” but its construction and steel sectors are still “facing a difficult period.” One of the nation’s scrap-fed electric arc furnace (EAF) rebar mills has filed for bankruptcy, citing low demand.
Nathani predicted steel and scrap demand in India that will be “subdued for the rest of the year,” and noted the International Monetary Fund (IMF) has forecast 10 percent GDP contraction for India in 2020. Although 2021 is bound to feature a rebound, Nathani said “the path ahead is not without challenges,” including new virus cases that continue to arise in India.
Neighboring Pakistan and Bangladesh “seem to have managed the pandemic in a more effective manner,” said Nathani, and thus have endured less economic damage. Buyers in both nations, he said, have “led the way” in ferrous scrap imports, “both in containers and bulk cargoes” from nations including the U.S., the United Kingdom and Japan.
Tom Knipple of California-based SA Recycling portrayed steel and scrap conditions that started improving in the U.S. in May but commented that if the current $650 per ton price range for hot-rolled coil (HRC) steel moves any higher, “there is some concern we may not have sustainability on those prices,” which would likely also affect scrap prices.
Other concerns Knipple mentioned included a dormant oil and gas steel pipe market and a decline in architectural billings in the U.S. that started in February. That statistic can serve as a leading indicator, meaning once current construction projects are completed there will not be new ones to keep the sector active. A construction slump will reflect rebar demand, among other impacts, said Knipple.
Denis Reuter of TSR Recycling in Germany pointed to similar concerns in Europe. In terms of a rebound, Reuter said Europe’s scrap market has benefited from steady demand from Turkish EAF mills. In Europe, “The biggest problem remains availability of new arisings because the industrial production is still, in part, 30 percent below production levels before the pandemic started,” stated Reuter.
Quintin Starkey of the Metals Recyclers Association of South Africa (MRA) and Johannesburg-based Star Recycling Co. gave an overview of the scrap metal export duties and restrictions introduced there in 2020. The measures have been taken to discourage recyclers from exporting ferrous, aluminum and copper scrap in favor of selling at what would become below-market prices to domestic consumers.
Rolf Willeke, statistics advisor to the BIR Ferrous Division, said first-half 2020 figures showed a world that had scaled back its steel output in reaction to COVID-19 and subsequent restrictions—except for China, where steel output rose by 1.4 percent in the first half of 2020 compared with the first six months of 2019.
For recyclers, the steel output declines in the rest of the world meant a 10.5 percent drop in ferrous scrap consumption in the first half of 2020 compared with the previous year’s first six months. While the U.S. exported 2.3 percent less ferrous scrap in the timeframe, the European Union’s exports dropped by 10.7 percent.
In China, despite its steel output rising by 1.4 percent, steelmakers there consumed 7.4 percent less ferrous scrap. That could be in part a reflection of the lack of ferrous scrap supply within China and globally—as well as a strict scrap import quota system that has severely limited China’s ferrous scrap imports in 2020.
China was the focus of comments from guest speaker Ian Roper of Shanghai Metals Market (SMM). Although steel output has remained on track in China this year, the phenomenon hasn’t accrued to the bottom lines of steelmakers there, according to Roper.
Rebar producers in China have on average accrued almost no profits in 2020, according to a chart displayed by Roper, and HRC producers have fared little better. That is in stark contrast to 2017 and 2018, though profits had started to narrow in 2019.
Going forward, Roper said China’s central government seems to be putting the brakes on the rampant infrastructure spending that marked its initial COVID-19 response. However, he said China can still undergo more urbanization and the building of “satellite cities,” which can support steel demand.
Roper predicted a slow road ahead for the creation of new standards to allow Chinese steelmakers to import ferrous scrap. Noting the curiosity of the government’s anti-scrap sentiment, considering “scrap purity is higher than ores by far,” he said nonetheless there are “too many cooks involved” in finalizing the standards, including China’s scrap associations, its Ministry of Environment and Ecology and its customs agency. “It’s not until Customs signs off on things, and issues the accompanying documentation, that it’s actually going to happen,” said Roper, seeing later 2021 as likelier than earlier in the year.
Despite challenges and question marks, optimism remains an option, said Ferrous Division President Greg Schnitzer of U.S.-based Schnitzer Steel Industries. “We’re starting to see worldwide demand for scrap,” he remarked. “Were seeing buyers of scrap metal today that we haven’t seen in years.”
The overseas buying from multiple sources has already had an impact and will continue to do so, said Schnitzer. “This is all having a positive impact in our markets. If that wasn’t true, I think we would have seen a softer scrap market today. I personally look forward to the coming months and finishing 2020 strong, and look forward to the first quarter of 2021.”
The BIR World Recycling Convention Week is being hosted online by the Brussels-based organization Oct. 12-16.
Get curated news on YOUR industry.
Enter your email to receive our newsletters.
Latest from Recycling Today
- Takeuchi adds dealer locations in central US
- MRAI gears up for event in Vietnam
- Reworld partners with Mystic Aquarium
- BIR calls for fair standards, circular solutions in defining ‘green steel’
- LME reports active Q2
- Liberty Steel assets facing financing deadlines
- Sims is part of Australian recycling loop
- Tariffs target steel exporters Brazil, Canada and South Korea