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Ferrous - 8 February

The UK’s ferrous metal recyclers have not seen a good start to 2013. On the contrary, and according to the Quarterly Report from the Bureau of International Recycling (BIR), out earlier this month, 2013 will be nothing more than an extension of the problems the industry faced in 2012.

In his opening remarks, Christian Rubach, president of the BIR ferrous division, quoted statistics that reveal a highly diverse picture of steel production: in Asia and North America it grew by 2.6% and 2.5%, respectively, whereas in the EU it shrank, most notably in Spain and Italy by 12.1% and 5.2%.

He went on: “Europe is economically ‘the sick man’ and its political future is still unclear. I personally fear that 2013 will not be the year of a positive turn-round in Europe’s fortunes; its current plight may last into 2014 or even longer.”  

Unfortunately, other parts of the report endorsed this gloomy view. Rolf Willeke, BIR’s statistics adviser, was particularly downbeat about the use of steel scrap as a raw material.

Based on data available for the first nine months of 2012, there is a decline in the use of such scrap in the main steel-producing countries of the world.

Looking at those parts of the data most likely to interest UK exporters, we see that scrap usage in China dropped sharply by 16.9% to 60.6 million tonnes, with crude steel production up by 1.7% to 542.34 million tonnes. There were steel scrap usage reductions in the EU27 (-6.7% to 72.01 million tonnes). But it is worth noting a smaller percentage decline in EU27 crude steel production (-4.6% to 129.63 million tonnes).

Also on the decline during the most recent January-September period was steel scrap consumption in Russia (-3.4% to 15.6 million tonnes), even though the country’s crude steel production increased around 4.3% to 53.78 million tonnes.

Steel scrap use in Turkey and the US were the only major positives. From the BIR statistics, it is noticeable that the increase in Turkish steel scrap use (+9.7% to 24.74 million tonnes) was greater than the growth in domestic crude steel production (+8.4% to 27.15 million tonnes).

Also, in the first nine months of 2012, Turkey’s overseas purchases of steel scrap climbed around 7.7% to 16.86 million tonnes to enable the country to reinforce its position as the world’s foremost importer of steel scrap.

The growth in US steel scrap use of around 2.2% to 42.5 million tonnes was outpaced by the upturn in domestic crude steel production (+5.3% to 68.15 million tonnes).

It was also interesting to note the increased overseas purchases by the Republic of Korea (+20.4% to 7.75 million tonnes) and India (+53% to 6.23 million tonnes). Other positives included steel scrap imports into Malaysia (+7.3% to 1.57 million tonnes) and Thailand (+4.6% to 1.44 million tonnes).

Moving ahead to the present time, Tom Bird, president of the European Ferrous Recovery and Recycling Federation, is a lot more optimistic. He wrote: “Container business out of the EU has picked up somewhat in January. This has increased the options available to EU suppliers and is keeping up the market level in certain areas.

“Looking ahead in the first quarter, a great deal will depend on availability. Worsening weather conditions across Europe will put a squeeze on arisings. The January buying spree has calmed down but the market is still holding out.

“February should see a flat market, with a rollover of prices expected in most markets across the EU. There seems to be little downside anticipated.”

Out and about in UK scrap yards, merchants report a slight upturn in demand and prices for exports to Turkey, but markets in Spain, Italy and other EU countries are more or less dormant.

Indian ferrous scrap imports continue to increase year on year. Prices went up in November and peaked at around $425 (£270) per tonne cfr Nhava Sheva in early December. Since then prices have again cooled off, and UK exporters were not interested in January when sales of shredded in containers fetched $420-430 per tonne cfr Nhava Sheva.

So far, the market for February has weakened slightly but some pundits expect stock shortages to push up prices.

In the UK, with steady demand in the home market forcing exporters and local buyers to keep their price levels honest, most companies would put problems caused by the severe shortage of scrap steel above those caused by price.

To put it into perspective, one yard foreman pointed to his firm’s hugely powerful shearing and shredding machinery and said: “We’ve got some greedy machines out there and, when we can’t feed them, they drain money away.

“Sales are not really a problem and our local steelworks is a reliable bedrock.”

That is the crux of the problem in the UK: low industrial output and manufacturing are simply unable to generate enough feedstock.

Despite the economically challenging downturn, Celsa Steel in Cardiff has invested £250m since 2003 and it now has one of the EU’s most efficient electric arc furnaces (EAFs). Solely reliant on scrap with 276kg CO2 per tonne of steel produced (2011) (against a benchmark of 283kg CO2 per tonne of steel produced), Celsa is one of the best 10% EAF steelmakers in Europe.

Looking to the future, a spokesman said: “While the situation in 2013/14 remains unclear, planned investment in energy and rail projects holds a promise of better market conditions for 2014/15. But delays in these projects will only maintain the market at 2012 levels for the foreseeable future.”

Among other good news, Tata Steel Port Talbot has relit its rebuilt No.4 furnace, and Sahaviriya Steel Industries’ plant at Redcar has hit its two million tonnes production target less than a year after its restart.

Finally, after securing a contract worth £3m with Severstal, the country’s largest steel company, Sheffield Forgemasters has secured its position as Russia’s leading steel rolls supplier.

The Bureau of International Recycling is a global association representing more than 890 companies and affiliated federations from 70 countries. It is a non-profit organisation.

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