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Is growth here to stay for materials markets?

Some extraordinary growth figures were reported to the BIR Spring Convention held in Istanbul, but recycling industry experts were quick to caution against over-optimism. Indeed, in his address to the organisation’s General Assembly, BIR president Dominique Maguin of France warned: “It is far too early to celebrate. We must remain very alert and learn from what we have experienced in difficult times to seize all the opportunities offered by renewed growth.”

The contrast between statistics and sentiment was perhaps starkest at the Stainless Steel & Special Alloys Committee meeting. Although global output could well jump from below 24 million tonnes last year to more than 30 million tonnes in 2010, there is “great uncertainty” about business prospects, in particular for the third quarter of the year, suggested committee chairman Michael Wright of ELG Haniel.

Half of this year’s output is set to come from emerging markets such as China, India, the Middle East and South America, with China very much “the main driver”. David Wilson, director of metals research at Société Générale Corporate & Investment Banking (SGCIB) in the UK, predicted that China’s annual output of stainless steel could be approaching 16 million tonnes by the year 2014 when world production is expected to be nearer 38 million tonnes, thereby generating “a massive requirement for scrap”.

“Turkey’s need for imported scrap is expected to rise significantly in the medium term”

India will also become a far more significant force on the stainless production “dance floor”, added Cengiz Onal, sales manager of Eti Krom in Turkey. India is in line to become the world’s third largest producer next year, when its annual melting capacity is scheduled to reach 3.3 million tonnes. And the figure could rise to six million tonnes a year within the next five years, delegates were informed.

There was also muted enthusiasm at the Ferrous Division meeting, despite confident predictions of a massive upturn in steel output and consumption this year. Latest World Steel Association statistics are suggesting that global apparent use will leap 10.7% in 2010 to 1.241 billion tonnes and that EU production is on course to recover from 139 million tonnes last year to 167 million tonnes this year. But, as noted by Ruggero Alocci of Alocci Rappresentanze in Italy, EU output will still fall well short of the 2007 peak of 210 million tonnes. There is at least 40 million tonnes of annual steelmaking overcapacity in the EU which needs to be resolved, he contended.

The same meeting also generated some good news from Dr Veysel Yayan, secretary general of the Turkish Iron & Steel Producers’ Association. Although its ferrous scrap demand declined from 23.8 million tonnes in 2008 to 21.4 million tonnes last year, the world’s leading importer is expecting to consume 24.9 million tonnes this year to satisfy an estimated crude steel production increase of around 15%. And the guest speaker predicted that Turkey’s annual consumption would approximate to 30 million tonnes as early as 2012.

Dr Yayan was joined by Uğur Dalbeler, general manager of Turkish steel producer Çolakoğlu Metalurji, in confirming that their country will rely on imports to satisfy around 75% of overall ferrous scrap needs for the foreseeable future. Having dropped to 15.6 million tonnes in 2009 after two years above 17 million tonnes, Turkish ferrous scrap imports would top 18.2 million tonnes in 2010 and perhaps 20 million tonnes in 2011, the latter forecasted. And Dr Yayan observed: “Despite stable growth in domestic scrap collection, Turkey’s need for imported scrap is expected to rise significantly in the medium term.”

Europe has been winning an increasingly substantial share of the Turkish import market during recent years, largely at the expense of Russia. The EU satisfied 38% of Turkey’s scrap import requirements in 2005, rising to 50% last year and then to 61% of the 3.8 million tonnes imported in the first quarter of 2010.

Recent and highly significant legislative developments were reviewed at meetings of the Non-Ferrous Metals Division and the International Trade Council. David Chiao of US- and China-based Uni-All Group confirmed that, on the very day of the meetings, Chinese authorities had introduced Notice 21. This aims to eliminate under-declaration of consignment values by requiring the individual packaging of each item in mixed loads. Early feedback was indicating that zorba (shredded mixed non-ferrous scrap) would be identified as a single item, whereas a detailed analysis of all content was likely to be required for irony aluminium and other mixed materials.

Chiao also explained that overseas suppliers of recyclables to China whose AQSIQ licences expire at the end of 2010 can begin the renewal process on 1 July this year. As before, applications will have to be submitted in both English and Chinese. First-time applicants must be able to demonstrate certification to ISO 9001, RIOS or an equivalent standard.

On a positive legislative note, BIR environmental and technical director Ross Bartley underlined the importance of the process currently taking place at EU level to ascertain criteria to establish when a waste ceases to be a waste. Speaking at the International Environment Council meeting in Istanbul, he argued that this is a much-needed development, and the world recycling body “will go right to the end of the process” to guarantee that the recycling industry as a whole extracts from it the maximum benefit and relief.

BIR director general Francis Veys expressed the hope that all EU member states will fully support the product of these end-of-waste deliberations “to minimise differences in interpretation and implementation”.

Despite constant references in Istanbul to market volatility, several speakers were still prepared to venture price predictions. For example, SGCIB’s Wilson said he expected the cash nickel price to operate in the $20,000-$24,000 per tonne range during June and July before establishing an average of $25,000-$26,000 in Q4. Upward price progress should be maintained into next year, he added. According to Robin Bhar, senior metals analyst at Crédit Agricole in the UK, the average London Metal Exchange cash price for aluminium will be nearer $2,300 per tonne in 2010 compared with just $1,650 in 2009. Higher demand will push the average to some $2,500 per tonne for 2011, he added.

At the Ferrous Division, Blake Kelley of Sims Group Global Trade Corporation in the US envisaged “a brighter outlook this year” for scrap. In the near term, he expected Turkey to “return to the market in an effort to secure delivery for the end of June and July”.
Alocci predicted that, unless there is rapid and substantial steel sales growth, scrap prices will fall again - but not to the low levels seen at the beginning of this year.

At the time of the Istanbul Convention, indications were that prices for plastics scrap exports from Europe to China would remain relatively unchanged for June. In this context, chairman of BIR’s Plastics Committee Surendra Borad, of Belgium-based Gemini Corporation, called for Europe’s recyclers to take steps to reduce their “over-reliance” on exporting to China. Of the 3.3 million tonnes of plastics scrap exported from the EU last year, 90% went to China and Hong Kong. There is a need, he said, to “develop other markets by de-blocking the restrictions on imports into other regions” such as India and the Middle East.

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