Many hurdles ahead, negative risks persist, Irepas raw materials chief tells conference

A wide variety of factors have contributed to “a really shaky period” in international trade, delegates heard at the 86th meeting of Irepas, the International Rebar Producers & Exporters Association, held in Istanbul, Turkey, on May 29-31, 2022

Jens Björkman, chairman of the raw material suppliers committee, listed the factors that have recently affected the steel and raw materials markets.

These included the Covid-19 pandemic, the global semi-conductor shortage, the war in Ukraine, raw materials and component shortages, high inflation rates, monetary tightening, and the effects of China’s zero-Covid policy on growth.

High inflationary pressures were also causing the industry to slow down, and the idling of more plants by some steel-using producers was expected in the next few months, signaling negative developments in terms of demand.

There were still pockets of supply shortages in the automotive sector, where production was not keeping up with demand, because even when demand is high, production remains low due to component shortages. This also resulted in a shortfall of scrap generation.

All of these factors pointed to numerous challenges ahead, according to Björkman.

“For the past year-and-a-half, we have been trading [steel scrap] at around $400 per tonne,” he said. “However, in the past two months, we have seen price movements that we haven’t seen since 2008, amid trade distortion and the effects of the war [in Ukraine] on actual trade. We have seen $200-per-tonne decreases because prices first increased by that much, though it is a short-term effect.”

Fastmarkets’ daily index for steel scrap, HMS 1&2 (80:20 mix), North Europe origin, cfr Turkey, was unchanged day on day at $424.05 per tonne on Tuesday June 7.

The raw material suppliers committee expected the market to remain at these levels for some time because current prices were deemed workable, with limited downside risk.

Looking at the EU, Björkman said that the region was under pressure from rising energy costs, while there was also a lot of investment activity in the EU, either to shift production to electric-arc furnaces from blast furnaces or in greenfield investments for green steel.

He went on to say that new electric-arc furnaces were being built in North America and Turkey, and that these markets, which were undergoing backward integration, will need to secure raw materials.

Concerning the financing of scrap and other raw materials trading, he added that financing has been under pressure in recent months due to high prices, and insurance companies have been unwilling to take on additional risks.

He also noted that, with commodity prices doubling, corporations have been unable to guarantee trade products, while the financial sector has grown more sensitive to sanctions and was more cautious about the metals trade.

Björkman also commented on the pig iron shortfall, conceding that it does exist, but that India has imposed an export duty on pig iron and that demand in China has slowed owing to its zero-Covid policy, while the effects of the pig iron scarcity on scrap prices has decreased for the time being.

He also noted that India has imposed an export duty on iron ore, but because India’s iron ore exports are insignificant, this will have little effect on iron ore availability in export markets, while supporting domestic supply in the country.

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