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For the last couple of years it’s been all about the raw materials.
First iron ore miners were looking for record increases at annual benchmark negotiations, then coking coal producers pitched for the same.
Now that the industry has passed through one of the biggest downturns in its history and is starting to show signs of recovery, the result has been an entirely new landscape in terms of pricing and the role raw materials play in the world economy.
It’s ferrous scrap’s turn now.
The year opened quietly, and with stocks at mills low. But quickly, as EAF-based producers in regions like Turkey were forced to make new bookings or face shutting up shop, scrap prices tracked upwards.
Prices have since cooled off as mills curbed their buying, unable to pass on these increased costs to beleaguered construction consumers throughout the Middle East and North Africa.
But the market is still very sensitive — whenever Turkish mini-mills make new bookings US- and EU-origin merchant sales prices track upwards, forcing billet, rebar and wire rod prices in the same direction.
The market could be set to get a lot more sensitive soon.
As the cost of procuring iron ore increases, more and more consumers in the world’s largest steel producing nation have started to purchase scrap.
They should continue to do so to enable more sustainable development of the industry, according to Yin Ruiyu, the honorary president of China’s Central Iron and Steel Research Institute (CISRI).
China’s dependence on iron ore imports has made it a passive player in a seller’s market, Yin told China Steel Scrap Forum in Kunshan, Jiangsu province.
Only about 10% of China’s raw steel comes from electric arc furnaces, down from 17.6% in 200. Capacity has grown a great deal since then, but most of the investment has been in integrated steel works, it seems.
In the US, for example, 58% of crude steel comes from EAFs. Around third is scrap-fed in the rest of the word.
But this is starting to change.
“China’s apparent consumption, including imports, has reached 90 million tonnes,” Yin said, telling the conference that any increase in usage is limited by supply, high electricity costs and the fragmented nature of the scrap recycling industry.
China’s recycling sector is in a woeful state for such a large economy, and it needs to consolidate and improve practice to ensure a stable supply of quality scrap, according to Yin.
Domestic scrap normally comes from steel mills, steel processing companies and recycling companies, with supply shrinking from mills and processing companies as efficiency increases.
Scrap from mills, in particular, supplied 15% of China’s steel production in the 1980s, but have fallen to just 5.3% in 2009, said Yin.
“China’s scrap supply from the recycling sector through used cars and household appliances will play a more important role,” he told the conference, saying it usually takes 10-15 years for steel production to turn into scrap.
Huang Jianzzhong, an official in the resource and energy saving department of the ministry of industry and information technology, agreed.
As more and more iron ore mines are tapped out, it is inevitable that scrap will become a major steelmaking resource, he said.
Taking past history as an example, China’s recycling sector will most likely flourish extremely quickly, once it makes sense for it do so.
For the time being, however, the focus remains on large scrap-consuming centres like Turkey, India and other Asian countries such as South Korea and Vietnam.
Fitting then, that the metals sector meets this week in Istanbul for the first Bureau of International Recycling convention of this year.