Several presenters during the Ferrous Division meeting at the Bureau of International Recycling’s (BIR) World Recycling Convention offered promising signs of improvement for that sector’s future performance, even as challenges persist.
|TSR Recycling's Christian Rubach
The convention was held June 1-4, 2014, at the Fontainebleau Hotel in Miami.
Ferrous Division President Christian Rubach, an executive with Germany's TSR Recycling, summarized global conditions in the ferrous scrap sector as challenging, but said the division had received a number of positive signs in recent weeks.
“Global apparent steel consumption is forecast to grow in 2014 compared to 2013 worldwide by 3 to 5 percent,” Rubach said. But, he added, overcapacity in the sector will remain the biggest challenge.
Rubach said three recent promising developments relate to what may be a changing climate in the European Union with regard to the regulation of exports. One such development, he noted, was a changing of the ranks within the European Commission, and the fact that the incoming president of European steel association EUROFER
Robrecht Himpe, executive vice president at ArcelorMittal Europe, has spoken in support of free and fair trade.
“The conditions have changed under which we work,” said Rubach, explaining that steel producers and federations seem to now recognize there is an oversurplus of steel scrap in Europe, and that exports should not be restricted.
“Before that, we were regarded as unpatriotic scrap exporters working strictly for China or India,” Rubach said. “I hope that changes.”
Tom Bird, president of the European Ferrous Recovery & Recycling Federation (EFR) and U.K. managing director of Van Dalen Recycling, presented an overview of the European scrap markets. He said while there is more optimism for steel producers, the European domestic market remains challenging.
“Competition for material across all European regions remains very strong,” said Bird. “Margins are, therefore, under pressure in most areas.”
Bird said rationalization also is taking place, with some larger operations closing yards in certain regions. However, he added, smaller operations also were appearing to open in those same areas, which is what usually happens when significant closures occur for economic regions.
Bird said political conditions in the Ukraine have led traditional customers of this market to turn to Turkey for their supplies, leading to increased demand from that country and improved prices.
He said, “This filtered into the European Union’s domestic market, and we saw improvements in that market in April across most regions.” Bird also called the Turkish market “buoyant” this year, based on strong demand within Turkey.
Bird shared recent pricing comparisons between billet and rebar prices, reiterating his belief that the market continues to operate in a tight band.
It’s a good reflection he said “of how the prices still very much drive the price of scrap and vice versa.” Continuing exchange rate movements in relation to the euro and the British pound against the U.S. dollar, Bird noted, are having a dampening effect on the local monetary benefit of increased U.S. prices.
But, he concluded, “There are definite signs of improvement across European Union economies.” However, he added, the scrap industry is usually among the last sectors into a recession and the last out.
“A cautious eye needs to be kept on the continuing turmoil in the Ukraine which could have a ripple effect across all regions within the European Union market,” said Bird. “The general view however is that quarter three and quarter four will deliver a somewhat stronger market.”
William Schmiedel of Sims Metal Management, located in the United States, presented a U.S. market update. He said U.S.-based exporters of scrap have not been competitive in the global market and, therefore, haven’t been able to increase their arisings. He also said annualized U.S. scrap exports, year to date, were far below the 2013 level of 18.5 million tons, which was also down from the prior year.
“Certainly U.S. steel makers are enjoying some of the world’s best margins, and so not surprisingly steel imports into the U.S. in April increased 15 percent month to month,” to an annualized level which is historically very high, Schmiedel said.
Ignacio Sanchez of the Argentina-based company Scrapservice S.A. provided a market report on the Latin and South American region.
Sanchez said demand in the region was strong and exports were low as a result of increasing domestic demand.
Two guest speakers also delivered presentations during the Ferrous Division meeting. Renate Cakule, a market analyst based in the London office of U.S.-based research firm Wood Mackenzie discussed the changing global steel industry and long-term trade flow expectations for ferrous scrap.
Christopher Plummer, managing director of the U.S. firm Metal Strategies Inc., provided global steel industry forecasts highlighting various supply options and hot rolled coil as the industry’s bellwether product.