Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Stimulus monies injected into the global economy have had a profound effect on the industry, according to the Bureau of International Recycling (BIR), increasing demand and supporting soaring prices in Q4 2020. 

 

The bureau has forecast a positive global ferrous scrap market on rebounding demand and prices in China and the Indian government’s reduction of import duty on certain scrap to zero effective until March 31, 2022. Emerging market economies in Asia, Africa, and Latin America seek to diversify local economies to support growth in steel-consuming industries like transportation, logistics, renewable energy, technology, telecommunications, construction, and petrochemicals.

 

Prices rising in the US

According to BIR, global ferrous scrap prices increased from mid-October through January. In February, scrap prices dipped on inventory recovery as scrap yards received better flows due to mild weather. Import buying activity increased as Asian mills reopened on limited ferrous scrap inventory and domestic sources. 

 

Scrap prices in the US are expected to firm up in March due to the inclement weather conditions in unprepared regions as mills are concerned about scrap availability in the midst of strong demand schedules that already have higher than usual lead times. 

 

Finished steel prices in the US and internationally may soften later in the year with new production sources coming online and seasonality but scrap market demand will remain healthy. The key fundamentals in steel demand-consumption will strengthen as the world learns to balance COVID-19 complications and economic activity, BIR indicated. 

 

Asia looks beyond China

Asian countries have benefited from the China-US trade feud with countries like Taiwan, Bangladesh, and Malaysia, to name a few, attracting billions in investments with the installation of hundreds of new companies either launching or relocating. 

 

China aims to reduce carbon emissions by cutting its steel output in 2021 according to its masterplan for steel. Obsolete lines are being phased out and strict approval and regional bans are being considered on new steelmaking capacity, BIR noted. The country also plans to prevent a resurgence of idled capacity and induction furnaces and through its shift to electric arc furnaces (EAFs), China is planning to raise its scrap ratio to 30pc. Large-scale scrap recycling, processing, and distribution centers are expected to grow domestically but China will also be placing pressure on global prices through import demand. 

 

The UK to face Brexit challenges

The EU, Japan, the US, and the UK will continue to play an important role in ferrous scrap export as the world’s largest sources of scrap. 

 

The steel sector in the UK has managed to operate at near-normal levels during the COVID-19 pandemic. However, given the Brexit plan, the country will confront some challenges with the new EU framework. Scrap prices in the UK encountered increases in November-January with price erosion of about 10-15pc in February, following the same trend as the US. 

 

Scrap exports were affected by container availability and the sharp increase in freight costs. The difficult situation in the container market had buyers and sellers preferring deep-sea bulk scrap cargoes. 

 

Growth factors

The steel industry’s sustainability will depend on the growth in construction, car manufacturing, and engineering including energy, according to BIR. Additional well-planned stimulus monies throughout 2021 can assist in supporting these industries. The recovering global economy is also expected to support oil prices, which, in regions like the Middle East, will drive construction activity. The Steel industry in the UAE, for example, is forecast to grow by 30pc in 2021 with further growth towards 2026 given major infrastructure plans. Growth is also expected to continue in Vietnam, a major scrap importer. 

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