EU ferrous scrap exports dip 5% in Jan-Aug'24. What lies ahead ?

• Decarb, protectionism raise EU's scrap consumption
  
  
• Reduced export price viability discourages exports
  
  
• CY'25 likely to see scrap exports declining further
  
  

Morning Brief: Ferrous scrap exports from the UK and European Union (EU) fell nearly 5% to a provisional 11.80 million tonnes (mnt) over January-August, 2024 (8MCY'24) as per data collated by BigMint. Volumes in the same period last year were recorded at 12.41 mnt. Despite this decrease, European countries maintained their status as the world's leading exporter of recycled steel.

Country-wise trend

A country-wise review shows a mixed trend. For instance, France experienced a nearly 4% dip in total exports, but volumes to Morocco surged over 64%. The UK saw an over 7% drop, with a significant 46% decline seen for both India and Pakistan. Conversely, Poland recorded an 8% overall increase, bolstered by a remarkable 468% surge in shipments to Morocco. The Czech Republic posted a sharp decline of 60%, while Belgium's fell 10%, although exports to India increased significantly by 84%. Italy saw a 29% rise in total volumes, driven by a massive 249% increase to Pakistan. Germany's total exports decreased 12%, despite a 69% increase in volumes to India.

Why did ferrous scrap exports dip in 8MCY'24?

EU H1 scrap intake rises amid decarb, protectionist drives: The EU increased scrap consumption in the first half (January-June) of 2024 by nearly 9% y-o-y to around 44 million tonnes (mnt) as per data from the Bureau of International Recycling (BIR). Resultantly, H1 saw EU's scrap exports decreasing 19% y-o-y to 7.36 mnt.

This increased scrap intake was driven by the growing decarbonisation drive and EU's domestic mills' active increase in flat steel production in the face of a growing imports threat.

This is corroborated by the fact that crude steel production in the EU saw a slight 0.7% y-o-y increase to around 74 mnt in 8MCY'24 against 73 mnt in the same period in 2023.

Falling scrap prices make exports unviable: HMS (80:20) bulk prices, FOB Rotterdam, witnessed a sharp y-o-y decline in 8MCY'24. Offers averaged $362/t in January-August, 2024 against $375/t in the same period in 2023, a y-o-y dip of 3.5%.

The price fall can be attributed to a pile-up of semi-finished and finished products at domestic EU mills because of poor end-user demand from August onwards. The declined scrap offers made exports somewhat unviable.

In fact, Q2CY'24 (April-June) offers fell 5% to $355/t from $375/t in Q1 while August offers dipped 4% m-o-m to $344/t from $359/t in July.

Exports to key consumig countries drop amid protectionism: Scrap exports to key consuming countries are dropping amid the EU-27's growing protectionist stance keeping in view the urgency to meet its carbon emission targets.

A new climate change target reveals the EU aims to cut greenhouse emissions by 90% by 2040, from 1990 levels. That apart, the EU's Climate Law enshrines the target of becoming "climate neutral" by 2050., which indicates that greenhouse gases will have to drop to net-zero by mid-century.

Consequently, H1CY'24 saw recycled steel exports from the EU-27 dropping nearly 19% to 7.40 mnt. Key markets like Turkiye saw a reduction of 18% to 4.65 mnt, Egypt was down 7.5% to 0.59 mnt, and India's plummeted 39% to 0.45 mnt in H1.

Outlook

The EU's seaborne ferrous scrap trade, going forward, is set to decline as more countries are expected to introduce legislation that will aim to retain the material for domestic use with decarbonisation being a future watch-word.

In 2024, growth in the EU's steel-using sectors is projected to drop -1.6% due to the second recession in a row in the construction sector, persistent geo-political tensions, and the lagged impact of high interest rates on the overall manufacturing sector.

However, 2025 is expected to see moderate growth of 2.3% as per Eurofer's "Economic and Steel Market Outlook 2024-25". This will warrant increased crude steel production which, in turn, will create a stronger case for higher domestic scrap usage and lower exports.