Europe's CY'23 scrap exports marginally down. What key trends impacted market?

• UK export volumes decline 24% y-o-y
  
  
• Turkiye's lack of demand drags down volumes
  
  
• Scrap's share in EU crude steel-making up in CY'23
  
  
• Prices fall amid decline in demand
  
  

Morning Brief: Ferrous scrap exports from the top nine European countries (excluding intra-EU trade) experienced a mere 5% y-o-y decline in calendar year 2023 (CY'23), totaling 15 million tonnes (mnt) as compared to the nearly 16 mnt recorded in CY'22, according to provisional data maintained with SteelMint.

The total export volume by 28 countries in Europe also experienced a modest decline of just 3%, reaching 50 mnt (estimated for CY'23), compared to the previous year's figure of 51.5 mnt in CY'22.

Demand- as well as supply-side issues, kept volumes more or less stable.

Country-wise break-up-

The UK, which is the largest ferrous scrap exporter from Europe, saw its volumes decline 23.50% to 5 mnt (7 mnt in CY'22).

The second-largest exporter, Germany's total volumes rose 6.63% to 2.85 mnt, with Turkiye and India as the primary recipients.

Belgium's exports grew 3.60% to 2.75 mnt, with Turkiye and Egypt remaining major destinations.

Poland's exports surged 72% to 1.32 mnt, driven by strong growth in volumes to India and Turkiye while France saw exports increase a moderate 17% to 1.11 mnt, with Turkiye and Egypt seeing mixed trends.

Key trends that emerged in Europe's ferrous scrap market in CY'23

Inflation impacts home demand: In 2023, the European economic landscape was marked by a mix of positive and negative factors. A high cost of living coupled with monetary tightening were factors that hit steel demand. Inflation reached a record 10.7% in the Eurozone in October 2023, driven by escalating energy costs and supply chain disruptions.

Ongoing risks from the Ukraine war and dependence on Russian energy created concerns about further price hikes and supply disruptions of the same. The war and a global economic slowdown contributed to a volatile business environment, influencing investment decisions.

As a result, the EU28's crude steel production remained flat in CY'23 at 135 mnt (136 mnt in CY'22).

Euro volatility: The euro started last year on a strong note of 1.20 to the dollar. But in the latter half, it came under pressure, sliding below 1.10 as the US raised interest rates aggressively to combat inflation. Rising energy prices in Europe put additional pressure on the euro. The volatile currency made trade participants wary and cautious.

Low import demand dents prices:With demand falling, scrap prices from Europe also showed a declining trend, which possibly also discouraged scrap exports to some extent. For instance, FOB Rotterdam prices for bulk HMS (89:20) averaged $366/t in CY'23, down 12% against $417/t in CY'22. CFR Nhava Sheva prices were also down 12% in CY'23, averaging $417/t ($475/t).

Scrap share in crude steel-making rises: However, leaning towards meeting emission goals, the EU28 (including the UK) exhibited a more pronounced shift towards scrap usage, with its share in crude steel production rising from 52% in 2022 to an estimated 54-55% in 2023. This is likely due to stricter environmental regulations and a focus on circular economy principles.

In 2023, a 4% increase in scrap consumption is estimated at around 81 mnt.

Turkiye demand declines: Turkiye, the world's largest scrap importer, remained the dominant destination for top European scrap exporter countries. However, its total scrap imports dropped 13% in CY'23. Turkish mills struggled to sustain normal operations due to weak domestic steel demand amid a fluctuating currency and steep inflation, as well as a sharp decline in steel exports. The aggressive rate hikes were aimed at curbing inflation, which peaked at 85.5% in October 2023. While inflation has shown signs of moderating, it still remains high at around 61.36% (as of December 2023). The rapid interest rate increases also impacted the lira, causing its significant depreciation against major currencies.

The economic outlook for Turkiye remains uncertain, with the rate hikes potentially dampening economic growth in the short term.

Demand from other importing countries down: Scrap import volumes from Bangladesh and Pakistan dropped as both countries struggled with domestic steel demand, currency slides, inflation and forex reserves depletion. Bangladesh's total scrap imports declined 14% to 4.45 mnt and Pakistan's by 30% to 2 mnt. Other key scrap consumers like Korea and Vietnam also witnessed scrap imports declining 17% (3.67 mnt) and 3% (3.54 mnt) respectively y-o-y. Most countries battled sliding currencies and inflation last year which led to lesser procurement of European scrap.

Outlook

Europe's scrap exports will depend much on which way the global economy moves. If macro indicators improve, then export volumes may increase. On the other hand, the EU is resorting to measures to safeguard its own scrap for domestic consumption in order to meet emission goals.

2nd India Steel and Metal Conference: Keeping above dynamics in mind, SteelMint, along with the Steel Users Federation of India, will be organizing the 2nd India Steel and Metal Conference: Supply Chain & Sourcing Strategies, over 10-11 January, 2024 in Mumbai. Several key sessions will explore the current challenges and enablers. Experts will also try to read future trends.

Particularly, a session on "Evolving trade dynamics in a fast-changing global steel market",will discuss tightening of quality parameters for imports; give an overview on the carbon pricing mechanism and its impact; explore energy prices and their impact on steel, and a lot more.

This is the only conference focusing on steel end-user industries and their issues. It will be followed by the glittering SUFI Steel Awards, 2023. Register fast.