Global ferrous scrap trade volumes shrink 6% y-o-y in Jan-June'24 - BigMint data

• High Chinese steel exports weigh on global seaborne scrap demand
  
  
• Cost pressure drives Indian mills to DRI, scrap imports drop sharply
  
  
• Protectionist policies cast shadow on global ferrous scrap trade
  
  

Morning Brief: Global ferrous scrap trade volumes, excluding intra-European Union (EU) trade, dropped 6% y-o-y in January-June, 2024 (H1CY'24), BigMint data shows. Total scrap imports in H1 declined to around 25.9 million tonnes (mnt) compared to 27.5 mnt in H1CY'23.

Although global crude steel production in H1 remained stable y-o-y at over 954 mnt, economic headwinds such as inflation and its impact on manufacturing and construction demand weighed on steel production in key geographies.

Seepage of competitively-priced steel in the global market, predominantly from China, also impacted steel production in many countries which had a direct bearing on scrap demand and imports.

Decisive factors impacting scrap trade

High Chinese steel exports: China's steel exports increased 22% y-o-y in H1 due to a combination of factors which include low domestic demand as well as structural price advantage. China's steel industry continues its stronghold as the world's largest exporter through aggressive pricing strategies. Data reveals China has been consistently keeping global HRC offers lower, undercutting competitors from India, Japan, and South Korea. China has not only captured market share globally but also poses a significant challenge to domestic producers in key markets like India and Vietnam. It deserves mention that Yuan depreciation has boosted Chinese steel exports: Historic high exports by China have weighed on scrap demand.

Increased shipping costs, spike in freight rates: Increased shipping costs and freight rates kept the global supply chain in turbulence as Southeast Asia grappled with a shortage of vessels and containers, driving freight rates to unprecedented highs. Recent reports indicate that businesses across Malaysia, Thailand, Vietnam, and other neighbouring countries are facing significant challenges in securing shipping capacity, leading to disruptions and soaring costs.

What's driving freight rates?

Chinese exporters, reacting to rumors of potential US duties, are reportedly hoarding containers to maximize shipments to other markets. This shift away from the US market has caused a surge in traffic, worsening congestion at key ports in Vietnam, Singapore, and other regional hubs. As a result, space availability for shipments has decreased, intensifying the scarcity of vessels and containers.

Extended travel times and heightened congestion caused delays in ferrous scrap deliveries, disrupting global supply chains created challenge for industries reliant on timely scrap imports for production.

Major importing countries

Turkiye retained the top spot among ferrous scrap importing countries, with volumes rising nominally in H1 by around 4% y-o-y to 10 mnt. The US emerged as Turkiye's largest ferrous scrap supplier delivering 2.12 mnt followed by the Netherlands at 1.31 mnt. Although Turkiye has been grappling with challenges like rising inflation and a sliding currency, which have made imports costlier, the country's crude steel production surged 17% y-o-y to 18.6 mnt, according to World Steel Association (WSA) data. This was driven by new capacities, including a major steelmaker of the country-- Tosyali Holding's 4 mnt/year quantum electric arc furnace-based flat steel mill.

India's scrap imports fell sharply by 26% y-o-y to 3.9 mnt. Domestic scrap remained cost-effective compared to imports. BigMint data shows that domestic HMS (80:20) was lower by INR 2,000-4,000/t ($24-48/t) in H1 compared to imported offers from the UK and Europe. The Red Sea crisis significantly impacted buying patterns by disrupting logistics and increasing transportation costs. Indian buyers exhibited wariness during the long election period. Also, amid weak demand, cost-effective DRI emerged as a viable alternative.

Bangladesh ramped up scrap imports by over 25% y-o-y to around 2.4 mnt on pent-up demand since the national elections in January, enhanced foreign exchange reserves, improved letter of credit (LC) approvals from banks, uptick in construction and infrastructure activities post-election.

Imports into the US fell to 2.2 mnt in H1, down nearly 14% y-o-y, while Vietnam witnessed import shipments increasing 7% on the year to 2.2 mnt. Vietnam's imports from the US dropped nearly 50% y-o-y as steelmakers preferred smaller short-sea cargoes over deep-sea shipments. Imports from Japan and Hong Kong increased by 50% and 45% y-o-y, respectively, leading to a 69% and 65% rise in total scrap trade in H1 CY24. While demand-supply imbalance, decrease in crude steel production, and a cautious outlook weighed on scrap imports by the US, the availability of domestic scrap and constrained steel exports due to weak global demand have impacted imports.

South Korea's scrap imports fell with a prolonged bearishness in downstream steel markets that prompted domestic mills to shun imports. South Korea's construction sector faltered in June with falling investment reflecting a downturn in the real estate market. Overall economic activity was weighed down by elevated interest rates and high corporate sector debt.

Outlook

Protectionist policies are impacting global scrap trade. Global seaborne ferrous scrap trade volumes are bound to be impacted in the coming time. The incremental downturn in scrap trade volumes portends to be a long-term trend. The regionalization of scrap trade is also a threat.

However, in the short term, China's steel exports glut in the global market will keep scrap trade volumes suppressed.