How did global recycled steel market perform in Q2CY'24? Will supply constraints fuel competition in Q3? - BIR report

The latest quarterly report from the Bureau of International Recycling (BIR) highlights a consistent concern among industry experts: Limited availability of recycled steel. This scarcity is impacting markets globally, from Scandinavia where low supply is challenging capacity fulfillment and squeezing margins, to the UK where flat steel mill prices reflect fears of growing supply shortages.

In Germany, increased demand, driven by higher crude steel production contrasts with recent production slowdowns. Meanwhile, in the US, extreme weather has curtailed collections, potentially straining supply further as demand rebounds post-summer. Internationally, Turkiye and Asia are witnessing increased demand and rising prices amid tightening availability, underscoring the critical role of recycled steel in global markets.

• Global production, consumption trends: In Q12024, global crude steel production reached 469.1 million tonnes, a slight increase of 0.5% y-o-y. Asia and Oceania remained the largest producers despite a 0.4% decline, while the EU-27 and North America saw decreases of 1.4% and 1.9%, respectively. Conversely, Africa, Other Europe, the Middle East, the CIS, and South America reported production increases ranging from 3.2% to 20.5%.
  
  
• Shift in terminology, sustainability focus: The BIR's Ferrous Division now prefers "recycled steel" over "steel scrap" to emphasize its crucial role in global steelmaking. Annually, approximately 630 million tonnes of recycled steel are used worldwide, significantly reducing CO2 emissions and conserving energy and resources. This shift supports sustainability initiatives promoting greener steel production practices globally.
  
  

Global market updates:

Europe:

• EU-27: In the first quarter of 2024, the EU-27 saw an 11.2% decline in its exports of recycled steel, totalling 4.336 mnt. This decrease was influenced by slowdowns in industrial production and the construction sector, which dampened steel demand. Despite these challenges, the EU-27 remains committed to advancing recycled steel as part of its sustainability initiatives, reflecting a growing preference for lower-carbon steel in the market.
  
  
• Germany: Denis Reuter from TSR Recycling GmbH & Co. KG said that Germany's recycled steel market conditions in Q2 2024 were largely stable compared to Q1. Although steelwork demand remained steady, there was a notable increase in crude steel production, with oxygen steel rising by 2.5% and electrical steel by 6.5% y-o-y in the first five months. This uptick in production led to a rise in recycled steel demand, impacting material availability. However, economic momentum waned in May, as reflected in a decline of 2.5% in industrial production m-o-m and nearly 7% y-o-y, driven by contractions in the automotive and construction sectors.
  
  
• Scandinavia: According to Mogens Bach Christensen of H.J.Hansen Genvindingsindustri A/S, July marks the primary vacation period in Scandinavia, resulting in partial or complete shutdowns for two to three weeks in many companies, affecting recycled steel industry activity. Competition from Turkish steel mills has intensified due to rising energy costs, trade barriers, surplus Chinese steel, and Turkiye's cessation of rebar exports to Israel. Despite slight price increases, high container freight rates have deterred European mills from exporting to markets like India, limiting sales opportunities even as demand for shredded material remains stable.
  
  
• United Kingdom: The UK market for recycled steel has faced significant supply constraints, as noted by Shane Mellor of Mellor Metals Ltd and Tom Bird of Enicor. Despite a slight uptick in export opportunities, yard operators have to contend with fierce competition, which has compressed profit margins. Steel mill prices have remained stable to prevent further strain on supply. Shredding operations are under pressure from new capacities in South Wales and Birmingham, heightening competition. Post-Eid, demand has strengthened, with container prices improving and HMS cargoes to Turkiye fetching $390-395/t. Although material volumes have slowed since earlier this year, a sideways-to-slightly weaker market is expected during the summer, potentially leading to price increases post-summer shutdowns.
  
  

CIS nations:

• Turkiye: In Q12024, Turkiye's overseas purchases of recycled steel surged by 7.8% y-o-y to 5.327 mnt, solidifying its position as the world's leading recycled steel importer. Key suppliers included the US, which increased exports by 5.2% to 1.009 mnt, the Netherlands with a notable 45.1% rise to 0.804 mnt, and the UK, which saw an 18.2% increase to 0.577 mnt. Other notable reductions in recycled steel imports were observed in the US (-5.7% to 1.090 mnt), the EU-27 (-19.4% to 0.850 mnt), Taiwan (-2.1% to 0.764 mnt), Mexico (-14.0% to 0.620 mnt), South Korea (-48.0% to 0.571 mnt), and Thailand (-17.8% to 0.291 mnt).
  
  

Asia:

• China: Despite a 1.9% decline in crude steel production, China increased recycled steel consumption by 1.9% to 58.55 mnt in Q1 2024, driven by sustainability goals and industrial demands. (Insight from BIR World Mirror)
  
  
• India: India's recycled steel imports fell sharply by 29.2% to 2.28 mnt in Q1 2024, reflecting market adjustments. However, domestic consumption remained resilient with a 12.2% increase to 9.98 mnt, outpacing crude steel production growth. (Insight from BIR World Mirror)
  
  
• Japan: Japan recorded a 3.1% rise in recycled steel usage amid a slight decline in crude steel production, highlighting its balanced approach to meeting domestic steel demands. (Insight from Ted Taya, Shinsei Scrap Co. Ltd)
  
  

Middle East:

• Moosa Kazim of Al-Qaryan Group (ARE) highlighted the Middle East's robust ferrous market dynamics, driven by resilient demand from major construction and infrastructure projects. Significant steel consumption is bolstered by ongoing industrial developments across manufacturing and oil/gas sectors, solidifying the region's reliance on ferrous materials. Government initiatives, focusing on urbanization and economic diversification play a pivotal role in sustaining current demand levels and stimulating future growth prospects for steel and related commodities.
  
  
• Saudi Arabia's Vision 2030 projects such as NEOM, Qiddiya, and the Red Sea Project lead the region's ferrous-intensive initiatives, driving substantial steel demand. Mills increasingly favour direct deals to meet rising project demands amidst subdued retail markets for rebar in Saudi Arabia. The Middle East's pivotal position in the global ferrous market is underscored by expanding domestic production capabilities and attractiveness to international suppliers. Iran remains the region's largest crude steel producer, with output growing by 2.1% y-o-y to 3.25 mnt in May-June 2024. Significant y-o-y increases in crude steel production in Saudi Arabia and the UAE indicate robust capacity growth in steel manufacturing.
  
  

North America:

United States

• George Adams of SA Recycling (The US) reported a challenging 2024 for recycled steel prices, marked by five downward trends and one sideways. Falling hot rolled coil (HRC) prices, dropping below $700/t from over $1,000/t, have pressured recycled steel prices amid weak demand for sheet steel due to consumer spending shifts away from metal-intensive goods. Despite lower recycled steel collections during a record heatwave, a deficit supported prices both domestically and internationally, with stable rebar demand providing some resilience.
  
  
• US exports rose on higher coastal prices amid tighter European availability and supportive Asian markets. July saw recycled steel prices stabilize after earlier declines, setting expectations for potential stabilization or price increases in late 2024, contingent on recovering consumer demand and new electric arc furnace capacities aligning with green steel initiatives.
  
  

South America:

• South America reported a 3.2% increase in crude steel production to 10.6 mnt in Q12024. Brazil, a major player in the region, contributed significantly to this growth, supporting the overall market stability.
  
  

Oceania :

• Australia saw a 42% increase in recycled steel exports to 0.602 mnt in Q12024. This growth highlights the country's increasing role in the global recycled steel market.
  
  

Outlook for Q3CY'24: Looking ahead, experts expressed their opinions about the near-term future.

Europe: Continued focus on sustainability will drive efforts to promote recycled steel amid economic uncertainties.

Asia: China and India are expected to maintain their roles as key consumers, supporting global demand amid evolving industrial needs.

Middle East: Looking ahead, the UAE's construction sector is poised to propel steel demand, potentially transforming it into a net importer of recycled steel to meet escalating needs. Expansion plans at AGSI and Emirates Steel Arkan underscore efforts to augment steel production capacity and integrate more recycled steel, underscoring ongoing growth in the Middle East's ferrous market.

United States: Looking forward, the market expects a potential post-summer recovery, supported by reduced recycled steel availability and prospects of new electric arc furnace capacities coming online. These developments, aligned with green steel initiatives, could potentially bolster recycled steel prices as the year progresses.