What factors edged up global seaborne ferrous scrap trade in 2021?

• Global seaborne ferrous scrap trade rises
  
  
• Pent-up demand, higher crude steel production, energy inflation spur volumes
  
  
• Turkey retains leading importer's position
  
  
• Volumes from Japan drop on increase domestic consumption, lesser generation
  
  
• Future volumes may turn limited as countries crack down on scrap exports to meet Green goals
  
  

Morning Brief: Global ferrous scrap seaborne trade rose by over 5% to 57.74 million tonnes (mnt) in 2021 against 55 mnt seen in the previous calendar, as per data maintained with SteelMint. However, it may be noted the figure does not include the inter-trade within the European Union countries, which may amount to an additional 25-30 mnt.

The increased trade can be attributed to a few key reasons.

• Pent-up demand: The release of pent-up demand from 2020 - a year of lockdowns, post which economies swung into revival mode.
  
  
• Energy inflation: Runaway inflation in coking coal and iron ore prices spurred many steel-makers to shift to the electric arc furnace route, for better margins.
  
  
• Crude steel output up: Crude steel production grew y-o-y in most scrap-importing countries, except for China, where it dipped 3%. However' US's grew 18.3%, Japan's by 15%, and Turkey's by 13%. Russia saw a 6% rise, and South Korea, by 5.2%, amongst others.
  
  

The majority of countries, except Vietnam, Pakistan, India and Taiwan, showed a y-o-y increase in seaborne scrap imports. Turkey was the leading importer, followed by Vietnam and USA.

Key importing countries

• Turkey: This country, traditionally the highest consumer of scrap globally for steel-making, since it lacks iron ore mining resources domestically, was again the topper with a leading volume of 24.36 mnt in 2021 against 22.18 mnt in 2020, showing a y-o-y rise of almost 10%.The demand was whetted by Turkey's increased crude steel production, which rose 13% y-o-y in 2021 to 40 mnt. As a result, mills remained active in booking deep-sea cargoes throughout last year.
  
  

Turkey's crude steel production increased to support its heightened finished steel exports. Being strategically located, Turkey took advantage of the 2020 production cuts in Europe on account of lockdowns, chip shortage and energy cost inflation.

• Vietnam: This South East Asian country, however, showed a marginal 3% drop y-o-y to 5.67 mnt in 2021 (5.85 mnt in 2020). Covid-related lockdowns kept steel demand low in Vietnam for long periods. Ho Chi Minh City was the worst impacted. Moreover, Japan is the largest supplier to Vietnam but its own domestic demand and lower busheling generation due to limited automotive production led to a 34% drop in supply.
  
  
• USA: Its imports were at 5 mnt, a rise of around 17% against 2020's 4.29 mnt. Domestic prices were very high which forced buyers to explore imports, bulk of which arrived from neighbouring Canada and Mexico.
  
  
• South Korea: This country stood 4^th, with import volumes rising 9% y-o-y to 4.47 mnt (4.11 mnt). It too is attempting to increase scrap usage in a bid to limit carbon emissions. However, Korea's sourcing challenges lie in its dependence on Japan which is conserving its own scrap for domestic use while its automotive scrap generation, one of its key categories for exports, has been hit by the chip shortage.
  
  
• South Asia: India's imports dropped nearly 13% y-o-y to 3.78 mnt (4.33 mnt) as the steep global prices singed buyers, who preferred the more accessible domestic variety. Volumes tracked till the last five years show the sharpest drop in 2021. Dubai-origin HMS 1&2 (80:20) average prices in rupee terms, with freight etc added, were at over INR 35,000/t while domestic DAP Mumbai prices of HMS 80:20 averaged INR 33,500/t.Pakistan's imports declined 10% to 4.10 mnt (4.57 mnt). Covid lockdowns and challenging weather in winter impacted finished steel demand along with a weak currency.
  
  

Bangladesh's volumes rose 5% to 3.95 mnt (3.76 mnt), with a slant towards bulk bookings from USA and UK as dependency on Japan dropped.

• China: The world's largest steel guzzler, surprisingly imported a mere 0.50 mnt against the expected 10-12 mnt. The high global ferrous scrap prices and quality concerns are impeding China's imports, apart from its production cuts last year.
  
  

Supply-side -

• EU countries: The EU seaborne ferrous scrap exports are estimated to drop 14% to 19.5 mnt in 2021 from 22.6 mnt in 2020 on the back of the exports ban from November last year.
  
  
• USA: Exports from Uncle Sam's country gained as Japanese scrap became more expensive and was characterised by bid-offer disparities. Exports were up 3% to over 17 mnt (16.50 mnt) on improved steel demand in buyer countries. However, USA's benchmark HMS CFR prices to Turkey rose a steep $168/t over Jan-Dec'21.
  
  
• Japan: Exports from Japan declined a sharp 23% y-o-y to 7 mnt in 2021 against 9.10 mnt in 2020. Japan's crude steel production increased 15% to 96.3 mnt y-o-y last calendar which necessitated higher domestic scrap consumption and an export de-focus. Its average bid H2 scrap prices have risen from less than JPY 40,000/t FoB in Dec'20 to over JPY 55,000/t in Feb'22.
  
  

Outlook

With a pronounced global emphasis on green steel production for arriving at decarbonisation goals, countries are restricting exports of ferrous scrap. Most would now want to retain the scrap within their shores for domestic use. The European Commission imposed a blanket ban on ferrous and non-ferrous scrap exports late last year, while Russia also slapped a 5% but not less than Euro70/tonne duty on ferrous scrap exports. Ukraine, in December, 2021 raised the export duty on ferrous scrap to Euro180/t from the previous Euro58/t.

Thus, prospects of a rise in the volume of seaborne trade in ferrous scrap will be limited alongside the increase in scrap consumption.