Cheap Chinese billets changing global scrap market dynamics
Mr Kunal Bose wrote in Business Standard last week that the fall in iron ore prices to nearly USD40 a tonne, a 10-year low, has led to a shift in steel production from EAFs and IFs to the primary blast furnace route, particularly in China. This explains the steep fall in US exports of ferrous scrap to China from a peak of 5.5 million tonne in 2009 to a quarter of a million tonne in 2014.
Naturally, the focus of all major scrap exporting countries has shifted to non China destinations such as Turkey, India and south and south-east Asian countries.
It is Turkey, the world's largest importer of steel scrap, that decides the prices of this EAF and IF feedstock. Last year, its imports exceeded 19 mt. In the first nine months of 2015, Turkish imports are down 18 per cent to 12.04 mt from a year earlier. Scrap imports falls are because of inundation of Turkish market with low priced billets from China. This is proving to be a discouragement for billet production by local EAFs.
The Turkish Steel Producers' Association says "low-cost imports narrowing the gap between finished steel and raw material prices and stronger competition in the country's export market" are responsible for weakening of steel production in Turkey, which is seen as a bridge between Asia and Europe.
According to World Steel Association, Turkish steel production between January and October is down 10 per cent to 26.6 mt from 28.5 mt a year ago. This could not have been otherwise.
The side in steel production in Turkey was primarily responsible for its cost and freight import price of the most commonly traded heavy melting scrap '1 & 2 (80:20)' sinking to a historical low of $169 a tonne on October 20 from the June monthly average of $270.2 a tonne.
Now the Turkish government order that all steel finished products made from billets imported from China will have to be exported within nine months has triggered fresh import demand for scrap by EAFs. The novel Turkish fiat has caused a rise in scrap prices for a couple of weeks on the trot. The question is, will this hold for long in the current economic environment.
Source : Business Standard