Morning Brief: Total global seaborne ferrous scrap trade volumes are
expected to reach nearly 56 million tonnes (mnt) - 55.72 mnt - in calendar year
2023 (CY'23), as per provisional data available with SteelMint. Seaborne trade
is expected to drop 5% y-o-y from 58.49 mnt in CY'22.
The top 8 seaborne
scrap consumers this year are Turkiye, India, Bangladesh, South Korea, Vietnam,
Taiwan, Pakistan, and China, which collectively contribute to 82% (45.57 mnt)
of global trade.
Apart from India and
Taiwan, all other countries showed a decrease in import volumes- particularly
key importers such as Turkiye, Bangladesh, Pakistan, and South Korea.
Steel
production falls amid macroeconomic headwinds
·
All leading scrap-importing
nations, except India, witnessed a decline in crude steel production in CY'23.
In Turkiye, crude steel output is projected to fall by 5% y-o-y and mills
remain sceptical of steel demand owing to inflation and high-interest rates.
Turkish steel producers have struggled to maintain normal operations due to a
weak steel sector and a fluctuating currency rate, as well as a sharp decline
in exports.
·
In Bangladesh, the steel sector
has been sluggish amid weak sentiments for finished steel and severe forex
crunch, followed by prolonged LC opening issues and subdued downstream demand.
Likewise, Pakistan may see a 13% drop in steel production in CY'23 amid energy
inflation, currency fluctuations, and upward adjustments in power tariffs.
·
Even South Korea has lowered
scrap imports by around 17% despite largely stable crude steel production due
to cheaper domestic substitutes as well as weak downstream demand. So, the 36%
projected growth in India's imports in CY'23 has somewhat offset the overall
contraction in global trade.
Restrictions
in exporting countries
·
In October this year, the UAE
extended an existing ban on exports of scrap metal for three months - until 19
December. The country first imposed a four-month ban on scrap exports in May
2020 and has continued with the policy to support the developing domestic steel
sector. Although exports continue to India, Pakistan, and Bangladesh, customs
crackdowns in India have resulted in a drop in import volumes.
·
Asia's leading scrap exporter,
Japan, which used to ship around 7-9 mnt during CY'18-20, has witnessed a
decline in exports to 6.07 mnt in CY'22 from 7.02 mnt in CY'21 and 5.54 mnt in
10MCY'23. Steel major Nippon Steel is reportedly shifting some BF facilities to
EAF, while in Setouchi and Hasaki new EAFs have been installed. Tokyo Steel
plans to double its capacity by 2030 and JFE is considering replacing a BF with
EAF at its Kurashiki plant. Besides, Japanese steelmakers are seeking to
increase scrap use in BOF to lower carbon footprint. So, exports are gradually
declining.
Outlook
As ferrous scrap is seen as a
vital decarbonisation lever for the steel industry, more and more countries are
increasing scrap use, and, as per Indian government sources, some 60 countries
have imposed restrictions on exports. If the EU's waste shipment regulations
come into effect, restrictions may get tighter, thereby seriously impacting
Indian steelmakers.
Dwindling supplies from Japan may
reorient trade flows, forcing key Asian buyers such as South Korea, Bangladesh,
and Vietnam to shift to suppliers in the US and elsewhere. The availability of
higher grades, such as HS may also decrease.
Demand may rise in Q1CY'24 as
inflation eases and interest rates stabilise, but seaborne supply tightness may
intensify going forward.
Source: steel mint