Ever-higher levels of steel production around the world created growing demand for our material in 2018, prices of which remained relatively strong throughout the year. However, the year also provided multiple causes for concern in the form of: trade wars; import restrictions and bans; financial woes in key markets such as Turkey; and the fathomless implications of Brexit.
Let’s start with the pluses. Last year ended on a largely positive note for our industry in most parts of the world. In Europe, for example, mills’ order books were generally strong and scrap prices remained healthy. As the year-end approached, world crude steel production was running 4.7% ahead of that for 2017, with the big hitters of China, the USA and India all recording sharp upturns in output of, respectively, 6.7%, 5.7% and 4.9%. In effect, 2018 was on course to register another all-time high in global steel output.
At the same time, many of the world’s growth areas for steel production – including the Indian Sub-Continent – were increasingly establishing themselves as go-to destinations for scrap exporters.
Meanwhile, data for the first half of 2018 indicated a 41% surge in steel scrap usage for crude steel production in China. This development was as a direct consequence of the government’s bid to establish stricter pollutant emission controls, underlining once again the ecological soundness
of choosing scrap over alternative sources of raw material. In effect, use of scrap is becoming ever more imprinted on the Chinese steel industry’s DNA: the country’s basic oxygen furnace mills have upped their scrap ratios to, typically, 20-25% while, at the same time, many new electric arc furnaces have been installed or are in the pipeline, leading to further investments in steel scrap processing machinery such as shredders.
All this is good news for our industry, but there has been disappointment too in the form of recent confirmation by China that various forms of iron and steel scrap would be switched from non-restricted to restricted status for the purposes of imports with effect from July this year. BIR has waved the flag for free and fair trade throughout its 70-year history, but 2018 was to be a year in which that principle would be challenged on many fronts. The current phase of protectionist activity – involving the USA, China and Turkey, among others – impacted the scrap markets by altering flows of material, thus underlining once again the ability of our scrap industry to adapt to ever- changing circumstances beyond its control.
It has become something of a truism to state that our industry’s course through any new year is difficult to predict because of too many unknowns. For 2019, these include: the softness or hardness of Brexit and the nature of the relationship that will exist between the UK and EU member states from late-March onwards; the US/China trading relationship, which has recently shown signs of improvement but which still has the potential to undermine our markets; and the US Federal “shutdown” and other political unknowns that all conspire to create an unsettling environment for businesses.
Discussion of tariffs and other such tools dominated the debate at our two meetings in 2018.
In London last October, Fastmarkets metals analyst Lee Allen argued that the positive steel pricing environment in the USA would persist so long as tariff structures remained in place and that protectionist measures could encourage mills to invest in more modern technology.
Earlier in Barcelona, Jason Schenker of Prestige Economics also reminded us of the need, despite an uncertain economic climate, for the recycling industry to take full account of technological changes. He predicted a significant increase in automation within scrap operations, potentially including driverless trucks and scrap-carrying drones. While this may sound fanciful to some, he provided us with a timely reminder that, throughout the course of recent decades, the lion’s share of the recycling industry spoils has invariably been captured by the most agile businesses that were prepared to push innovation to the limit.
by Tom Bird,
Interim President Ferrous Division 2018