Ferrous scrap prices will bounce back in Q4 2017, BIR says
Prices for ferrous scrap are likely to rebound in the fourth quarter of 2017 after global markets weakened during September, according to Tom Bird, a board member in the ferrous division of the Bureau of International Recycling (BIR).
Metal Bulletin’s price assessment for Northern Europe-origin HMS 1&2 (80:20) imported to Turkey reached a peak of $351.42 per tonne cfr on September 7. It then tumbled by more than $56 per tonne to $295 per tonne cfr on September 29.
“Underlying sentiment is still relatively positive and, despite this correction, it is not expected that we will see a continuing negative market,” Bird said.
“Instead, the general consensus is that we will see prices climb back slightly [as we go] into the fourth quarter,” he added.
“Even with the expectation of weaker demand in some regions, and lower steel prices, the global steel industry overall continues to demonstrate positive signals for the remainder of this year,” William Schmiedel, president of the BIR ferrous division, said.
One major driver of the positive steel markets has been the strong demand in end-user sectors, he added.
“In Europe, construction is performing well and the automotive industry continues to expand. This is supportive of steel demand growth, which has caused steel output and imports to grow,” Schmiedel said.
In the USA, there has yet to be any movement arising from the Section 232 investigation into the national security implications of certain imports, and no boost to infrastructure spending from the administration of President Donald Trump.
However, private sector spending on commercial buildings and oil & gas developments increased by 13% and 8% respectively in the first half of 2017, Schmiedel added.
Chinese prices could rise again
Chinese scrap and rebar markets have had a strong summer because of robust construction activity, with Metal Bulletin’s price assessment for domestic rebar in Eastern China moving to its highest level for more than five years on August 25.
Although the markets have softened since then, with a slowdown in construction projects leading to a rise in stock levels, prices could improve again due to the Chinese central government’s policy to restrict steel output in Beijing, Tianjin and 26 other cities, BIR said.
“Mandates will be enforced [for mills] to maintain steel utilisation rates below 50% between November 15 and March 15,” BIR said.
“This may prompt some mills to increase production levels before the policy comes into effect, with the intention of minimising production disruptions in the latter months of the year. It may also encourage more price increases in future,” according to the BIR.
Government-enforced shutdowns of induction furnaces and “illegal steel mills” in China, as well as pollution control measures, have led to higher steel prices in the country and a year-on-year drop of 29% in the country’s steel export volumes from January to August 2017, according to Schmiedel.
Despite capacity closures in China, Hebei-based Xinji Aosen Iron & Steel plans to start up 1.40 million-tpy of wire rod capacity in the middle of next year, according to German equipment supplier SMS Group.