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Scrapyards Project Improvements but Material Prices still a Concern

Recycling center operators project slight increases in scrap metal prices over the coming year.

Ferrous and non-ferrous prices should improve slightly within the next three, six and 12 months, according to respondents to the ScrapyardPRO Scrap Metal Market Outlook.

Respondents continue to worry about the economy and material prices though, and recent reports indicate that their concerns may be justified.

China’s economy, which may be the predominant influencer of scrap prices in today’s global marketplace, grew at its slowest pace (6.9 percent) in 25 years in 2015. “The economy faces relatively big downward pressures,” a Chinese government official said in announcing plans to lay off 1.8 million coal and steel workers, including 500,000 of the latter, at state-owned-enterprises, Reuters reported.

China’s crude steel production decreased by 7.8 percent in January, compared to the same period a year ago, the World Steel Association (worldsteel) reported. Globally, crude steel production declined 7.1 percent in January.

However, reduced output and capacity could help boost scrap metal prices by more closely aligning supply with demand.

What is your forecast for scrap metal prices? Share it with us by completing the ScrapyardPRO Scrap Metal Market Outlook.

02/29/2016

Steel Production Slows in 1st Half

Crude steel production was flat in June and down -1.9 percent in the first six months of 2016, the World Steel Association (worldsteel) reported in its most recent steel production update.

First-half production increased by 0.6 percent in the Commonwealth of Independent States (CIS) but declined by:

  • -0.6 percent in North America;
  • -1.0 percent in Asia;
  • -3.2 percent in the Middle East;
  • -6.1 percent in the European Union (EU); and
  • -13.8 percent in South America.

In June, production increased by 1.4 percent in Asia but declined by:

  • -0.6 percent in the CIS;
  • -1.2 percent in North America;
  • -3.0 percent in the Middle East;
  • -5.3 percent in the EU; and
  • -11.1 percent in South America.

China produced 69.5 million tonnes (Mt) of crude steel in June, 1.7 percent more than a year ago. But its first-half production was down by 1.1 percent.

“The economic environment facing the steel industry continues to be challenging with China’s slowdown impacting globally across a range of indicators contributing to volatility in financial markets, sluggish growth in global trade and low oil and other commodity prices,” worldsteel Economics Committee Chairman stated in a press release announcing the organization’s Short Range Outlook (2016-2017). “The global steel market is suffering from insufficient investment expenditure and continued weakness in the manufacturing sector.

Demand will contract in China in 2016 and 2017 but is projected to increase in all other markets next year, according to worldsteel’s projections. Worldsteel has proposed key principles for excess capacity and structural adjustment in the steel sector, including removing barriers to efficient mergers. The association’s members represent approximately 85 percent of the world’s steel production.

What is your steel market forecast? Click here to take our Scrap Market Outlook Survey.

Photo courtesy of worldsteel.

07/29/2016

Aluminum Overcapacity Targeted

U.S. Sens. Rob Portman (R-OH) and Sherrod Brown (D-OH) have urged the U.S. Trade Representative (USTR) to bring a World Trade Organization (WTO) case against China in an effort to address aluminum overcapacity.

“Exponential growth in China’s aluminum sector, fueled by heavily subsidized, government-directed lending, has had significant implications for the U.S. aluminum industry,” contributing to the loss of 15,000 aluminum production jobs in the past decade, including 1,500 this year alone, the senators wrote to USTR Ambassador Michael Froman on Oct. 21, according to a jointly issued press release.

 “China has unfairly subsidized its aluminum industry – it’s not competing, it’s cheating,” Brown stated in the release. “Enforcing our trade laws will ensure that U.S. aluminum manufacturers, the best in the world, have the opportunity to compete on a level playing field.”

Each year since 2008, China has increased capacity and production beyond what its domestic market demands, prompting a 35 percent drop in global aluminum prices, according to the letter to Froman. “With significant government support, Chinese companies are allowed to operate at losses or otherwise independent from market considerations,” the senators wrote.

A panel of recycling industry representatives addressed concerns about the aluminum market, including the “significant decline in aluminum scrap activity,” at the ISRI Commodities Roundtable 2016 in September, Recycling Today reported in a story about how aluminum struggles with overcapacity.

Panelists shared steps that scrap metal recyclers could take to lessen their exposure to the volatility in the aluminum markets as well as forecasts of market conditions. Though long-term issues remain, aluminum scrap prices could get a short-term boost if inclement weather causes shortages and auto shredders scale back operations as ferrous prices decline, panelists said.


Photo by JAXPORT

10/31/2016

Steel Market Forecast 2017

The World Steel Association projects that global steel demand will increase by 0.5 percent in 2017 to 1,510  million tonnes (Mt).

Demand increased slightly in 2016 but weakness in investment globally is hampering a stronger recovery, worldsteel noted in its steel market forecast for 2017.

Steel demand is projected to decline by -2.0 percent in China in 2017 but will start a moderate recovery in Brazil after two consecutive years of double-digit contraction, according to worldsteel. The association projects demand to expand by 4.0 percent in emerging and developing (excluding China) economies and by 1.1 percent in developed economies.

In 2016, world crude steel production increased by 0.8 percent to 1,628.5 Mt, worldsteel reported in its most recent steel market update.

Annual steel production increased by:

  • 7.0 percent in the Middle East;
  • 2.1 percent in Australia/New Zealand;
  • 1.6 percent in Asia; and
  • 0.8 percent in the CIS.

Production decreased by:

  • -10.6 percent in South America;
  • -4.4 percent in Africa; and
  • -2.3 percent in the EU.

North American production remained flat from 2015 to 2016 while the US produced -0.3 percent less than in 2015, worldsteel reported. China’s annual output rose by 1.2 percent and its share of world crude steel production increased from 49.4 percent in 2015 to 49.6 percent in 2016.

In December 2016, crude steel production increased by 5.5 percent compared to the previous year. The crude steel capacity utilization ratio of the 66 countries that reported to worldsteel was 68.1 percent in December, 2.8 percentage points higher than in the same period a year ago. The average capacity utilization in 2016 was 69.3 percent compared to 69.7 percent in 2015, according to worldsteel.

Iron ore prices of $80/ton in December were nearly double those of a year earlier, due partially to strong steel demand in China, according to a January 2017 Commodity Markets Outlook from World Bank. “However, prices softened into January, with China’s inventories rising and seasonal demand expected to weaken,” researchers wrote.

World Bank researchers also noted that iron ore exports from Australia and Brazil hit record levels in November and that new low-cost capacity is expected online this year. “These considerations, along with rising scrap supply and an expected slowdown in China’s steel production, are expected to pressure prices downward and force high-cost production to close. Key uncertainties are the strength of steel demand and iron ore production in China,” according to the World Bank report.

Uncertainty related to government measures meant to stabilize China’s decelerating economy will continue to weigh on the steel market, according to a January 2017 Steel Industry Stock Outlook by Zacks Equity Research. “Although the steel industry will remain under pressure for some time, it is certainly expected to grow thereafter on the back of the automotive and construction industries,” Zacks reported.


What is your steel market forecast for 2017? Complete our
Scrap Metal Market Outlook.


Photo courtesy of worldsteel.

01/31/2017

Steel Production Starts Strong

Steel production has surged in early 2017.

Domestic raw steel production was up 4.7 percent for the year-to-date through Feb. 25, according to American Iron and Steel Institute statistics. Capacity utilization was at 73.0 percent compared with 70.8 percent a year ago.

World crude steel production increased 7.0 percent to 136.5 million tonnes (Mt) in January from the same period in 2016, the World Steel Association (worldsteel) reported. A 7.4 percent increase in production in China contributed to the sharp rise overall. Researchers attributed the improvement in China largely to the fact that there was a “marked dip” in production in January 2016.

The U.S. produced 6.5 percent more (6.9 MT) of crude steel in January than it did last year.


Steel production increased by:

  • 15.6 percent in Africa;
  • 13.5 percent in the Middle East;
  • 11.6 percent in South America;
  • 11.5 percent in Other Europe countries;
  • 11.4 percent in the Commonwealth of Independent States (CIS);
  • 7.1 percent in Asia;
  • 6.2 percent in Oceania;
  • 4.0 percent in North America; and
  • 2.4 percent in the European Union.


Production did not decrease in any of the regions tracked by worldsteel. Capacity utilization among the 67 countries that report to the organization was 68.5 percent in January, which was 3.4 percentage points higher than a year ago and 0.9 of a percentage point more than in December.


Photo courtesy of worldsteel.

02/28/2017

Steel Production Keeps Increasing

Steel production remains strong domestically and abroad.

Domestic raw steel production was up 4.4 percent for the year-to-date through March 25, according to American Iron and Steel Institute statistics. Capability utilization was at 73.4 percent compared with 71.3 percent a year ago.

World crude steel production increased 4.1 percent to 126.6 million tonnes (Mt) in February from the same period in 2016, the World Steel Association (worldsteel) reported. A 4.6 percent increase in production in China contributed to the overall increase. 

The US produced -1.0 percent less, 6.4 Mt in total, of crude steel in February than it did last year. There were 29 days in February 2016.

Steel production increased by:

  • 24.7 percent in Oceania;
  • 18.2 percent in Africa;
  • 15.8 percent in Other Europe countries;
  • 5.7 percent in the Middle East;
  • 5.1 percent in Asia; and
  • 1.5 percent in South America.

Steel production was flat (0.0 percent) in the Commonwealth of Independent States (CIS) and North America. It decreased by -0.6 percent in the European Union.

Capacity utilization among the 67 countries that report to worldsteel was 70.3 percent in February, which was 4 percentage points higher than a year ago and 1.1 of a percentage point more than in January.

Year-to-date, global steel production was up 5.8 percent through February, worldsteel reported.


Photo courtesy of worldsteel

03/31/2017

China Scrap Ban Looms

China intends to ban certain scrap from being imported, citing environmental concerns.

Recycling industry leaders expect more bans to follow.

The impact of restrictions could be significant for US recyclers because China is the largest receiver of exported scrap commodities.

Scrap organizations are on edge.

On July 18, the Institute of Scrap Recycling Industries stated:

“More than 155,000 direct jobs are supported by the U.S. industry’s export activities, earning an average wage of almost $76,000 and contributing more than $3 billion to federal, state, and local taxes. A ban on imports of scrap commodities into China would be catastrophic to the recycling industry.”

To date, China has told the World Trade Organization that it plans to ban the import of certain scrap materials by the end of 2017, including unsorted mixed paper, most scrap plastics, metal slags, and drosses. Scrap paper accounted for $1.9 billion of the more than $5.6 in scrap commodities that were exported from the United States to China in 2016. Scrap plastics comprised $495 million.

The restrictions that have been announced so far will impact scrap paper more than plastics due to China having already cut back on its import of scrap plastics over the past few years. The exact impact on the US scrap industry is still uncertain but some possibilities or prediction have been made, according to a Waste Dive report on China’s scrap ban surprise.

The US tends to export its scrap because of the lack of technology to optimize sorting and extracting. Without the ability to just send the banned products overseas, companies will have to push for better technology to optimize their extraction levels. Or, companies could choose not to become more efficient. If that were to occur, consumers could be less likely to recycle because prices could drop due to excessive supply of scrap materials that can’t be exported .

In having to adjust and determine where all of the banned scrap will now go, the US may work towards making better use of its scrap. This may be done through using scrap to produce more products or, as  mentioned previously, by finding better ways to extract as much of the resource as possible.

Using recycled materials for production of goods is often cheaper than creating the material new. This mindset could align with the Trump Administration and its plans to bring manufacturing jobs back to the US. There already have been efforts to start improving the efficiency of recycling and scrapping through the use of technology. This is accomplished by producing machines and processes that allow for more of a material to be extracted from scrap.

One of the worries about the restrictions that China is initiating is that other scrap may be banned as well. This was confirmed shortly after China released the details on its ban on plastics, mixed paper, and other materials.

China has mentioned that it also plans on banning wire, motors, and some bulk metal scrap in 2018, Reuters reported. One of the wires that will be banned is copper wire. This news sent the price of copper up with an increase of 5% per tonne in some places.

Additional news:

Waste Dive: What comes next after China’s Scrap Ban Surprise?

Reuters: China reviewing copper scrap imports; may call halt in 2018: notice

Institute of Scrap Recycling Industries: ISRI Statement on China's Intent to Ban Certain Scrap Imports

07/27/2017

Hurricanes Disrupt Scrap Supply

The bigger the disaster, the bigger its effects on the scrap industry.

When homes are destroyed, buildings damaged and automobiles wrecked, massive amounts of materials are extracted and the demand for rebuilding supplies surges. Typically, the demand for materials exceeds the supply extracted from the damaged areas.

The U.S. scrap industry has been greatly impacted in recent months as two major hurricanes have hit southern states. Hurricane Harvey hit Texas and surrounding states. Then Hurricane Irma struck Florida and Georgia.

The extensive damage wrought by the hurricanes caused large shifts in supply and demand for materials, like previous storms have done. But the economic impact of the storms was compounded by where they hit.

Hurricane Harvey was particularly powerful in Houston, whose port handled roughly 68% of Gulf Coast container traffic in 2016, according to MetalMiner. Since January 2017, 40% of iron and steel pipe and tube imports had come into the Port of Houston. Container ships were diverted and trade was effected when the port was closed during the storm.

Also, because it struck Houston, in addition to its impact on logistics Hurricane Harvey had an outsized effect on the rebuilding process, which usually drives the scrap economy after a disaster. Typically, when a major storm hits a highly populated area the first grades of scrap to come out are light iron and shreddables, scrap dealers stated in an S&P Global Platt’s article on the storm’s impact on steel scrap. Then come automobiles, non-ferrous grade scrap, and heavy steel.

Despite the large volume of resources that are extracted from the storm, there is still a deficit.  More materials are needed to rebuild than are being extracted from the damage. This combined with the fact that Houston has been the largest market for newly constructed homes means that the demand for materials will surge once rebuilding begins.

Scrap prices were already projected to be bullish in October. With increasing demand due to the large amount of materials that will be needed for rebuilding , the impact of the recent hurricanes should support these projections.


09/29/2017

Flooding Impacts Auto Market

Automotive recyclers and salvage yards may be deluged by vehicles damaged by the hurricanes that have hit southern states in recent months.

Massive flooding in Houston and surrounding areas hit by Hurricane Harvey caused widespread damage to vehicles.

Cox Automotive estimates that 300,000 to 500,000 cars were damaged, according to a Steel Market Update report on hurricanes’ effects on auto scrap markets. Some vehicles will be repaired while others will be salvaged.

Both repaired and scrapped vehicles impact the salvage yard market. Typically when a vehicle is repaired, recycled parts will be used when a brand new part is not needed. The percentage of recycled parts used increases as vehicles age. For instance, a 4-6-year-old car being repaired uses 59% non-OE parts, including recycled ones.

Cox Automotive estimates that 20 percent of the damaged vehicles will be repaired and that the others will be replaced. This means that around 20 percent of the vehicles will require some recycled parts and that 80 percent of vehicles will be up for auction for salvage yards, which could remove all useable useful parts.

The automotive industry as a whole is expected to take a hit due to the massive number of damaged vehicles that were either at dealerships or warehouses. This means that the people who have damaged cars now also have a tough time getting a new car because the local car dealerships are often impacted the same. The effect will be particularly acute given that Texas is the nation’s second-largest market.

However, it is projected that the industry will end up with positive growth due to the massive number of vehicles that will need to be purchased or repaired. Texans account for 9 percent of the vehicles sold retail in the U.S, according to a Detroit News article on how the auto industry feels Harvey’s impact. They also account for 14 percent of full-size pickup sales.

One Houston-based dealership experienced 700 calls over a few days from people who needed to bring their damaged vehicles in for repair. The automotive industry will likely see a similar boom that happened after Hurricane Sandy hit the Northeast. Car sales spiked 49 percent in the month after Sandy. That surge lasted two months.

Repairs and replacements could continue to drive the industry in fast-growing Houston, which is one of the nation’s largest home-building markets.


09/29/2017

Nonferrous Exports Surging

See full chart
Exports of nonferrous scrap have boomed this year.

Nickel, copper, and aluminum have been particularly strong.

Nickel exports were 31% higher through the first eight months of 2017 than in the same period a year ago. The nickel waste exported totaled $80.5 million through August of this year compared to $61.4 million in 2016. A majority of the nickel was exported to Canada and went through the Buffalo customs district.

Copper exports surged by 20% through August. A total of $1.74 billion was exported in 2017 compared to $1.45 billion in 2016. The largest importer of copper was China, which accounted for $1.053 billion. This amount was 21% higher than the same period in 2016.

Aluminum exports also rose over the first eight months of 2017, increasing by 16% from a year ago. Exports increased by $190 million, from $1.20 billion in 2016 to $1.39 billion in 2017. China also was the largest receiver of the imported aluminum with a total value of $724.7 million. This accounted for more than half of the total US shipments.







10/27/2017

Nickel Prices Fluctuating

See full chart
The steady increase in global demand for stainless steel scrap has not been reflected in the price of nickel.

Given that nickel is used in making stainless steel, an overabundance of the former being mined in Asia has affected its price.

The price of nickel was great in early December 2016, fetching $11,675 per metric ton at its peak. At the beginning of 2017 however, the prices were strong but had declined to $9,375 by the end of January. The price continued to decline until around early July. Prices rose until early September before dropping again. The price stood at $11,665 as of Oct. 17.

Why has the price fluctuated so much?

At the ISRI2017 convention in New Orleans in April, Joe Pickard who is the chief economist and director of commodities at ISRI spoke about the flows of nickel and stainless steel.

The flow of nickel closely correlates to the price of nickel, Pickard said. The more that nickel flows, the better the prices are. Recent price drops stem from China’s decrease in scrap imports. China’s share of the global import market for stainless steel has dropped to 6% but it still has a major influence on the industry and price.

Historically China imported large amounts of stainless steel scrap from the US. But it has recently started getting more of its materials through nearby countries in Asia or from mines that produce nickel. The overabundance of nickel has led to China choosing to produce new over recycling old.

On top of that, China is also importing more nickel pig iron from Indonesia and the Philippines. The acting secretary of the Department of Environment and Natural Resources in the Philippines, Regina Lopez, had been holding China back.

Lopez had ordered 28 of the 41 mining companies in the Philippines to shut down earlier in the year due to alleged violations of environmental regulations. When her confirmation to become the official secretary got rejected, the price of nickel dropped right after.

The price of nickel has rebounded despite the increased production from mines.

As far as stainless scrap goes, market leaders have a somewhat optimistic outlook given that the demand for stainless scrap is high. They say that the US market is still aggressive but will face some major challenges through the rest of 2017.


10/27/2017

China eases scrap ban

China’s recent announcement that it will not be as strict in banning scrap materials as it once indicated has not resolved the recycling industry’s concerns.

Officials still worry that the tightening of scrap supplies to China could affect the industry worldwide.

China’s move to ban or reduce its paper and plastic imports in the upcoming years remains a major concern among scrapyard and recycling centers because the country has long been a primary consumer of  such supplies.

Citing environmental concerns, China announced in August that it would not accept certain materials if they exceeded a proposed 0.3% threshold for contamination. This was a large change given that the limit was previously 1.5%. Furthermore, industry experts  viewed the proposed target as  impossible to achieve.

Though China still plans to reduce the amount of harmful waste that enters the country and to tighten the laws around scrap imports, it has indicated that it would raise the proposed threshold from 0.3% to as much as 1%, according to a mid-November response to China’s proposed contaminants threshold from the Institute of Scrap Recycling Industries (ISRI).

As of Nov. 16, the following standards would apply to shipments arriving in China on or after March 1, 2018, according to ISRI.

  • Smelt Slag                    0.5%

  • Wood                            0.5%

  • Paper                            0.5%

  • Ferrous                         0.5%

  • Nonferrous                    1.0%

  • Electric Motors              0.5%

  • Wires and Cables               0.5%

  • Metal and Appliances    0.5%

  • Vessels                            0.05%

  • Plastic                              0.5%

  • Autos                               0.3%

Though the higher thresholds were good news for the industry, officials remain frustrated over the large decrease in prices that resulted from China's original plan.

“China’s proposed ‘carried waste’ thresholds that, like their earlier proposals, are not in line with standards followed globally by the recycling community and our industrial consumers,” ISRI President Robin Wiener said.

“Although ISRI is heartened that the new proposal moves away from the 0.3% threshold, the new levels are still of great concern. ISRI is reviewing the documents carefully and will submit comments through the WTO and directly to the Chinese Government.”

The industry standard for contamination of paper entering China has been 1% to 5% depending on the grade. This standard was created through the collective efforts of the recycling community as well as a reflection of manufacturing standards. Officials say that China should adhere to these standards and not enact such a strict stance on the 1%.

Looking ahead, industry leaders will focus on how China enforces its new rules. Currently, there are containers that arrive in China that do not meet the current standards and will definitely not meet the future ones.

China is phasing out its small paper mills and putting more effort towards large ones as well, Recyling Today reported in an article about the country dialing back contamination restrictions.  It has announced that Chinese mills with capacities less than 300,000 metric tons per year will not be issued import permits next year. Also, only companies that process scrap will be allowed to receive a permit, which eliminates any type of broker or middleman.


11/30/2017

Tax Reform May Help Recyclers

Recyclers could benefit from the tax reform bill that has been signed by President Donald Trump.

The reforms include a reduction in the corporate tax rate as well as changes in how certain types of income and expenses are handled.

Legislators lowered the corporate tax rate to 21 percent from 35 percent. They also reduced the amount of taxes that non-corporations, such as partnerships, would pay as pass-through companies.

Additional takeaways for the recycling industry include the following, according to Resource Recycling.

  • Immediate and full expensing is allowed on qualified equipment purchases from Sept. 2017 through 2013 before expensing allowance gradually phases out in subsequent years. Certain recycling industry equipment should qualify, according to the Institute of Scrap Recycling Industries (ISRI).

  • Cap for deducting qualified asset purchases by small businesses is doubled to $1 million.

  • Corporate alternative minimum tax is repealed.

  • Tax-exempt private activity bonds remain. Recycling facilities often use such bonds for qualifying capital investments, Resource Recycling reported.

The House and the Senate approved the tax bill on Dec. 19 and President Trump signed it on Dec. 22. You can click here to read the Tax Cuts and Jobs Act

12/27/2017

Mutilated Coin Program to Resume

Recyclers will once again be able to make money by redeeming recovered coins.

The U.S. Mint is relaunching its Mutilated Coin Redemption Program after a two-year hiatus.

The Mint suspended the program in November 2015 due to counterfeiting fears. Recycling industry officials have since pushed for its return.

“The resumption of the U.S. Mint’s Mutilated Coin Program is a significant victory for the many recyclers that rely on the recovery of coins as part of their business,” Robin Wiener, president of the Institute of Scrap Recycling Industries (ISRI), stated in a press release hailing the program’s resumption.

“ISRI is extremely grateful to the Mint, which worked closely with the industry to better understand the sorting and separating technologies used in scrap facilities, global trade flows, and other critical issues that will allow it to effectively implement this program.”

The program is worth millions of dollars annually to the recycling industry, according to ISRI. Recycling facilities have been recovering coins, like loose change left in cars or money from vending machines and coin-operated laundry machines, for decades. Advances in technology have made it even easier to recover large amounts of coins, thereby increasing the importance of the mutilated coin program.

“The recycling industry is committed to working closely with the Mint on the success of this program,” Wiener said. “We share the common goal of the recovery and recycling of coins while protecting the integrity of the program.”

The Mint formally announced the program’s return in the Federal Register on Dec. 20. It also set certification procedures for program participants and revised the redemption rates for U.S. coins based on denomination and composition.

Recyclers and others who submit coins for redemption will receive $1.81 per pound for copper-plated zinc coins, Coin World reported in an article about the mutilated coin redemption program. The Mint will pay $1.4585 per pound for cents or mixed submissions of both bronze and copper-plated zinc cents.

Coin World also reported that the Mint announced it would not accept fused coins and “‘will also not accept mixed coins (coins of several alloy categories presented together) for redemption, with the exception of bent or partial one-cent coins and $1 coins that are presented in mixed years.’”  

Some estimates have put the value of lost coins in the U.S. at more than $60 million per year, Waste Dive reported, calling the resumption of the mutilated coin program “a welcome piece of news for companies that are constantly looking for ways to maximize value from the resources they're processing.

No official date has been announced for the mutilated coin program’s resumption. Click here to read the final rules in the Federal Register.

 

12/27/2017

2018 Steel Market Forecast

The World Steel Association projects that global steel demand will increase by 1.6 percent in 2018 to 1,648.1 million tonnes (Mt).

Demand increased by 2.8 percent in 2017,worldsteel noted in its steel market forecast for 2017.

Progress in the global steel market this year to date has been encouraging,” T.V. Narendran, Chairman of the worldsteel Economics Committee, said. “We have seen the cyclical upturn broadening and firming throughout the year, leading to better than expected performances for both developed and developing economies, although the MENA region and Turkey have been an exception.”

Statistically, the global steel market has been affected by the closure of most of China’s outdated induction furnaces in 2017. Such furnaces generally were not captured in official statistics but with their closure the demand from this sector of the market is now satisfied by mainstream steel makers and therefore captured in the officials statistics for 2017, worldsteel explained.

Consequently, the nominal growth rate for steel demand in China increased to 12.4 percent or 765.7 Mt, researchers noted. Disregarding this statistical base effect worldsteel expects that the underlying growth rate of China’s steel demand for 2017 will be 3 percent, which will make the corresponding global growth rate 2.8 percent, according to worldsteel’s short-range outlook.

“In 2018, we expect global growth to moderate, mainly due to slower growth in China, while in the rest of the world, steel demand will continue to maintain its current momentum,” Narendran said.
 
“So, world steel demand is recovering well, driven largely by cyclical factors rather than structural. The lack of a strong growth engine to replace China and a long term decline in steel intensity due to technological and environmental factors will continue to weigh on steel demand in the future.”

 

What is your steel market forecast for 2018? Share it with us through comments or complete our Scrap Metal Market Outlook.


Images courtesy of worldsteel



12/28/2017

Trump Gets Aluminum Report

President Donald Trump has three months to determine how far he will go to protect U.S. aluminum producers.

Trump could levy tariffs or impose quotas if he were to determine that doing so would be in the interest of national security.

Federal investigators for the Department of Commerce submitted the results of a nine-month probe into aluminum imports to the White House on Jan. 19. Trump has 90 days from then to act.

The Aluminum Association urged the president to adhere to four principles in any remedial actions that he might take.

  • Address Chinese overcapacity

  • Not interfere with relationships with critical trading partner countries, including Canada and the European Union

  • Help domestic producers and fabricators

  • Adopt a monitoring system for imports

“We expect that the report will recognize the significant role the aluminum industry plays in ensuring our nation’s security and welcome the opportunity to engage the administration on an appropriate remedy that will benefit the entire aluminum value chain,” Aluminum Association President & CEO Heidi Brock said, in the trade group’s response to the Section 232 Report on aluminum imports being submitted to Trump.

Investigators began probing aluminum imports in April 2017 to determine if they posed a threat to national security.

Though Trump has promised to protect aluminum workers from imports, particularly from Chinese overcapacity, some pro-business officials in the administration are urging restraint to avoid a run-up in metal prices or disruptions to U.S. allies, Reuters reported in an article on the aluminum probe findings

“Critics say using national security to erect steel and aluminum tariffs could trigger a trade war with China, undermine the global rules-based trading system and hurt America’s friends more than China, as well as damage global growth prospects,” David Lawder wrote for Reuters.

A Bloomberg article on the aluminum study reported, “Beijing has pushed back against U.S. talk of raising trade barriers, while many American manufacturers and metal producers have urged the White House to step in on their behalf.”

The U.S. aluminum industry supports 161,000 direct jobs and more than 700,000 jobs when indirect and induced impacts are considered, according to the Aluminum Association. The association estimates that the industry creates $75 billion in direct economic impact and $186 billion in total impact annually, around 1 percent of U.S. GDP.


Image Property of Alcoa, Courtesy of The International Aluminum Institute



01/24/2018

China’s Plastic Imports Shrink

China is projected to import less than 1 percent of the scrap plastic that it did in the first quarter a year ago.

In issuing its first round of import permits for 2018, China established a total limit of 9,335 tons of scrap plastic, which was 99 percent less than the 3.9 million tons authorized in the initial permits for last year.

China also implemented new thresholds for contaminants as of Jan. 1, lowering the limit for plastics to 0.5 percent. The corresponding drop in demand has delivered a massive shock to the scrap industry.

In previous years, 85 percent of plastics collected in the EU, 95 percent of plastics collected in Ireland and almost 16 millions tons of materials from the US were sent to China, according to Customs Today. Businesses have lost revenue and cut jobs as China’s waste import ban has upended the global recycling industry, the newspaper reported.

China is limiting imports in an effort to protect its environment. It hopes to replace imports with domestic materials and to improve its own recycling as well.

But one of the biggest arguments against China’s new rules is that they will hurt the environment rather than help it because the standards are extremely high. Affected materials are less likely to be recycled if they cannot be imported, some experts argue. Materials that aren’t recycled will be thrown away instead.

In the US, mountains of plastics are sitting at recycling centers with nowhere to go. Or, plastics are being sent to the landfill instead of being recycled, Recycling Today reported.

“While increasing the volume of exports to Southeast Asian countries, India, and others, apart from raising domestic recycling and reuse, the low-end plastic items still have no alternative outlet other than landfills and incineration in [many] exporting countries,” Steve Wong, president of the China Scrap Plastic Association (CSPA), wrote in an email to members, according to a Recycling Today article about how China plastic scrap imports have disappeared.

“This is very concerning, as the capacity of [domestic recycling and waste destinations] in many exporting countries such as the United Kingdom, Germany, the United States and Japan, is not capable of handling the increased volume yet.”

The scrap industry also has complained that China has not allowed enough time to react to new laws, nor for the country to do so itself.  Countries that were relying on the massive amounts of exports to China are now having to export to other countries or to improve local recycling manufacturing.

China itself reportedly faces a supply gap of 5 million tons of plastic scrap, according to a Resource Recycling story on where exports displaced from China are finding a home.


Scrap imports are surging elsewhere in Asia in the meantime. Materials are being sent to Southeast Asian processors that create pellets which will then be sent to China. Other countries such as India, Thailand, and Vietnam have all significantly increased the amount of scrap plastic they import.

Though this will help offset the massive surplus of plastic scrap, there still needs to be a larger fix globally to combat the issue. Scrap plastic exporters will face an uphill battle over the next few years until the market shifts and local recycling efforts expand enough to account for the supply of materials.


01/29/2018

Aluminum Prices and Scrap Affected by Market Uncertainties


Tariffs. Trade wars. Consumption shifts.


All raise questions about the long-term direction of aluminum prices.


At $2,011 per ton, the London Metal Exchange price for aluminum was 10.8 percent less at the end of September than it was at the start of January. It had been as low as $1,966 per ton on June 4 and as high as $2,597.50 per ton on April 19.


Uncertainty has mounted as tariffs have been imposed, trade wars have arisen and manufacturers have shifted from primary aluminum to scrap.


North American Tariffs

Most recently, negotiators did not remove the Section 232 tariffs that the U.S. has levied on aluminum from Canada and Mexico when agreeing to terms for the United

States-Mexico-Canada Agreement (USMCA) on Sept. 30. USMCA will replace the North American Free Trade Agreement (NAFTA), pending approval by legislators in all three countries within 60 days.


The Aluminum Association was disappointed that there was no 232 tariffs resolution in USMCA and that the tariffs on imports from Canada and Mexico remain in effect.


Creating barriers within the North American supply chain threatens U.S. growth and investment, association officials say. “Fully 97 percent of domestic aluminum industry jobs are in mid-and-downstream production and processing,” Aluminum Association president and CEO Heidi Brock stated in a release.


“By artificially raising input prices and constraining metal supply, tariffs and quotas risk harming demand, growth and investment in the United States. We will continue to review the specifics of the agreement and work towards tariff- and quota-free trade of aluminum with our North American trading partners.”  


The “232 tariffs” were named for Section 232 of the Trade Expansion Act of 1962, which lets the U.S. president restrict imports for national security. President Donald Trump used Section 232 to impose aluminum and steel tariffs earlier this year. Canada has since countered with tariffs of its own.


“Eighty-four percent of aluminum produced in Canada, or 2.5 million metric tons, is exported to the U.S. each year, meaning the 10 percent tariff imposed by the Trump administration poses a significant threat to the Canadian industry,” according to a Bloomberg article on how with NAFTA renewed focus shifts to aluminum and steel tariffs.


Officials from Canada and Mexico will push to remove the tariffs before the USMCA agreement is signed, Bloomberg reported, and the U.S. seems willing to negotiate.


U.S.-China Trade War

Aluminum also has been caught in the trade war between the U.S. and China, according to an ALCircle article on how China’s revised 50 percent tariff on U.S. aluminum scrap to continues to hit the US scrap industry.


“The penalties are China’s latest blow to the U.S. recycling sector, after Beijing hit aluminum scrap with huge retaliatory tariffs in April as part of the trade dispute. Aluminum scrap grouped as UBC and non-UBC for pricing purposes —has been particularly affected by ongoing trade wars and sanctions,” ALCircle reported.


U.S. scrap exports to China decreased 24 percent to a total of $2.2 billion in the first six months of 2018, according to ALCircle. That was even before China increased the total tariff on aluminum exports from the U.S. from 25 percent to 50 percent on Aug. 23.


China also has tightened quality standards for imported materials to protect its environment. In seeking alternative buyers outside of China, the U.S. has become the second-largest exporter of scrap aluminum to Thailand, S&P Global Platts reported.


Changes in Consumption

Scrap aluminum is being used more in the U.S. as well.


“Our aluminum industry historically has been primary-driven. That has shifted. In the U.S., we’re [now] a scrap-based industry,” John Weritz, vice president of standards and technology for The Aluminum Association said while speaking at a recent event held by the Institute of Scrap Recycling Industries (ISRI), according to a WasteDive article about how China and tariffs are forcing market changes.


WasteDive reported: “As such, groups like The Aluminum Association and ISRI seek solutions to questions such as, ‘How do we find new applications for that scrap? How do we maintain the value of that scrap?, said Weritz. Answers to those questions gain extra significance and urgency during times of market difficulty and uncertainty.”



Uncertainty will linger at least until issues like tariffs, trade wars and consumption changes continue. All probably will last a while longer.



Photo Courtesy of The International Aluminum Association

10/03/2018

Progress in U.S.-China Trade War May Help Copper Prices

President Donald Trump’s decision to delay an increase in tariffs on Chinese exports could indicate that the end of a trade dispute that has disrupted the scrap industry may be nearing.


A deal could help copper prices, which have struggled as the U.S. and China have exchanged tariffs in a year-long trade war.


The U.S. had planned to raise tariffs on $200 billion of Chinese goods from 10 percent to 25 percent on March 2. But the Office of the U.S. Trade Representative announced on Feb. 27 that the increase would be suspended indefinitely, thereby confirming a delay that Trump had first indicated was possible on Feb. 24, citing progress in trade talks.


According to Reuters, on Feb. 25, the three-month price of copper reached $6,516.50 per ton, its highest since July 4, 2018, Recycling Today reported in an article on how the copper price strengthened on positive China-U.S. talks.


U.S. exports of copper to other countries, like India, Japan, Malaysia and South Korea, have increased as China has tightened restrictions on imports, Institute of Scrap Recycling Industries economist Joe Pickard wrote in a recent summary of commodity news.


Total U.S. scrap exports to China decreased 37 percent, or by $1.9 billion, to $3.3 billion for the first 11 months of 2018, according to Pickard. U.S. scrap exports to countries other than China increased 13 percent, or by $2.5 billion, to $18.7 billion during that same period.


On Feb. 27, U.S. Trade Representative Robert Lighthizer told members of Congress that any deal that the administration reaches with China would not need congressional approval, unlike traditional free trade agreements, according to a CNN article on the U.S.-China trade war tariffs. “Instead, the scope of the agreement will focus on unfair trading practices specified in the Trump administration's Section 301 investigation, which provided the basis for imposing tariffs last year.”


03/01/2019

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