Posted on 17 Mar 2021
Chinese scrap imports are having little effect on the seaborne market so far due to their low tonnages and specific qualities, but their role will grow in future, said International Rebar Exporters and Producers Association (Irepas) committee members at the association’s virtual meeting this week.
Imports so far have been mostly of Japanese-origin material at small tonnages in order to test customs procedures, Irepas raw materials suppliers committee chairman Jens Björkman said at the meeting attended by Kallanish. Scrap prices elsewhere in the world have been strong since the turn of the year, making imports into China uncompetitive.
Nevertheless, “we will likely see much more import into China going forward that will act like a buoy for the market,” Björkman observed. Over time, China will commission more electric arc furnaces and its domestic scrap generation will grow, with imports used as a means to “cool down” the local market and source quality material lacking in China.
Producers committee chairman Murat Cebecioglu said Chinese imports pose a competitive threat for Turkish scrap importers. On the other hand, Chinese scrap import procedures are very strict, which is likely to dissuade importers from purchasing HMS 1&2 and limit them to premium scrap deals.
When asked if current scrap prices are sustainable, Björkman suggested prices are likely to continue their short-term range-bound swings for the time being. “We’ve had a few periods where market prices have peaked; when prices move up quickly, you also see collection of scrap move up quickly," he said. "If demand doesn’t move in tandem, you have a dip in pricing because of availability.”
Prime grade scrap has its own dynamic, however. Due to quality considerations EAF-based hot rolled coil producers need prime grade scrap as feedstock, or alternatively pig iron. “When a slab producer needs to figure out whether it wants prime grade scrap, he can compare it to pig iron,” Björkman observed, rather than to obsolete scrap prices. Using this logic, scrap is currently substantially undervalued compared to pig iron.
The outlook for prime grade scrap is for increased demand given the growing number of EAF investments, Björkman added.
Source:Kallanish
