Posted on 05/11/2008 in category Ferrous



Brussels,5 November 2008

BIRAutumn Round-Table Sessions

Düsseldorf,30-31 October 2008


Disturbingmarket conditions and dramatic price cuts

Atthis year’s BIR Spring Convention in Monte-Carlo, there had beenevidence of optimism and even bullishness, according to FerrousDivision President Christian Rubach of Interseroh Hansa RecyclingGmbH of Germany. Nobody had anticipated the subsequent scrap pricefalls of “up to 80%” since the middle of the year, he tolddelegates to the Round-Table meeting in Düsseldorf. The ferrousscrap industry has grown accustomed to market volatility “but notin such dimensions”, he added.

Heexpressed regret that contracts have not been honoured in certaininstances - even by several global players in the steel market. Andin his report on US and international business conditions, BlakeKelley of Sims Metal Management agreed that it has been “disturbing”to see so many attempts by buyers to renegotiate contracts or allegeletter of credit discrepancies.

Scrapcollections have reduced by around 40-50% in response to “dramatic”price cutting while many steel mill and scrap yard purchasers havesimply stopped buying, according to Mr Kelley. “In the meantime,”he added, “everyone in the chain is trying desperately to reduceinventories.”

Ona more positive note, Mr Kelley noted that the favourable cost ofscrap in relation to blast furnace iron is encouraging increasedconsumption of the former among integrated steel producers whilesupporting a more competitive position for electric arc furnacesteelmakers. “The daily rate of apparent purchased scrapconsumption increased 4.6% in September compared to August, reversingtwo consecutive months of decline,” he observed.

Thespeaker also identified “some signs that scrap prices are trying tofirm” although he qualified this comment by adding: “But we needto watch carefully.”

AnotherSims Group expert, Kevin Fitzpatrick of the UK, spoke of the“unprecedented” speed of price declines in his report on the EUferrous scrap market. A 60% drop in scrap demand is anticipated forthe fourth quarter while yard infeed volumes are some 30% lower, headded. According to Roman Genkel of PG Mair in Russia, “pricerenegotiations and overdue payments” have been dominating thedomestic market while crude steel production cuts have averaged25-30% in Russia and 75% in the Ukraine.

Guestspeaker Professor Dr Norbert Walter, Chief Economist at Deutsche BankGroup and Head of Deutsche Bank Research, warned delegates that theworld financial crisis is “far from being over”. And while Asiaas a whole will continue to outperform other markets in terms of GDP,he doubts whether China will return to the 11% growth levels achievedin recent years.

ProfessorWalter also expressed concern that the current crisis may provoke abacklash against capitalism, prompting a move away from globalisationand towards protectionism.

Fellowguest speaker Dr Jost Massenberg, Member of the Executive Board atGerman steelmaker ThyssenKrupp Steel AG, acknowledged that thebusiness climate is currently “delicate” but insisted that hisown company will persist with its longer-term strategy, includingspending Euro 7bn on new projects in Brazil, the USA and Europe. Healso pointed out that raw materials accounted for more than 70% ofThyssenKrupp Steel’s hot-rolled coil production costs in 2007/08compared to 56% in 2003/04.