Let me first put on record how immensely honoured I feel to have been elected President of the BIR Ferrous Division and how committed I am to carrying on the excellent work of my predecessor Greg Schnitzer, who steered the ship through one of the most challenging periods in the ferrous scrap sector’s history.
One of the advantages of following in a long line of skilled Presidents is that I inherit many highly impressive initiatives from their time in office. This includes the quarterly “World Steel Recycling in Figures” analysis (compiled by our esteemed Statistics Advisor Rolf Willeke) which, for more than a decade, has enabled us to quantify the contribution of our industry to more sustainable iron and steel production around the world.
According to the two most recent analyses at the time of writing this report, steel scrap usage growth slowed as we headed into the second half of last year after a rampaging opening two quarters. Most notably, China’s steel scrap consumption soared 47.1% in the first six months of 2021 whereas, year on year, the country’s usage was only 18% higher by the end of the third quarter.
On the upside, it should be added that higher scrap use is now part of China’s DNA as it bids to limit CO2 emissions from crude steel production. The nation’s scrap ratio is still well below those of, for example, the USA and many European countries, and so there remains plenty of scope for further growth.
This deceleration in global scrap usage growth reflects a year of two halves for steel output. According to the World Steel Association (WSA), the global crude steel production total of 1.004 billion tonnes for the first half of 2021 was an impressive 14.4% higher than in the corresponding period of 2020 which, of course, was more badly affected by COVID-related restrictions on industry, travel and other aspects of normal daily life. Double-digit percentage increases were recorded every month for the entire March-to-June period, with the peak coming in April when crude steel production was an astonishing 23.3% above that of the same month in 2020.
By the middle of 2021, however, this growth was starting to lose its momentum, to the extent that world steel production in the second half of the year was almost 100 million tonnes lower than in the first six months. China, of course, was a major factor: having produced 563.3 million tonnes in first half of 2021 (up 11.8% year on year), this dropped to 469.5 million tonnes in the second half to give a production total that, for the year as a whole, was 3% down on 2020.
So what can we expect for the balance of 2022? The WSA’s outlook published last October projected that a global steel demand spike of 4.5% in 2021 would be trimmed to a 2.2% increase this year, with no growth at all anticipated in China given the combination of its renewed environmental focus and depressed real estate sector.
Orders for steel, and thus for scrap, were always likely to lose some of their impetus once the pent-up demand created by the pandemic had been largely satisfied. In looking ahead, however, we have ample reason to believe in a bright future for scrap usage. At our BIR Ferrous Division webinar last November, McKinsey & Company’s Senior Knowledge Expert Dr Steven Vercammen argued very persuasively that the global imperative to reduce carbon emissions would create a major opportunity to grow the scrap share of crude steelmaking raw materials beyond its current average of around 30% – even to the point of achieving a price disconnect to coking coal and iron ore.
Dr Vercammen contended that China’s scrap consumption had the potential to double over the next 30 years while Lee Allen of Fastmarkets, our guest speaker in May, made note of suggestions that China’s annual imports of ferrous scrap could soar to around 10 million tonnes in the coming years.
And yet there were clouds on the horizon as we entered 2022, including proposed changes to EU shipment regulations that had the potential to heavily restrict exports to many parts of the world. So while the globalized and environmentally-driven demand for ferrous scrap further underlines the importance of free trade, shipping rules are increasing their stranglehold on our industry.
This defies reason and must be challenged at every opportunity.
Construction materials for roads, railways, infrastructure & buildings
Cans & containers
Automobiles & other vehicles
Hardware such as bolts, nuts and screws