In his presentation at the SteelOrbis Spring '11 Conference & 64rd IREPAS Meeting held in Hong Kong, Ved Prakash from Gemini Corporation NV said that the scrap market in the post-crisis period has started to gain momentum in line with the increase in world steel production. Mr. Prakash told attendees that world scrap consumption is projected to reach 631.5 million mt by 2015.
Assessing the world scrap trade, Mr. Prakash said that the US remains by far the largest scrap exporter, with its exports reaching 20.6 million mt in 2010. However, due to the recovery of US steel production, its scrap exports declined by eight percent in 2010 as compared to 2009. According to the figures presented by Mr. Prakash, 62 percent of US scrap exports went to Asian countries last year, down from 72 percent in 2009, while Turkey accounted for 21 percent of US scrap exports, up from 16 percent in 2009. The European Union's scrap exports totaled approximately 20 million mt in 2010, with one third coming from Eastern Europe, where plenty of new steel recycling activity is witnessed, while Japanese scrap exports fell sharply from 9.4 million mt in 2009 to 6.5 million mt in 2010. Mr. Prakash added that, if Japanese demand for construction steel increases due to the reconstruction works, its scrap supply would decrease, causing Chinese and S. Korean scrap buyers to head to the US market.
As regards the world's main scrap importers, Turkey remained the biggest scrap importer in 2010, with 19.1 million mt in 2010, rising by 22 percent from 2009, while Chinese scrap imports dropped from 13.7 million mt in 2009 to 5.8 million mt in 2010, due to its increased domestic scrap consumption.
Analyzing the monthly changes in scrap prices, Mr. Prakash indicated that average monthly price trend sees a change of nine percent on month-on-month basis, whether in an upward or downward direction. Based on the price behavior in the last two years, Mr. Prakash said it can be assumed that, if the steel market behaves as normal, the scrap price band may remain between €325-375/mt ex-yard in 2011.
Remarking that scrap prices are seen to be directly proportional to billet prices, Mr. Prakash also said that steel billet producers can have the possibility to proxy-hedge the price risk of scrap on the London Metal Exchange (LME) platform, where billet price graphs are almost parallel with actual market prices. However, commoditization and indexation of scrap may increase scrap price volatility, instead of reducing it.