Scrap steel demand set to continue, but uncertainty lingers

In an end-of-year report, the International Iron and Steel Institute said world crude steel production stood at 1.05 billion metric tonnes in 2004. This represented an 8.8% increase in production compared to 2003, largely driven by China. Excluding China, the growth on 2003 was 4.5%.

”All we can really predict is that prices will be as volatile as last year. “
– Sandro Giuliani, BIR

The Chinese were by far the largest steel producers in 2004, producing 272.5 million tonnes, with a 23.2% growth on 2003 production figure. China made a quarter of all the steel produced in the world last year.

The next largest steel producers were Japan, producing 112.7 million tonnes (2% up on 2003) and the USA, producing 98.5 million tonnes (5.2% up on 2003). Crude steel production grew in all global regions apart from Oceania, where production fell by 1.4%, the Institute said.

The stainless steel and special alloys committee of the Bureau of International Recycling (BIR) reported that scrap availability was “considerable” in the early part of 2004. But, the committee said this fell steeply in Europe over the past months, “causing some problems for steel industry consumers”.

Favourable
Despite high volatility of scrap prices, the committee's chairman, Sandro Giuliani said 2004 had been “extremely favourable for our sector” because of high levels of demand.

But, he warned that 2005 has begun “against a backdrop of risk and uncertainty” concerning issues including the weakness of the US dollar, oil price volatility and the impact of the tsunami disaster. The issue of scrap availability is also adding to uncertainty this year, Mr Giuliani added.

Commenting on the 2005 market, Mr Giuliani said: “It is difficult to predict prices given the many unquantifiable influences. All we can really predict is that prices will be as volatile as last year.”

The BIR's steel committee chairman said the Chinese government's efforts to cool down its overheated economy would have a “marked impact” on steel markets, suggesting that steel production growth rates in China could drop to 8-10% this year.

Some scrap metal traders have had difficulties with the Chinese authorities over mixed loads, particularly with regard to tighter controls on imports introduced last year. The BIR is putting pressure on China's General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) to clarify registration procedures for importers.