Speaking at the BIR World Recycling Convention in London on Friday, the Steel and Iron Statistics Bureau's director of operations, Steve Mackerill, said that demand for scrap would steadily rise towards 2010.
World crude steel production has grown in each of the last five years, he said, to 965 million tonnes last year.
Mr Mackerill predicted that the 277 million tonnes of merchant scrap steel required by world steel mills in 2003 would rise to 292 million tonnes this year, about 318mt in 2005, 326mt in 2006, 336mt in 2007 and 388mt a year by 2010.
But, because finite supplies of scrap would remain fairly constant, he said prices would continue to be high for the foreseeable future. Exports of shredded scrap from Europe alone are likely to be worth 1.25 billion this year.
Other experts agreed with this prediction, with Sims Group's Jeremy Sutcliffe reporting: “Ferrous scrap prices will remain at high levels in the near term, unless there is a dramatic shift in the fundamentals.” But, Mr Sutcliffe warned that increasing oil prices could have consequences for the economic growth in Asia.
Mr Mackerill said that while expectations were of high prices, price volatility could be expected as has been seen this year. In China this year, for example, steelmakers brought imports of scrap steel to a halt until values dropped to the $200 a tonne mark, but when China returned to the market prices went straight back up to the $300 a tonne mark.
In the UK, the increases in the price of steel could mean increases in the prices local authorities or private sector companies have to pay for new vehicles. But, with prices of scrap remaining high, the UK's problem with abandoned vehicles will remain minimal.
Demand
The demand for scrap is being driven by the increasing use of electric arc furnaces in steel-making – a system that uses more scrap in the production of new steel than basic oxygen furnaces. Global production of steel in electric furnaces is expected to be 345 million tonnes this year, 25 million tonnes more than in 2003. Countries like India, which has nearly doubled the amount of electric furnace production in four years, are seeing
Main markets for scrap metal are moving away from “traditional” steel producing countries to Asia, with no growth in Europe and no growth in America as well as a decline in steel production in the former Soviet Union. Good markets for scrap would also be found in Poland and Turkey, as well as Brazil and Argentina, Mr Mackerill said.
China
Much of the world growth in steel production has been driven by China, which has seen its production levels quadrupling in the last 15 years, Mr Mackerill said. China's economy is going through the kind of growth seen in Japan in the 1950s and 1960s, but on a much larger scale. The country has become the “workshop of the world”, producing two-thirds of all photocopiers, microwaves, DVD players and digital cameras in the world, he said, with the associated construction and infrastructure developments to go alongside it.
While the globe produced, on average, 8.7% more crude steel in the first nine months of 2004 compared to the same period in 2003, in China production was up a massive 21.6%.
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