China rebound failure, Turkish reconstruction delay dampen scrap

The failure of China’s expected post-zero-Covid demand rebound to materialise, as well as delayed post-earthquake reconstruction in Turkey has dampened previous scrap market optimism, says Bureau of International Recycling (BIR) Ferrous Division president Denis Reuter.

The construction industry in Europe remains the steel industry’s “problem customer”, despite some encouraging news from automotive, after EU suppliers enjoyed strong export markets amid weak domestic demand in the first quarter, according to Reuter.

“There could be no talk of euphoria among steel producers” in Europe in Q1, Reuter says in the latest Ferrous Quarterly Report sent to Kallanish.

Spurred by upward economic growth forecast revisions in early 2023, world market prices for steel rose significantly in Q1, linked both to the tightening of recycled steel supplies and to the sharp rise in iron ore prices.

“However, towards the end of the quarter, the basis for the increase in recycled steel prices became significantly undermined for a number of reasons: the expected revival in Chinese demand did not materialise; the real estate market failed to achieve the hoped-for turnaround; and owing partly to weather conditions as well as buyer restraint, the construction recovery in China was delayed,” Reuter says. “Chinese steel mills, which had significantly increased production in anticipation of an improvement, were forced to sell their steel on the export market.”

“[Post-earthquake] reconstruction in Turkey also stalled following delays caused by the forthcoming parliamentary elections and growing criticism of the pricing policies of Turkish steel mills. Added to this is the continuing devaluation pressure on the Turkish lira which is likely to make it even more difficult for domestic steel mills to import recycled steel,” he adds.

In Europe, in anticipation of further interest rate increases by the European Central Bank, housing construction in particular is likely to fall well short of expectations, Reuter concludes.

Adam Smith Poland