Curbs on EU scrap exports could distort market: German association

The European Commission is currently revising its directive on exports of waste, including scrap metal, and if ferrous scrap exports to third countries are restricted this could distort the market, according to a representative of the Federal Association of German Steel Recycling and Waste Management Companies, or BDSV.

Speaking on a webinar organized this week by European steel distributors and stockholders’ association EUROMETAL, Daniela Entzian, BDSV manager, said that if more ferrous scrap were to be kept in the EU for local use, it is feared this could lead to lower prices within the region, which would reduce the incentive to collect scrap arisings.

Restricting exports from the EU would also impact international markets, as the EU is currently the world’s biggest ferrous scrap exporter, having exported 22.6 million mt of scrap in 2020 to destinations including Turkey, according to statistics from International Recycling Bureau, or BIR, presented by Entzian.

“We’re very concerned about the EC revision,” Entzian told the webinar. “We expect trade bans. With an export tax or ban on scrap exports we wouldn’t have a level playing field with primary raw materials any more….If European traders couldn’t export to Turkey or (other) third countries this would have a negative impact on price levels in Europe. It would be difficult for our member companies to work effectively as sorting and preparation of the raw materials is quite cost-intensive: there would be severe consequences if there were regulation and no free price building.”

Turkey is the world’s biggest importer of ferrous scrap, using it for its growing electric arc furnace-based steelmaking industry. In 2020, it imported 22.4 million mt of scrap, according to BIR’s data.

“Turkey has excellent export conditions for steel at the moment so they will continue to have high demand which is good for scrap prices,” Entzian said. “With low arisings of new scrap due to difficulties in the automotive industry, [scrap] prices may remain stable or rise further in the short term…. But EC trade restrictions would impact prices negatively,” she said.

The EC revision of waste export is based on environmental and not trade considerations, according to Entzian.

The EC did not immediately respond to emailed questions on when the results of the revision may be made public or what their content may be.

Annual use of some 630 million mt of ferrous scrap, a recycled material, in production of 1.9 billion mt of crude steel in 2019 saved emission of around 950 million mt of CO2 that would have been emitted had all steel been produced using virgin materials including coal and iron ore, according to World Steel Association data.

2020 EU market tightness

Scrap scarcity continued to be seen in Europe during second half of 2020 due to earlier COVID-19-related restrictions on collection of arisings and distribution.

Alessandro Sciamarelli, director of market analysis and economic studies at European Steel Association, or Eurofer, told S&P Global Platts in a May 25 interview that given the strong demand and trend toward wider use of scrap in electric arc furnaces in the move toward industry decarbonization by 2050, scrap supply and pricing volatility is not beneficial for the EU steel sector.

“We’ve seen some scrap export restrictions from some neighbouring countries, relevant trade partners, which in Europe we oppose strongly and there are hopes these could all be removed as soon as possible…. We hope the EU waste shipment directive revision will fully acknowledge scrap as a fully recyclable material to be used in steelmaking,” he said.

Consumption of steel scrap in the EU-28 region in 2020 fell to 77.54 million mt, down 10.3% on 2019, according to BIR, virtually in line with an 11.8% fall in crude steel production to 138.79 million mt.

Platts assessed Turkish imports of premium heavy melting scrap 1/2 (80:20) at $515.75/mt CFR May 25, the highest level since the Platts index began in April 2010, before slipping slightly to $512/mt May 26.

China scrap usage to jump

Steel scrap usage is set to grow rapidly in China, amid steel decarbonization moves. BIR figures showed that 220.3 million mt of ferrous scrap was consumed in China in 2020, up from 215.93 million mt the previous year.

Horizon Insights, a Shanghai-based independent research firm, estimated earlier in the week that China’s ferrous scrap consumption may increase by as much as 43 million mt this year, after China eliminated import curbs and taxes on ferrous scrap to help meet growing domestic demand.

World Steel Association’s head, environment and climate change, Asa Ekdahl, said in a lecture on steel industry decarbonization in the week ended May 22 that the industry needs to maximize scrap usage to reduce CO2 emissions.

Scrap market availability is expected to increase substantially in coming years to assist in the decarbonization process: from an estimated 390 million mt in 2018 to some 600 million mt in 2030 and to 900 million mt/year in 2050, she said.

However, scrap quality will also need to be improved in future to allow permit production of more steel product types using scrap, Ekdahl indicated.

— Diana Kinch