Quarterly Report – July 2018

Welcome once again to the Ferrous Division’s Mirror report. Since we met in Barcelona, the ferrous scrap market has continued in a positive vein despite concerns at the time that caution was needed, particularly given the uncertainties going forward. Over the last couple of weeks, we have seen a gradual cooling in prices as Turkey has stepped back, buying at lower levels with the pressure on finished product prices. Low residual scrap has remained particularly strong over recent weeks with healthy demand and shortness of supply. Demand for shredded scrap has followed suit, with a wider than normal premium for shredded over HMS grades. However, macro-economic factors continue to play an important part in our industry and the last few months have clearly demonstrated this.

During my address to the plenary session in Barcelona, I expressed concern over the US/China trade war that was starting to build up a head of steam, pointing out its potential impact. The figures are staggering, with China and the USA accounting for US$ 1.4 trillion of the US$ 2.3 trillion estimated to be wiped off global trade. Just prior to the meeting in Barcelona, it seemed that there had been progress in the negotiations, leading to optimism that the USA and China would resolve their differences. Unfortunately, and as we are all aware, this has not been the case. It seems that tariffs and sanctions are escalating and we are approaching a point of no return for an all-out trade war.

Regulatory issues in China are also on the increase, with the effects on Zorba shipments from the USA having a significant impact on our shredders. In addition to the much stricter inspection protocols, we have the added pressure of tariffs on our products in retaliation for measures imposed by the USA. This all adds up to a challenging environment for our industry. Prices of raw materials for our shredders need to reflect the impact of much lower Zorba prices.

I also stated at the Barcelona meeting that, in terms of steel and aluminium product exports to the USA, it was likely the EU would receive a similar deal to that of Brazil. However, the EU and the USA’s closest neighbour Canada have been hit with stringent tariffs. There are clearly many factors in this market to consider.

The summer months should be interesting and we will hopefully gain more clarity on the direction and magnitude of global trade issues. Demand for our ferrous scrap should remain strong and it is important we maintain a healthy steel sector.

Our next meeting will be in London on October 6 and we look forward to seeing you there as, no doubt, there will be a great deal to discuss as macro-economic factors develop even further.