Quarterly Report – February 2021

The COVID pandemic continued to worsen throughout the period from October to January, with another national lockdown imposed late in December. However, cases continued to rise, peaking early in the New Year and resulting sadly in further large losses of life. While the UK remains in lockdown, the vaccination roll-out has been immense and the cautious easing of restrictions in the coming weeks looks more likely with each passing day, with the hope that the UK economy will demonstrate a steady but bullish bounce-back.

Business-wise, our sector has managed to operate at near-normal levels during unprecedented market conditions. However, some merchants have experienced a number of teething issues within the new EU framework as the practicalities of Brexit take shape in the commercial world.

Overall, it has been the most thought-provoking period in terms of both demand and pricing that has been seen for a number of years, with erratic swings seen in the global markets. Indexes climbed strongly through December and into early January, with Turkish import prices dominating the global scene; the increase of 63% eclipsed that of the Indian index which gained around 34% from the beginning of November. However, these sharp price rises were short-lived as market participants engaged in securing new business and, within two weeks of the market high point, prices had fallen at a seemingly even more dramatic rate (by 18.5% and 20%).

The situation was further exacerbated by sharp increases in freight costs and container availability issues, which inevitably caused logistical problems. Most container buyers were seemingly inactive as the situation in the box market became almost untenable and sales into bulk deep-sea facilities became the preferred option for many UK sellers.

On the domestic front, merchants have seen somewhat less dramatic price movements with an increase of approximately 5% for December deliveries followed by a larger rise of around 16% for January. However, gains have been all but eradicated by reductions for February settlements of around 15% - a drop seen by some suppliers as too harsh when compared to the available export rates, particularly at a time when scrap metal remains in relatively tight supply.

The markets are looking for some stability and, as previously stated, there are early signs of a more settled picture than for a number of weeks, hopefully leading to a resurgence in demand for quality scrap metal both domestically and on the export front, with material flows increasing steadily.

Many think that we have reached the bottom in terms of pricing and that there will be a rebound in demand and prices once the Chinese market resumes following its New Year festivities. This, coupled with the Indian government’s decision to reduce its ferrous import duty to 0%, is leading many participants to forecast a positive market correction in the coming days. 

The main concern, as ever, remains with the wider economy and, in particular, the large consumers of raw material such as construction, car manufacturing and engineering. When will these industries return to more sustained production levels, with COVID-related uncertainties affecting supply, demand, price, volumes and the end destination for material?