Quarterly Report – February 2021

Market participants witnessed a swift increase in the price of ferrous scrap delivered to Taiwan during the final months of 2020.

The major catalyst for this sudden rise was the reopening of steel works throughout Asia, but specifically major producers in Japan and South Korea. As market activity in these two countries returned, the mills restarted with limited ferrous scrap inventory and undersupplied local markets; this quickly drove up scrap prices as they simultaneously rushed to the market to restock.

In addition to the supply squeeze fuelled by their Asian counterparts, Taiwanese mills also realized that the usual mode of transportation in containers from their biggest supplier - namely the USA - had become severely disrupted. This logistic disturbance was mainly from the US West Coast; the ports struggled to keep up with demand during the holidays and there was a major COVID outbreak at the port of Los Angeles, leading to higher ocean freight costs.

As scrap prices quickly accelerated, however, so did supply. This finally led to a price correction for both scrap and steel by the second week of January. Many buyers sat on the sidelines believing they would catch better deals if they waited until after the Asian holidays; however, some believed it would be too late if they waited and went ahead with purchases. Today, even as the Asian holidays are upon us and the market is quieter, the industry outlook is generally positive because the key market fundamental of steel demand/consumption is expected to continue throughout the year as the world learns how to balance the perpetual complications of COVID and the need to get back to work.

Because the Taiwanese government was quick to respond and suppress COVID, Taiwan was one of the strongest economies globally in 2020. As previously noted, Taiwan has also been a beneficiary of the China/US trade feud and, since 2018, has attracted approximately US$ 42.5 billion of investments from hundreds of companies, with robust overseas demand for its goods driving strong export numbers. The Taiwanese manufacturing Purchasing Managers’ Index (PMI), released by IHS Markit, showed Taiwan went from 59.4 in December to 60.2 in January, making it the best result for the country since April 2010.

Autumn Barnes - Autumn Barnes (Taiwan)

Autumn Barnes

Sims Metal Management Global Trade Corporation (USA), General Delegate & Board Member of the BIR Ferrous Division

Quarterly Report – February 2021