- Sourcing from Japan drops amid availability issues
- Turkiye’s absence offers US scope to divert material
- Bangladesh’s steel capacity expansion to keep scrap demand high
Morning Brief: Ferrous scrap imports (bulk and container) into Bangladesh rose 53% to 2.83 million tonnes (mnt) in the first half (H1) of 2022 against 1.85 mnt seen in the same period in 2021. The country is the six largest ferrous scrap importers globally.
Bulk ferrous scrap imports rose a chunky 72% y-o-y to 1.87 mnt against 1.08 mnt in this period.
Factors that pushed up Bangla scrap imports in H1
Data maintained with SteelMint reveals that even if volumes from Japan, a leading ferrous scrap exporter, dropped, it was more than made up by the US and the Netherlands.
- Japan focuses on domestic market: Japan showed a conspicuous 60% drop in bulk ferrous scrap exports to Bangladesh because of a steep rise in its offers. The main reason behind the steep offers was a sharp drop in Japan’s ferrous scrap generation. Hit by the pandemic, Japan saw a consistent drop in its new vehicles sales over entire H1, which hit auto production and subsequent scrap generation. As a result, whatever scrap was produced was consumed by Japan’s domestic market, leaving not much to offer to its overseas buyers.
Bangladeshi buyers avoided the expensive Japanese material. In March 2022, Japanese offers averaged $675/tonne CFR Chittagong, up 45% y-o-y. April’s offers averaged $667/t CFR (up 40% y-o-y) while May’s were up 9% y-o-y to $578/t.
- US supply increases: If Japan’s material was scarce, it was more than made up for by ample supply from the US. Bulk imports from the US rose 66% in H1 since it had enough material to sell to Bangladesh. Turkiye, a habitual buyer from the US, turned its attention to buying billets from Russia, lured by its aggressively low prices after the onset of the Ukraine war.
Turkiye being the world’s largest scrap importer, its absence had major ramifications for a scrap supplier like the US which had surplus material that was diverted to Bangladesh. “Souring cheap billets from Russia amounted to less than Turkiye’s usual steel production costs, which is found rather attractive,” informed a source. Russia, hemmed in by western sanctions, was keen to dump its steel and found a ready market in Turkiye too.
Data maintained with SteelMint revealed that average offers from the US in March were at $691/t. In April, these dropped to $655/t and in May further to $543/t and in June, to $449/t, which offered Bangladeshi importers price viability. Consequently, in March, US-origin bulk material sourcing increased to 0.20 mnt, and 0.25 mnt in April, the highest in the last one year and 0.16 mnt in June.
Meanwhile, in June, Russia’s Black Sea FOB billet prices averaged as low as $563/t against $710/t in April and $636/t in May while July prices look even lower, at $536/t.
- Supply from the Netherlands rise: Bulk imports from the Netherlands rose a whopping 222%, especially in April and May although this country saw a nominal 80,000 tonnes imported by Bangladesh in 2021. Possibly, crude steel production cuts in the European Union (EU) amid surging energy costs and lower prices allowed an increase in ferrous scrap exports in H1. World Steel data shows a 4.3% drop in crude steel output in the EU in January-May, 2022.
Outlook
Bangladesh is eying over 6% GDP growth in the current year, the second-highest in South Asia, after India. It is also putting a pronounced and sustained focus on infrastructure spending which will increase steel consumption going forward.
The country is increasing its crude steel capacity from the current 6.12 mnt to around 11 mnt by 2023 and this scenario will only increase its appetite for ferrous scrap in the future.
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