UAE bans ferrous scrap exports for four months

The UAE has banned the export of all ferrous scrap products for four months from 15 May, according to a document issued by the country's economy ministry.

The ministry said in a document dated 10 May that the ban is to ensure UAE steelmakers have sufficient feedstock to maintain operations amid the Covid-19 pandemic.

Products banned for export are listed under the HS codes 720450, 720449, 720430, 720429, and 720410, which encompass virtually all possible ferrous scrap export products, and 720421, which is stainless steel scrap.

The ban will cut off one of the largest sources of ferrous scrap supply to south Asia. The UAE was the largest single supplier of ferrous scrap to India in 2019, when it dispatched 1.15mn t to the country and accounted for 16.35pc of all Indian ferrous scrap imports.

The UAE was the second-largest supplier of ferrous scrap to Pakistan in 2019, exporting 656,000t and accounting for 18pc of Pakistani scrap imports.

In a typical trading environment, the removal of UAE exports would drive a significant increase in ferrous scrap import prices in south Asia. This could then have a knock-on effect on prices globally, as suppliers from the UK, US and Europe would move to divert volumes to containerised sales in order to benefit from higher south Asian prices, which would impact bulk availability to Turkey and other major importing regions.

Some form of this shift may occur as a result of the new UAE ban, but the scale of the impact will probably be offset by the near-term weakness of demand from south Asia, and India in particular, caused by the Covid-19 pandemic.

India entered lockdown to restrict the spread of coronavirus on 25 March and the country's main urban and industrial areas remain subject to strict lockdown measures until 18 May. The sharp downturn in steelmaking activity combined with the build-up of a vast backlog of previously booked containerised scrap at ports has collapsed scrap demand and caused many traders to suspend bookings and scale back planned shipments to India for the rest of the year.

The scarcity of Indian demand was reflected by a weaker recovery in Indian imported scrap prices in April relative to other scrap markets. The Argus weekly assessment for containerised shred cfr Nhava Sheva only gained $15/t from the beginning of April to $245-255/t at the start of May after falling sharply in March. The Argus daily HMS 1/2 80:20 cfr Turkey assessment gained $33/t over the same period.

Pakistan may better indicate how much the UAE ban will impact southern Asian and global scrap pricing. Exporters reported stronger demand from Pakistan relative to India throughout April and this was borne out by higher pricing that was more in line with the wider seaborne trend.

The Argus weekly assessment for containerised shred cfr Pakistan increased by $37.50/t from 3 April to $265-275/t on 1 May.

Ferrous scrap remains a major feedstock for UAE steel mills, despite the increased usage of direct-reduced iron (DRI) across the Gulf region in recent years.

Emirates Steel, the UAE's largest steelmaker, uses DRI as the main feedstock for its Abu Dhabi-based electric arc furnaces, but it also uses ferrous scrap. The company produced 3.1mn t of finished steel in 2018, of which 2mn t was rebar.

Abu Dhabi-based Arabian Gulf Steel and Sharjah-based Shattaf Steel both use ferrous scrap as the primary feedstock for their induction furnaces, through which they produce 400,000 t/yr and 100,000 t/yr of billet, respectively.

By Ronan Murphy