Viewpoint: US Fe scrap exports hinge on China in 2021

US west coast ferrous scrap exporters expect the current robust market to persist into early 2021, with the longer-term outlook clouded by rising blast furnace capacity in Asia and the possibility of Chinese ferrous scrap imports from the US.

Since mid-October, US west coast fas prices for containerized ferrous scrap experienced continuous weekly increases, with prices during the week ended 28 December reaching as high as $410/t for HMS 1/2 80:20 in Los Angeles for the highest levels recorded by Argus since March 2013. Influenced by a strong Japanese scrap market and the rising tide of Turkish ferrous scrap and steel prices, Asian ferrous scrap markets are expected to remain strong into early 2021.

The impending return of China as a ferrous scrap import market following its import ban in 2018 elicited bullish attitudes from US west coast market participants.

"China could certainly have an impact, we've seen it before with regards to other metals and our recycled paper sales," said a US west coast trader.

"If the inspection process works for bulk scrap exporters, prices would drive up substantially and containerized guys would be out of luck and need to raise prices to compete," said a California-based scrap supplier.

It is currently unclear which scrap grades China will deem acceptable for import, but it is expected that high-yield grades such as P&S and busheling will be admitted while imports of HMS 1/2 80:20, the most commonly traded seaborne grade of ferrous scrap, remain in question.

Global scrap recycler Sims last month suggested China's imports of ferrous scrap could result in a short-term tightness in an already-tight market. Looking into the mid- and long-term, China's next five-year plan called for increased scrap consumption to support steelmaking for rapid urbanization goals.

Logistics issues causing delays in containerized ferrous scrap shipments and limited supplies also factored into rising scrap prices through the late fall and early winter.

"This could be more of a beginning than an end [to price increases] with China coming back into the market for scrap steel," said a Los Angeles-based trader.

Still, some market participants expect the oncoming steel capacity increases in Asia could slow the increases in scrap and steel pricing. Several Nippon Steel production facilities have restarted or are scheduled to restart by late January 2021, while Vietnamese steelmaker Hoa Phat will also restart a blast furnace sometime in early 2021.

Market participants noted the increased blast furnace production not only threatened a steelmaking glut but poised additional billet production that could temper increasing scrap costs. Some mills in Taiwan were already considering this option as of the week ended 11 December. Argus assessed prices for billets ex-works Tangshan rose by around $66/t to $573.33/t between 16 October and 30 December, compared to an increase of $177/t to $400/t for containerized HMS 1/2 80:20 cfr Taiwan during that same span.

By Will Ehrhardt