The situation in the domestic scrap market worsened in March
The Ukrainian scrap market is showing negative monthly dynamics after a sharp rise in January–February. At the end of March, the volume of scrap collection compared to February (in which there were fewer calendar days) decreased by 9.1% – to 291.9 thousand tons, the supply of raw materials to metallurgical enterprises fell by 12.1%, to 259.1 thousand tons.
However, the record highs in the first two months of the year allowed the scrap collection industry to show significant growth in the first quarter. The enterprises of the industry were able to increase scrap collection by 28.2% – to 931.1 thousand tons. The supply of scrap to metallurgical enterprises also increased approximately proportionally – by 23.1%, to 837.7 thousand tons.
What will be the further dynamics of the market depends entirely on the situation in the metallurgy. Analysts predict positive price trends in the global steel market in the first half of the year and a worsening of the situation in the second half of the year.
Since the beginning of February, the level of stocks of scrap metal at metallurgical enterprises practically did not fall below 190 thousand tons. This allowed buyers to dictate prices, not at all taking into account the conjuncture in the world. In February, domestic prices dropped by 25%, and at the end of March they remained practically unchanged. Despite the price surge in the middle of the month by 15% – up to 7800 UAH per tonne, at the end of March the price increase was only 3% – from 6800 to 7000 UAH. This is despite the fact that world prices have not dropped below $400 per ton since the beginning of the year.
Since the beginning of February, the excess of world prices over domestic prices in excess of export costs ($110 per ton) made it possible to increase the export of scrap metal immediately by 4.3 times in the first quarter – to 49.1 thousand tons. In monetary terms, exports increased 5.7 times – to $16.6 million
Almost 93% of Ukrainian scrap deliveries in monetary terms went to Turkey. This is the smallest of what this country can consume. In the first two months of this year, Turkey increased the import of scrap metal by 17.1% – up to 4.1 million tons.
The key factor influencing the future of the scrap procurement market will be bill №5175, which proposes to extend the duty on the export of scrap for another 5 years. Lobbyists of metallurgists are already collecting parliamentary votes: it has already been approved by three committees of the Verkhovna Rada.
One of the main arguments for the adoption of the bill was theses on strategic raw materials for metallurgy and opportunities for decarbonization. However, scrap metal is critical to the electric steelmaking capacity. Steel production in 2020 in Ukraine amounted to 20.6 million tons, of which only 842.7 thousand tons, or only 4.1% of the total production, fell on electric steel–making capacities. There are no prospects for increasing the share of electric steel in the next 3 years. That is why the thesis of scrap as a prerequisite for reducing emissions is untenable in the medium term.
