2020 was the year of continued decline in the main indicators of the scrap collection industry. Nevertheless, the second half of it brought a certain improvement in the situation due to the fact that it turned out to be very successful for metallurgy.
After the spring quarantine, demand for metal products quickly recovered above the production capacity level, which led to a shortage of stocks in warehouses and a rise in prices to their highest in about 10 years.
At the end of 2020, the decline in key industry indicators was:
-
scrap collection – by 8.6%, to 3.07 million tons;
-
scrap metal supplies – by 3.9% to 2.89 million tons.
In total, the declared needs of metallurgical enterprises in scrap for the year were met by 105%. Earlier it was expected that scrap procurement in the country would amount to 2.8 million tons, scrap supplies to consumers – 2.75 million tons.
Literally over the last few months of the last year, the industry's indicators have improved: to a lesser extent scrap collection, to a greater extent – to scrap supplies to metallurgical plants due to an increase in shipments in December by 33% at once. In November, the decline in industry performance on an annualized basis improved to -8% from -10%.
For the second year in a row, the export–import indicators of the industry have shown complete stagnation. In 2020, the export of scrap metal decreased by 15.1% – to 35.8 thousand tons, imports – by 47.1%, to 26.4 thousand tons. In monetary terms, the export and import of scrap amounted to only $9.5 million and $26 million.
Turkey was the leader in both export and import of scrap. Imports of raw materials from Turkey amounted to 10.2 thousand tons for $ 13.2 million, exports – 30.6 thousand tons for $7 million.
Scrap exports and imports are not expected to change significantly in 2021. The range of expectations for exports is 60–80 thousand tons, for imports – 30-50 thousand tons.
Over the past two months, domestic scrap prices have pulled up to world prices, but are still far below their level. Since the beginning of December, metal scrap purchasing prices for scrap have increased from UAH 5.95 thousand to UAH 9.05 thousand per ton. At the same time, at the end of the year and at the beginning of January, prices for HMS 1&2 (80:20) scrap in the Turkish market were at the level of up to $475-485/mt. In mid–January, other suppliers pulled up. At the ProZorro auction, Ukrzaliznytsia sold its scrap with an increase in the average price per ton by 46% – from UAH 6000 to UAH 8770.
High demand and prices on the metal products market create prerequisites for improving the situation in the scrap collection industry. However, there will be no stable growth in the industry until the unconditional cancellation of the unfair export duty on scrap metal. The term of the law №1455–VIII, which established this duty, expires in the summer of 2021. The abolition of the duty will allow the export of raw materials at about $100 per ton more expensive than domestic prices.
Turkey, the largest regional consumer of scrap, is increasing steel production and scrap consumption. For 11 months of 2020, the local metallurgy increased steel production by 4.9% – up to 32.4 million tons. At the same time, steel exports last year fell by 2.8% to 20.6 million tons.
For 11 months, the country has increased the import of scrap for its electric steel–making facilities by 20% – up to 20.2 million tons. Although Turkey imported the bulk of the volume from the EU (62.7% of the total; 12.6 million tons), the share of raw materials from the post–Soviet space remains significant – 2.2 million tons.
The pressure on prices will be exerted by the introduction of new standards by China, which changed the classification of scrap metal. This will help boost imports of raw materials to the ever–growing Chinese market.
