Pandemic Induced Volatility
As the economic rebound has leveled off, the dramatic price swings associated with the pandemic have led to tempered expectations for robust ferrous scrap and old corrugated containers (OCC) markets. The fortunate result of this volatility earlier in the year gave cardboard recyclers and ferrous scrappers a boost, however, the rosy outlook for these markets has begun to dissipate.
This month, a trader from Germany has outlined the circumstances of the ferrous sector, noting that “The environment deteriorated significantly in the second quarter, with international quotations falling by almost 20 percent since mid-March [joined by] increasingly clear signs of a slowing of steel demand.”
From the Brussels-based Bureau of International Recycling (BIR), Denis Reuter of TSR Recycling GmbH & Co. KG explained, “The eurozone has been in a ‘technical recession’ since the first quarter. The optimism at the beginning of the year seems to have given way to a greater sense of reality.”
Multifaceted Issues Plague the Steel Industry
Analyzing the ferrous scrap global buying market in Turkey, there are multiple issues facing the steel industry. According to Reuter’s report, “Turkey’s steel segment has lost its competitiveness on the international steel market [and] the outlook for the third quarter remains subdued in view of multiple problems,” including a lack of funding for necessary earthquake reconstruction.
As measured by the Davis Index, a metals information provider, it is apparent that the current global downturn has had a considerable effect on the United States market. Through Reuter’s assessment, ferrous shred was observed to have experienced its highest value of around $491 per ton back in April. But, by mid-July, domestic mills had seen a steady decline in the price of the grade, falling to $446 per ton, a 9.2 percent decrease from prior weeks.
OCC Trader Gives Insight
The outlook for profitability for the OCC paper grade market is not as promising as it was earlier this decade either, which has been made evident by the low morale among Asia-based fiber traders. This projection has become even more apparent as 2023 progresses.
According to the trader, production levels of fiber originating from Europe and other regions have been depressed all year. Yet, despite this scarcity, mills in Asia and Europe have not increased bids.
Also, in stark contrast to news reports from earlier in the decade, which were focused on mill groundbreakings, expansions, or conversions to packaging grades, 2023 has instead brought about disclosures of an increasing number of paper mills being shut down or idled.
The fiber trader additionally asserted that despite an attempt to boost production from China-based firms like Nine Dragons and Lee & Man in Malaysia and Vietnam, it appears that the demand for OCC and mixed paper have not been able to bounce back from China’s policy of severely limiting importation.
Fastmarkets RISI Offers Pricing Details
As for ferrous scrap, Fastmarkets RISI’s OCC pricing calculations have revealed the present state of North American markets. This time last year, RISI’s price per ton was estimated at around $120. However, despite some efforts to recover, the current value has still not been able to reach even half its previous standing.
Volatility is a double-edged sword, and scrap commodities could increase rapidly due to unforeseen circumstances. Nevertheless, as 2023 reaches its midpoint, recyclers are anticipating a “lower-price environment.”
