For the first two months of 2017, US scrap exports came in at 2,244,000 tonnes up 28.6% year on year. For the year 2016, bulk US scrap exports totaled 13,815,000 tonnes, up by 8.3% compared to the year 2015.
Figure 1 presents scrap imports from the top six exporting countries for the period between 2013 to February 2017. The data is shown as a stacked bar chart for the countries and a black line sums the quarterly totals for all players. US scrap exports have trended down since the heady days of 2010 through 2013. However the situation reversed in 2016 after bottoming in Q1-2016.
Figure 2 shows a pie chart of the top four US exporting regions in 2016. Turkey has been the perennial largest buyer. In 2013 Turkey bought 5.23 Mt, falling sharply to 3.61 Mt in 2014, rebounding a bit to 3.96 Mt in 2015 then falling once more to 3.16Mt in 2016. For the first two months of 2017, Turkey has imported 437,500 tonnes, an annualized rate of 2.63 Mt. China, once a big player, imported just 740,300 tonnes in 2016. To put that number in perspective, China bought 6.2 Mt in 2009. Thus far in 2017 China imported 158,600 tonnes from the US which is less than a one million tonne rate for a year. Mexico is off to a fast start in 2017, importing 346,600 tonnes of scrap from the US, a 2.08 Mt annualize rate. Mexico’s total for all of 2016 was 1.49 Mt. Canada is the most consistent buyer of US scrap, averaging 67,900 tonnes per month with a tight (16,800 tonne standard deviation), from 2013 to present, most likely a function its close proximity to the US.
Arrived cost is the largest determining factor, in a country’s decision to purchase a commodity like scrap steel, so the currency exchange rate is a huge factor. Figure 3 illustrates, that currency (the Broad Index), and US scrap exports are only loosely correlated, (coefficient = 0.66). The Broad index shown on the right hand Y axis in reverse order. Scrap exports are presented on the left hand Y axis in millions of tonnes. Note that of late the two data sets are diverging. The other major factors in the buy decision are availability and quality of supply. The US has historically had both readily available of supply together with excellent quality. Availability can be restrained by trade regulations which impacts regional availability and therefore pricing. One example of this was Russia, which restricted scrap sales in the period between 2008 and 2012. This altered the normal global scrap flow and contributed to a spike in demand for US scrap exports.
Scrap cost is the single largest cost in the production of steel in the electric arc furnace. At Gerdau we monitor scrap costs and the factors that influence it very closely.