India becomes 2nd largest ferrous scrap importer in 2022 amid changed trade headwinds

The global ferrous scrap trade trends changed sharply in the year 2022, as reveals SteelMint's data. Among the top 15 ferrous scrap importers, all, but India and Bangladesh, showed a y-o-y increase in their volumes.

Surprisingly, India fought its way up to the second slot with a huge 91% increase y-o-y while Turkey managed to maintain its leading slot, being such a large importer, despite showing a decline because of the many challenges it faced in the current year.

The traditionally heavy lifters in South Asia and Southeast Asia - Pakistan, Vietnam and others showed a decline.

The total seaborne ferrous scrap trade for the top 15 countries dropped by over 7% in 2022 to 66 million tonnes (mnt) as against 71 mnt in 2021, the data reveals.

Factors pulling down scrap imports

1. Subdued steel demand: Scrap procurement dropped because of the general decline in steel demand globally. Construction activities slowed especially in Europe and, of course, China.

2. Decline in crude steel output: Thirteen of the top 15 ferrous importers showed a y-o-y drop mainly due to a decline in crude steel production as steel demand waned. Therefore, scrap buying especially by the electric arc and induction furnaces dropped.

Of the top 10 crude steel producers, all except India and Iran are the two bright spots, with a y-o-y increase over January-November, 2022, as per worldsteel.

3. High energy costs lead to inflation: High energy and gas prices also put power-intensive EAFs and IFs in a cost quandary. Because of high energy prices and the inflation that ensued, many countries preferred buying billets which were cheaper, rather than scrap.

4. Currency slide: The year was marked by currencies across the globe showing a free-fall against the dollar, which made imports costlier.

5. Liquidity crunch: There were liquidity issues which also impacted purchasing power. As inflation soared, central banks across the world tried to suck liquidity out of their economies by raising interest rates. This scenario led to an increase in the cost of funds. The benchmark 6-month Libor rate, for instance, has gone up from 0.33% a year ago to 5.18% at present, influencing banks across the globe.

Turkey remains top importer

Turkey, as already mentioned, managed to retain its leading share by sheer dint of the huge volume it buys from overseas annually. However, its volumes in 2022 declined by a considerable 16% to almost 21 mnt against more than 24 mnt in 2021 because of various factors. One key reason lay in the fact that the country imported substantial volumes of cheap billets from Russia this year to offset the high energy costs of steel-making. Secondly, it was hamstrung by the high energy costs and inflation which not only dented end-user demand but increased the cost of steel production as well. Thirdly, the currency depreciation made scrap imports expensive. Fourth, the Russia-Ukraine war hit Turkey's flat steel demand from Europe. Thus, all the above factors combined to bring about a drop in crude steel production, which, as per worldsteel data, dropped over 12% y-o-y in January-November, 2022. Lesser crude steel production would also necessitate lower scrap consumption.

India turns second largest importer

As with crude steel production, where India was the only bright spot globally, so is it with ferrous scrap. India became the second-largest ferrous scrap importer in 2022, nudging its way up from 9h position in 2021 and 4th slot in 2020. This happened mainly because the bulk cargo which found no takers in the traditional markets, had ready buyers in India, who drove a hard bargain.

Rising melting capacities in Bangladesh

In a surprising development, this South Asian country, usually one of the top buyers, showed a 35% y-o-y increase in 2022 to over 5 mnt against almost 4 mnt in the previous calendar despite the many challenges it faced in the latter half of the year. SteelMint's analysis shows that several capacities that had been installed a couple of years ago became operational this year. This development necessitated substantial imports of scrap earlier in the year, which boosted the overall volumes. However, towards the latter part of 2022, the Bangladesh market became quiet amid inflationary pressures, eroding currency and the compulsion to preserve foreign exchange which forced the country to ban opening of new letters of credit (LCs).

Pakistan under performs

From a consistent importer, Pakistan's volumes dropped the second-highest, at 28%, to around 3 mnt (over 4 mnt in 2021). This South Asian country has been beset by political turmoil, floods, sliding currency, inflation, and the resultant declined domestic demand. Therefore, it maintained an extended silence.

High inflation hits construction demand in Vietnam

From being the second-highest scrap importer in 2021 and 2020, this Southeast Asian country got relegated to the 7th position this year. Volumes decreased more than 35% to 3.67 mnt this year compared to 5.67 mnt last calendar. This is the steepest fall seen amongst the top 13 who reported a drop. Vietnam struggled with its own issues which negated the demand for scrap. It had a Covid resurgence which dented domestic consumption. That apart, slow construction activities also impacted steel consumption. On the other hand, domestic crude steel production was up, which forced Vietnam's own mills to turn exporters as home demand tapered off.

Global ferrous scrap trade overview

The top 15 ferrous scrap importers contribute 65-70% of the total seaborne trade in the material. SteelMint's top 15 table has not included other EU countries whose procurements are mainly intra-Continent. As per worldsteel data, the total global seaborne ferrous scrap trade is at 105-10 mnt per annum.