2020 ended with a price rally for ferrous scrap that was in many ways unprecedented. And though the positive price development was expected to continue in January, market participants in Germany "were stunned by the magnitude of the price surge. . "It is crazy, crazy, crazy,” said one trader, commenting on the market events in the first two weeks of January, when low scrap availability coincided with strong scrap demand from the steel mills. Compared to December, ferrous scrap prices skyrocketed by €80-90 per tonne in most cases. Depending on the mill and the baseline, the mark-ups at times even reached triple-digit territory with peaks of €100 per tonne.
The upward momentum was triggered by rising demand from Turkish steel mills. This started in mid-November, carried on throughout December and only ended – abruptly – in the second full week of 2021. Driven by the booming export business, since November there have also been sharp increases in the prices paid on the domestic market by German steel mills for all grades of ferrous scrap. However, in December prices on the German market were still significantly lagging the international market trend.
While the market was expected to catch up in January, the resulting price explosion took everyone by surprise. "On the first working day of the new year, the phones did not stop ringing. The steel mills were clamouring for scrap,” reported one trader. The order situation for both structural steel as well as flat steel producers is apparently very good, with order books sometimes stretching to the middle of 2021.
Semiconductor shortage causes production stoppages in auto industry
As is typical at the turn of the year, arisings of old and demolition scrap were lower due to the cold weather and the end-of-year holidays. However, the price bump did flush out some additional volumes onto the market. "Once prices reach a certain level, we are always surprised to see where scrap starts emerging,” commented one respondent. Volumes of new scrap were also lower because generators took plant downtime over the holidays. Many production lines only resumed operations on 11 January, EUWID was told.
There are also disruptions to production processes in the automotive industry right now because of semiconductor supply issues, say market participants. The shortage of electronic chips and sensors is now so extreme that automotive producers have had to halt production. This has a direct impact on the ferrous scrap trade. New scrap volumes that were agreed upon and planned are not materialising. This effect will become even stronger in the coming weeks, say respondents, who expect the availability of scrap to remain low.