"Long road back to normality" expected for steel scrap market

Scrap generation in Germany remains low even
after the restart of industrial production
19.05.2020 − 

The coronavirus and actions taken to curb its spread are causing massive economic damage. Based on the latest forecasts, Germany's gross domestic product will shrink by more than 6 per cent this year. The coronavirus lockdown will have palpable effects on the ferrous scrap market, too, for quite some time to come. “It will be a long road back to normality,” one scrap merchant said in an interview with EUWID, summing up the insights gained in the past few weeks. Even though steel processing industries are now slowly ramping up production again, there is a great deal of uncertainty, which will hinder the growth of the economy for a long time to come, market sources said.

The resumption of German automotive production at the start of May has been extremely sluggish. “Many assembly lines are running at 25 to 30 per cent capacity in a best-case scenario. Instead of running three or four shifts, they are often operating with just one shift,” one market player stated. In some instances, reduced output was a knock-on effect of supply chain interruptions stemming from the lockdown, meaning that manufacturers do not have the materials and upstream products they need for production.

However, merchants believe that, to an even greater degree, current production rates reflect the longstanding deterioration in automotive manufacturers’ order books. “This downswing started well before the coronavirus crisis,” one scrap merchant said, pointing to the sharp drop-off in arisings at larger industrial scrap generating operations since last autumn. The coronavirus crisis had dramatically intensified this downward trend.

Some steel mills producing just 30 per cent of normal output

With the auto industry foundering, the steel industry has lost one of its most important sales markets, at least temporarily. Market players report that several steel mills are producing just 30 per cent of the usual volumes right now. Demand for scrap, especially new scrap, is thus weak at the moment. “Demand from mills is very modest,” one merchant stated.

Price talks between steel mills and scrap merchants initially resulted in mostly unchanged to slightly higher prices in May. Alongside the limited supply, temporarily brisker demand for scrap from Turkey was underpinning prices, merchants told EUWID. The mood changed towards the end of the month, and some mills called for price cuts.

The full report on the steel scrap market in Germany will appear in the next print and e-paper issue of EUWID Recycling & Waste Management (11/2020) out on 27 May.

Online subscribers can access the report immediately here: Steel Scrap Germany

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