Ferrous scrap prices have followed steel prices higher, with reported January price increases ranging from $60 to $120 per gross ton depending on individual scrap grades and regional market conditions, adding to December’s price gains.
Several factors contributed to the solid start for the year, including improved demand from manufacturers, diminished competition from steel imports, depleted steel and scrap inventories, and the corresponding need for restocking. As a result, ferrous scrap market participants reported business conditions in December and January were some of the best they had seen in recent years.
Steel production down in 2020, but ramping back up
According to the latest figures from World Steel Association, global steel production decreased 0.9 percent in 2020 to 1.86 billion metric tons, but the trends in regional steel production diverged significantly. For instance, World Steel reports Chinese steel output increased 5.2 percent in 2020 to a record 1.053 billion tons as China’s share of global crude steel production rose to 56.5 percent last year. In contrast, steel production in the United States declined 17.2 percent in 2020 to 72.7 million tons, while Canadian steel production contracted 14.1 percent to 11.1 million tons. In Turkey, a key importer of ferrous scrap, steel production increased 6.0 percent in 2020 to reach 35.8 million tons.
2021 outlook largely positive, despite risks
U.S. Federal Reserve Chairman Jerome Powell recently warned: “The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic.”
Yet, despite the continued uncertainty surrounding the COVID pandemic, most economic forecasters are still projecting better days ahead in 2021, which should bode well for steel and ferrous scrap metal demand. The IMF projects the global economy will grow 5.5 percent in 2021, including a 6.3 percent increase in emerging and developing economies. In addition, the Fund projects global trade flows will rebound from a 9.6 percent contraction in 2020 to an 8.1 percent gain this year.