Ferrous scrap: North American & global markets update

Transcription

1 London Houston Moscow Singapore Dubai New York Ferrous scrap: North American & global markets update Beijing 2018 Canadian Association of Recycling Industries (CARI) Convention Kiev Niagara Falls, ON Tokyo Astana Xavier McClafferty Shanghai 9 June 2018 Rio de Janeiro Washington DC Riga Calgary Brussels Cape Town Mexico City Berlin San Francisco Sydney Market Reporting Consulting Events

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3 Agenda About Argus Seaborne ferrous trade Domestic ferrous trade Concluding thoughts Questions and answers

4 The Argus view One of the world s leading PRAs, Argus is a team of more than 800 staff members in 21 global offices Publishing more than 11,000 daily spot and forward price assessments, plus market intelligence for world commodities markets Coverage includes: Energy Fertilizers Petrochemicals Metals Services Price reporting and indexation Consulting Conferences Indexation examples US crude oil US and European refined products US and European natural gas NGLs US and European environmental markets

5 Argus North American ferrous coverage Seattle-Portland (Export) San Francisco-Oakland (Export) Los Angeles (Export) Main Grades Assessed #1 busheling Shredded Shredder feed (export yards) #1 HMS 5 P&S Machine shop turnings Monthly: delivered consumer buying prices, with 5-7 years of price history in most markets. Weekly: bulk and containerized assessments, including freight, as well as export yard buying prices, with two years of price history. Denver (Dealer) Weekly assessment Dallas (Consumer) Montreal (Consumer) Toronto-Hamilton (Consumer) Detroit Buffalo (Consumer) Chicago (Dealer) (Consumer) Cleveland, Quad Cities Pittsburgh (Consumer) (Consumer) Boston (Export) New York (Export) Philadelphia (Export, Consumer) St. Louis (Dealer) NE Arkansas (Consumer) Houston-San Antonio (Consumer) market Houston (Export, Dealer) Monthly assessment market Albany (Export) Birmingham (Consumer) New Orleans (Pig Iron Import) Carolinas (Consumer)

6 Scrap consumption as a share of steel output in 2017 Canada Scrap Consumption: ~7mn Shredders: 28 Scrap Consumed/Crude Output: 48% Crude Steel Output: 14mn t EAF: 53% BOF: 47% 6% of steel output 11% of scrap consumption Europe Scrap Consumption: 93mn t Scrap Consumed/Crude Output: 55% Crude Steel Output: 168mn t EAF: 60% BOF: 40% Global external scrap trade: 99mn t US Scrap Consumption: 59mn t Shredders: 316 Scrap Consumed/Crude Output: 72% Crude Steel Output: 82mn t EAF: 68% BOF: 32% World Scrap Consumption: 600mn t Scrap Consumed/Crude Output: 36% (Purchased Scrap Share: 68%) Crude Steel Output: 1.7bn t EAF: 28% BOF: 72% Source: Bureau of International Recycling (BIR), Argus estimates China Scrap Consumption: 148mn t Shredders: ~200 Scrap Consumed/Crude Output: 18% Crude Steel Output: 832mn t EAF: 9% BOF: 91%

7 Analysis: Seaborne ferrous scrap Market Reporting Consulting Events

8 : US, Turkey drive Canada s exports higher British Columbia Exports totaled 772k t in 2017, up from 645k t and accounting for 21% of Canadian exports. Ontario Exports totaled 1.6mn t in 2017, up from 1.4mn t in 2016 and accounting for 45%of exports. Quebec/New Brunswick Exports totaled 978k t in 2017, up from 371k t and accounting for 26% of Canadian exports. Top 5 Canadian export destinations (t) 1Q Q 2017 % Change US 638, ,826 10% Turkey 135, NM Taiwan 29,383 16,961 73% Mexico 26,250 31,500 (17%) India 22,319 10, % All Others 44,749 40,103 12% TOTAL 897, ,683 32% % Change 2,550,890 2,080,375 23% 570, ,000 81% 77,824 80,185 (3%) 173, NM 62,672 78,045 (20%) 265, ,847 34% 3,700,544 2,752,452 34% Note: NM = not meaningful. Source: Statistics Canada (Government of Canada), Argus estimates

9 Turkey also drives US exports YTD US ferrous scrap exports (metric tonnes) 1Q Q 2017 % Change Turkey 979, ,727 80% Mexico 457, ,200 7% Taiwan 409, ,653 12% Vietnam 239, ,854 43% India 237,927 65, % China 224, ,349 (5%) Thailand 155, ,982 15% Canada 148, ,238 (10%) Kuwait 133,495 94,282 42% Peru 120, ,059 (24%) Indonesia 119,374 8,097 NM Malaysia 118,606 5,480 NM Pakistan 107,596 67,891 58% South Korea 100, ,588 (34%) Bangladesh 72, ,878 (40%) Japan 70,914 4,110 NM Egypt 70, NM Ecuador 64,536 57,219 13% All Others 77, ,581 (48%) Total 3,907,905 2,921,414 34% % Change 3,631,140 3,123,264 16% 1,544,869 1,481,941 4% 1,305,656 1,237,016 6% 708, ,125 87% 638,617 1,013,430 (37%) 696, ,967 60% 535, ,313 26% 609, ,197 58% 426, ,681 21% 444, ,705 13% 85,341 59,580 43% 192,371 26, % 626, ,067 65% 525, ,414 (37%) 618, , % 73,218 35, % 399, , % 150,524 40, % 595, ,287 % 13,809,028 11,347,022 22% Note: NM = not meaningful. Source: US Census Bureau

10 But the Turkish landscape has shifted 40,000 35,000 30,000 25,000 Turkish scrap imports as a share of crude steel output in 2012: 62% Turkish scrap imports as a share of crude steel output in 2017: 56% 20,000 15,000 10,000 5, Imports from the US represented 18% of Turkish scrap in 2017, down from 28% in 2012 Imports from the US Total Turkish Imports Turkish Steel Production

11 A tale of two coasts in the US Northern border exports in 1Q 2018 to Canada fell by 10% from the prior year, accounting for 3% of total shipments. West coast exports in 1Q 2018 increased by 21% from the prior year, accounting for 39% of total shipments. Gulf coast exports in 1Q 2018 increased by 120% from the prior-year, accounting for 14% of total shipments. East coast exports in 1Q 2018 increased by 35% from the prior year, accounting for 42% of total shipments.

12 USEC: It s all about Turkey Bulk, containerized and export yard buying prices, #1 HMS 80:20 ($/t) $400 $350 Bulk Export (cfr Turkey) Containerized Export (fas NY) Bulk Export (fob NY) NY Export Yard $300 $250 $200 $150 $400 $300 $200 $100 Montreal Shredder Competition Drives Shredder Feed Higher (CAD/NT) Montreal NY Export Yard Jan Feb Mar Apr $100 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

13 USWC: It s about everyone Bulk, containerized and export yard buying prices, #1 HMS ($/t) $400 $350 $300 $250 $200 $150 Containerized Export (cfr Taiwan) Bulk Export (fob LA) Containerized Export (fas LA) Los Angeles Export Yard $100 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

14 2017: Scrap, metallics imports surge Scrap % Change Canada 2,550,643 2,079,310 23% UK 508, ,060 44% Netherlands 211, ,064 17% Sweden 207, ,183 (20%) Mexico 151,318 87,425 73% Japan 69, NM Spain 16, NM All Others 15,712 35,002 (55%) TOTAL 3,730,807 2,995,387 25% Pig Iron % Change Russia 2,784,226 2,222,825 25% Ukraine 1,143, ,850 67% Brazil 921, ,969 31% South Africa 134,346 95,504 41% India 72,000 3 NM Canada 40,469 45,528 (11%) ArgenTna 24, NM All Others 7, ,343 (93%) TOTAL 5,127,388 3,866,022 33% DRI/HBI % Change Trinidad/Tobago 1,562,256 1,467,522 6% Russia 115,500 96,540 20% Venezuela 64, NM Ukraine 23,752 14,014 69% Brazil 22,125 19,704 12% Canada NM TOTAL 1,788,620 1,598,104 12% Through the first quarter of 2018 compared with a year earlier: Scrap imports rose by 10% to 638,599t Pig iron imports rose by 22% to 1.3mn t DRI imports fell by 7pc to 429,912t on fewer shipments from Trinidad Note: NM = not meaningful.

15 Analysis: US-Canadian domestic trading Market Reporting Consulting Events

16 US-Canadian ferrous scrap trading Major Canadian import points from the US Pembina, ND 23,000t/month in Q Detroit, MI 12,000t/month in Q Canadian steel exports to the US in 2017: 5.7mn t US steel exports to Canada in 2017: 4.7mn t Major US import points from Canada Detroit, MI 95,000t/month in Q Seattle, WA 66,000t/month in Q Buffalo, NY 26,000t/month in Q Buffalo, NY 7,000t/month in Q Pembina, ND 7,000t/month in Q TOTAL 49,000t/month in Q Import/Export Routes US Import-Only Routes TOTAL 213,000t/month in Q1 2018

17 First quarter 2018: A quick synopsis US national index, del consumer (USD/gross ton) $450 79% $400 78% $350 77% $300 76% $250 $200 $150 2Q Q % shred/cuts +12% primes 75% 74% 73% 72% $100 $50 Shredded Scrap #1 HMS #1 Busheling Capacity Utilization 71% 70% $- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 69%

18 Hamilton-Toronto vs. Detroit, in CAD/NT #1 Busheling Shredded $500 $450 $400 $400 $350 $300 Detroit Toronto-Hamilton $300 $250 Detroit Toronto-Hamilton $200 Jan Mar May Jul Sep Nov Jan Mar May $200 Jan Mar May Jul Sep Nov Jan Mar May $450 5ft P&S $450 #1 HMS $400 $400 $350 $350 $300 $300 $250 $200 Detroit Toronto-Hamilton Jan Mar May Jul Sep Nov Jan Mar May $250 $200 Detroit Toronto-Hamilton Jan Mar May Jul Sep Nov Jan Mar May

19 Prime s premium over shredded normalizes US national composite price spread, #1 busheling vs shred del consumer ($/gt) $90 $80 $70 $69 $70 $78 $77 $78 $80 $68 A perfect storm of supply and demand factors drove prime scrap higher in 2017, including: Strong underlying flat-roll mill demand Big River Steel s entry in early 2017 Outages at Nucor s US DRI plant Lower overall prime scrap generation Pig iron supply disruptions from Ukraine, Brazil $60 $50 $51 $57 $50 $43 $42 $40 $30 $28 $23 $31 $20 $10 $9 $17 $13 $- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

20 Finished steel s premium over scrap soars US hot-rolled coil vs. #1 busheling scrap ($/gt) $1,200 HRC #1 Busheling $1,000 $800 June 2018: $596/gt $600 June 2017: $318/gt $400 $200 $- Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

21 1H 2018: Summary of trading themes Strong finished steel demand and supportive US trade policy boosting US mill utilization rates and driving scrap demand higher, making the US one of the hottest markets in the world for shredded, busheling Runaway finished steel prices widening the spread between finished steel and scrap in the US Sluggish post-232 finished steel sales in Turkey weighing on US obsolete grades Harsh winter conditions disrupting scrap generation, with high water on the Mississippi river and rail delays across north America limiting flows Narrowing spread between #1 busheling and shredded boosting demand for primes

22 Hurricane impact update Hurricane Harvey Surplus shreddable scrap began impacting the Texas market immediately following the storm, generating 281,015gt of shred through the first half of This is more than six times Houston s average monthly shred output of around 40,000gt and nearly three times monthly demand for shred from Texas mills of 100,000gt. Scrap vehicles generated Insured: 208,137 Uninsured: 49,875 Texas homes impacted Damaged: 286,769 Destroyed: 16,943 Incremental Fe Frag Generated (gt) Scrap vehicles: 265,384 Residential Scrap: 15,630 Incremental Zorba generated (lb) Scrap vehicles: 32.4mn Residential Scrap: 1.1mn 258, , , mn Hurricane Irma Dealers surveyed reported negligible market impact (<10k gt of ferrous scrap generated). Salvage auction company Copart processed an additional 7,500 vehicles as a result of the storm, compared to 150,000 vehicles in Florida annually. CMC s Jacksonville shredder offline in the week following the storm without power. Hurricane Maria Limited Schnitzer Steel s Puerto Rico shredder and export terminal. Ferrous scrap exports from the island dropped to 7k metric tonnes in 4Q 2017 from 25k in the same period a year earlier. Export activity recovered in 2018, with 55k t exported through February compared with 28k t in the prior-year period. Mexico is the primary export destination from the island. Scrap also shipped to Asia Pacific container markets.

23 Concluding thoughts US trade actions and the subsequent global response have roiled steel and scrap markets: boosting US domestic capacity utilization as steel imports drop, generating robust demand for scrap that is expected to last through 2018 driving US steel and scrap price increases to outpace global steel prices, impacting demand for US scrap from Turkey and other markets Trade disputes are not expected to be resolved quickly and uncertainty is expected to remain disruptive of global markets

24 London Houston Moscow Singapore Dubai New York Beijing Kiev Tokyo Astana Shanghai Rio de Janeiro Washington DC Riga Calgary Brussels Cape Town Mexico City Berlin San Francisco Sydney

25 Xavier McClafferty Argus Metal Prices Phone: Office: Web: Americas, Houston metals.argusmedia.com Stay Argus-media +Argusmediaplus argusmediavideo Copyright notice All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus. Trademark notice ARGUS, the ARGUS logo, Argus publication titles, and Argus index names are trademarks of Argus Media Limited. For additional information, including details of our other trademarks, visit argusmedia.com/trademarks.