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Brazil ferrous scrap exports reach record high in 2023 amid India steel boom

Issued at 2024-02-13



Brazil set a record high in ferrous scrap export volumes in 2023, with about 800,000 mt of material flowing abroad, more than doubling the 369,305 mt recorded in 2022, according to latest customs’ data analyzed by S&P Global Commodity Insights.

India emerged as the primary destination in 2023, taking 63%, or 501,744 mt, of total shipments, surpassing Bangladesh, a traditional destination for Brazilian material, by 182%.

The increase in outflows to Indian came during a challenging time for the Brazilian steel recycling sector, which has historically focused on the domestic market but saw exports as a relief valve in recent years amid reduced local steel consumption and production, in addition to a flood of Chinese steel imports.

Ferrous scrap exports last year represented less than 10% of total annual consumption in Brazil, at around 9-10 million mt, according to the national scrap association, Inesfa.

The highest volume of scrap exported from Brazil was recorded in September, when 98,326 mt were shipped abroad. Most of the material exported in 2023, around 70%, was heavy melting steel scrap, with the remainder a mix of shredded, light melting scrap bundles, plate and structural, and turnings scrap.

India steel boom
India’s economic boom and the country’s ambitious plan on steel production were also factors in the shift of Brazil’s ferrous scrap exports.

S&P Global analysts forecast India will become the world’s third-largest economy by 2030, driving steel production and consumption in the country. The nation ranked as the second-largest steel producer in 2023 with 140.2 million mt, up 11.8% on the year, according to data from World Steel Association.

Although India has announced an installed capacity target of 300 million mt by 2030, S&P Global estimates the country is more likely to achieve a capacity of around 200 million mt due to the long construction timelines of new steel facilities and the approval of new greenfield projects.

Data from S&P Global and the Ministry of Steel India indicates annual domestic supply of steel scrap in the country hovers around 25 million mt. To reduce this dependency on foreign material, India would need at least 70 new scrap processing centers with 300 collection and dismantling centers.

India imported a record 10.47 million mt of ferrous scrap over January-November 2023, up from 6.84 million mt in January-November 2022, according to the latest Indian customs data.

But to fulfill needs linked to the expansionary crude steel production plans by 2030, the Indian industry would require an additional 70 million-80 million mt of scrap supply or 700 new scrap processing centers with 2,800-3,000 collection and dismantling centers, S&P Global analysis indicates.

Brazilian steel downturn
Brazil produced 31.9 million mt of crude steel in 2023, down 6.5% on year, as domestic mills saw part of their traditional market shares eroded by an import surge, the Brazilian Steel Institute (IABr) said.

Direct imports of steel in 2023 soared 50% over the previous year to around 5 million mt, IABr data shows. Mills’ domestic sales fell 4.4% to 19.4 million mt in 2023, while Brazil’s steel export sales fell by 1.8% on year to 11.7 million mt.

“Pig iron became very cheap, and mills increased its consumption to lower costs,” a scrap dealer said. “In a scenario of low production, they decreased scrap purchases, which left material piling up in the domestic market; without exports, the industry would have collapsed.”

With scrap prices remaining static during first half of the year, scrap suppliers were facing the difficulty of maintaining their financial margins amid rising costs.

“Moreover, Brazilian steelmakers were more rigorous when purchasing and selecting quality material seeking operational efficiency, thus applying heavy discounts on deliveries due to impurities,” a local source said.

Data analyzed by S&P Global showed Brazilian ferrous scrap export prices were at an average premium of 30% over the domestic traded material during the 12-month period in 2023 on a $265/mt FOB basis.

Santos port, in the Brazilian southeastern Sao Paulo state, was the primary ferrous scrap export hub in 2023, handling 330,008 mt, or 40% of the national total. The ports of Sao Francisco do Sul, Itajai, Paranaguá, and Rio Grande, located in the southern states of Santa Catarina, Rio Grande do Sul, and Parana, respectively, combined for 318,438 mt, or 41% of total exports.

Inesfa said if the Brazilian government ensures the same economic conditions and the jump in freight costs do not turn negotiations unfeasible, scrap exports volumes should remain at the same high levels in 2024.


Source: hellenicshippingnews.com



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