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Global Economic Contraction: Navigating the Crushing Waves
of ChangePresentation to:
Ferrous Division, BIR World Recycling Convention Prague, The Czech Republic
by: Becky E. Hites, PresidentOctober 27, 2015
Our New Challenging World
• Less homogeneous economic growth.• Commodity oversupply for the next decade will
impact pricing.• China’s attempt to shift back to a consumer based
economy has stalled growth in many trade partner countries.
• Currency instability has also disrupted global trade.• Managing through tumultuous times requires
tenacity.• USA scrap export volumes now trail the EU.
2
Global GDP More Than Doubled from 2002 to 2014
3
0
10
20
30
40
50
60
70
80
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
$ in
Tri
llion
s
Global GDP - 54 Years
Source: The World Bank
Global GDP Has Only Had 5 Down Years in the Past 55 Years – So 10% of the Cycle
4
-10%
-5%
0%
5%
10%
15%
20%
25%
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Perc
ent C
hang
e
Global GDP Growth
Source: The World Bank
Europe and North America Account forAlmost Half of the Global Economy
5
North America25%
European Union24%
East Asia & Pacific (all income levels) less
China14%
China13%
Latin America & Caribbean (all income levels)
8%
Europe & Central Asia (all income levels)
6%
MENA5%
South Asia3%
Other2%
Global GDP by Region, 2014
Source: The World Bank
Top 10 Economies Account for 65% of Total Global GDP – Includes 3 Developing Countries
6
United States22%
China13% Japan
6%Germany
5%
United Kingdom4%
France4%Brazil
3%Italy3%India
3%Russian Federation
2%
Other35%
Top 10 Economies Percent of Global GDP, 201465% of Total Global GDP
Source: The World Bank
Global GDP in Sync in 2003/2004 and 2011
7
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014World 38.6 43.5 47.0 51.0 57.5 63.0 59.7 65.5 72.6 74.0 76.1 77.9 North America 12.4 13.3 14.3 15.2 15.9 16.3 15.8 16.6 17.3 18.0 18.6 19.2 European Union 11.9 13.7 14.3 15.3 17.7 19.0 17.0 16.9 18.3 17.2 18.0 18.5 East Asia & Pacific (all income levels) less China 6.8 7.5 7.8 8.0 8.5 9.3 9.2 10.6 11.7 12.1 11.3 11.1 China 1.6 1.9 2.3 2.7 3.5 4.6 5.1 6.0 7.5 8.5 9.5 10.4 Latin America & Caribbean (all income levels) 2.0 2.4 2.9 3.4 4.0 4.6 4.3 5.4 6.1 6.1 6.3 6.3 Europe & Central Asia (all income levels) 1.5 1.9 2.3 2.7 3.4 4.1 3.3 3.9 4.6 4.8 5.0 4.7 MENA 1.1 1.2 1.5 1.8 2.1 2.6 2.3 2.7 3.3 3.5 3.6 3.5 South Asia 0.8 0.9 1.1 1.2 1.5 1.6 1.7 2.1 2.3 2.3 2.4 2.6 Other 0.5 0.6 0.7 0.8 0.9 1.0 1.0 1.3 1.5 1.5 1.6 1.7 Arab World 0.8 1.0 1.2 1.4 1.6 2.1 1.8 2.1 2.5 2.7 2.8 2.9
Growth RatesWorld 12.3% 12.6% 8.2% 8.4% 12.7% 9.6% -5.2% 9.7% 10.8% 2.0% 2.8% 2.3%North America 5.7% 7.2% 7.3% 6.4% 5.1% 2.0% -2.9% 5.0% 4.4% 4.0% 3.4% 3.2%European Union 21.9% 15.5% 4.6% 6.7% 15.6% 7.6% -10.6% -0.4% 8.1% -5.9% 4.2% 2.8%East Asia & Pacific (all income levels) less China 9.3% 10.8% 3.8% 2.1% 6.3% 9.5% -1.0% 15.1% 11.0% 3.3% -6.7% -2.3%China 12.9% 17.7% 16.8% 20.3% 29.1% 29.4% 11.0% 19.4% 24.1% 12.9% 12.2% 9.2%Latin America & Caribbean (all income levels) 2.9% 16.2% 21.1% 17.4% 18.1% 16.2% -6.0% 23.7% 13.3% 0.6% 2.2% 0.6%Europe & Central Asia (all income levels) 22.2% 25.0% 20.2% 18.0% 24.1% 21.3% -18.7% 17.5% 18.8% 3.2% 4.3% -6.2%MENA 12.1% 16.3% 20.3% 18.2% 18.0% 24.8% -10.7% 16.3% 21.2% 7.3% 1.8% -1.9%South Asia 16.7% 16.0% 14.6% 14.3% 26.7% 1.7% 9.9% 22.2% 9.2% 0.6% 2.7% 10.7%Arab World 12.9% 17.3% 23.0% 18.6% 16.9% 26.9% -13.5% 17.0% 18.7% 10.3% 3.6% 0.4%
Source: The World Bank
GDP by Region($ in Trillions)
Three of the Top 10 Economies – Japan, Brazil and Russia - Were Down in 2014
8
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014United States 11.5 12.3 13.1 13.9 14.5 14.7 14.4 15.0 15.5 16.2 16.8 17.4 China 1.6 1.9 2.3 2.7 3.5 4.6 5.1 6.0 7.5 8.5 9.5 10.4 Japan 4.3 4.7 4.6 4.4 4.4 4.8 5.0 5.5 5.9 6.0 4.9 4.6 Germany 2.5 2.8 2.9 3.0 3.4 3.7 3.4 3.4 3.8 3.5 3.7 3.9 United Kingdom 1.9 2.3 2.4 2.6 3.0 2.8 2.3 2.4 2.6 2.6 2.7 2.9 France 1.8 2.1 2.2 2.3 2.7 2.9 2.7 2.6 2.9 2.7 2.8 2.8 Brazil 0.6 0.7 0.9 1.1 1.4 1.7 1.7 2.2 2.6 2.4 2.4 2.3 Italy 1.6 1.8 1.9 1.9 2.2 2.4 2.2 2.1 2.3 2.1 2.1 2.1 India 0.6 0.7 0.8 0.9 1.2 1.2 1.4 1.7 1.8 1.8 1.9 2.1 Russian Federation 0.4 0.6 0.8 1.0 1.3 1.7 1.2 1.5 1.9 2.0 2.1 1.9 Other 11.7 13.6 15.3 17.1 19.9 22.4 20.3 23.0 25.8 26.3 27.3 27.4
Top 10 26.9 29.9 31.8 33.8 37.6 40.6 39.4 42.5 46.8 47.7 48.9 50.4 Percent of Total 70% 69% 68% 66% 65% 64% 66% 65% 64% 64% 64% 65%
Top 10 Economies Growth RatesUnited States 4.9% 6.6% 6.7% 5.8% 4.5% 1.7% -2.0% 3.8% 3.7% 4.2% 3.7% 3.9%China 12.9% 17.7% 16.8% 20.3% 29.1% 29.4% 11.0% 19.4% 24.1% 12.9% 12.2% 9.2%Japan 8.1% 8.2% -1.8% -4.7% 0.0% 11.3% 3.8% 9.1% 7.5% 0.8% -17.4% -6.5%Germany 20.5% 12.5% 1.5% 4.9% 14.6% 9.1% -8.9% 0.0% 10.0% -5.8% 5.6% 3.3%United Kingdom 16.1% 18.2% 5.0% 7.1% 14.7% -5.8% -17.3% 4.3% 7.6% 0.9% 2.4% 9.8%France 23.2% 14.9% 3.7% 5.5% 14.5% 9.8% -7.9% -1.7% 8.1% -6.3% 4.8% 0.7%Brazil 9.9% 19.8% 33.2% 24.2% 26.0% 21.4% -1.8% 32.7% 18.4% -7.7% -0.9% -1.9%Italy 23.9% 14.6% 3.0% 4.9% 13.4% 8.5% -8.6% -2.7% 7.1% -8.9% 3.0% 0.3%India 18.0% 16.7% 15.6% 13.8% 30.5% -1.2% 11.5% 25.1% 7.5% -0.2% 1.6% 11.0%Russian Federation 24.7% 37.3% 29.3% 29.6% 31.3% 27.8% -26.4% 24.7% 24.9% 5.8% 3.1% -10.5%Other 16.0% 16.5% 12.6% 12.1% 16.1% 12.7% -9.3% 12.9% 12.5% 1.9% 3.7% 0.7%
Top 10 10.8% 11.0% 6.2% 6.6% 11.0% 8.0% -2.9% 8.0% 9.9% 2.1% 2.3% 3.2%
Source: The World Bank
Top 10 GDP Economies($ in Trillions)
Not Only Are the Global Economies “Out of Phase”; The Long Cycle of Growth Has Likely Peaked
9
• As early as the 1920s-1930s, theories emerged about a long cycle in the global economies. The Kondratiev Wave (or K-Wave) postulated that economies modulate between high and low growth over a 50-55 year cycle as measured by prices and the inflation rates.
• Over the years, theories about the length of the cycle have proliferated, generally ranging from 20-40 years, and have been tied to some new evolutionary change that refueled the growth engine.
The Information Revolution & China Drove the Last AccelerationWhat Will Drive the Next One?
10
China Embracing Some Aspects of Capitalism Filled The Global Economic Sails in the First Half of the Decade
• During this author’s professional life, I personally have witnessed 3 periods when the world’s economies aligned, resulting in higher global growth and driving commodity prices to new highs as all of the geographic markets competed for limited supply.
• Led by the strong growth in China’s economy starting in 2003, we experienced such a period from 2003-2004, and continued strong growth (Japan’s economy was in recession) until 2008 when the Lehman Crisis triggered a dramatic economic disruption in most countries.
11
These Growth Periods Are Typically Accompanied by Price Surges Driven by Commodity Supply Shortages
12
Chart is dated, but shows the
theory overlaying the change
in wholesale
pricing.
Global Economic Growth of 2%-3% Feels “Lousy” When You’re Used to 4%-5%
• Most economies had recovered by 2010 and the world was in positive sync again in 2011.
• In 2012, half of the top 10 economies contracted and the economies have been out of sync since.
• Global GDP growth for the past 3 years ranged from 2.0-2.8%.
• The world is still vulnerable to a slowdown which would approach a flat performance.
• Banking system has been shored up since the 2008 meltdown, but is still not resilient.
13
Macro Economic Events Creating a Headwind The USA Fed, Greece & Trade Bank Defunded
• The USA Federal Reserve Bank continues to signal its intention to shift away from quantitative easing and back to a more “normal” stance by raising rates to add a time value to money. The international banking community continues to strongly warn of risk to secondary currencies from such a move.
• Greece’s debt issues have been seemingly resolved in the near term, but the region isn’t stable. The risk from the West’s perspective is that if Russia or China step up to provide a financial bridge, that would be a significant shift in the power balance of the region.
• EXIM Bank in the USA has been defunded. • IMF & World Bank continue to signal global economic
vulnerability.
14
Higher Cost Energy – Could be Low Cost, But Opting for a Cleaner Environment
• Oil has now been in global oversupply for 5 quarters starting Q3 2014 – the longest period in my adult lifetime. Bloomberg, June 16, 2015
• Pope Francis has entered the clean environment fray with an “encyclical” calling for more action to halt climate change.
• Renewable energy generation could overtake coal in 15 year. Financial Times, June 14, 2015
• Between now and 2040, expecting $3.7 trillion in solar energy capital investments. Bloomberg Business, June 23, 2015
15
Global Dislocation & Other “Scandals” Disrupting Economics
• Russia Ukrainian border – Has seriously impacted steel production from Ukraine, which was low cost production, and has somewhat impacted raw material costs into Russia. Russia has rattled its saber about restricting scrap outflows due to shortages in the country.
• Asylum seekers are creating an immigration crisis in Europe. Will the fragile economies be able to absorb the impact, or will it cause them to falter?
• ISIS – USA had begun training forces in the region, arguably unsuccessfully, after the conflict began to migrate to US soil.
• Russia countered by providing air support for Bashar al-Assad in Syria.
• VW diesel emissions scandal could derail Germany’s economic performance.
• FIFA corruption could impact the next two World Cups. Soccer is big business globally.
16
Commodities Have a Non-Linear Supply Curve
• Classic economic theory quite accurately predicts that as prices rise with increased demand, supply will be developed to meet that demand.
• Regarding many, if not all, of the raw materials supplying the steel industry and basic industry in general, additional new supply is not linear, but rather choppy in that it takes a period of years to identify the new resource to be developed, obtain the required environmental licenses, establish funding and then develop the mine.
17
Demand Goes Undersupplied, And Prices Rise
• Thus, the demand goes undersupplied for an extended period until supply catches up.
• And often then supply exceeds demand, pushing the cycle into the over-supply phase.
• Where marginal projects that should not have been completed, but were caught up in the exuberance of the shortage, now get terminated.
18
When Demand Drops, Prices Drop Sharply As Too Many Tonnes Chase Too Little Demand
Rebar Blended Export Rebar Home Billet Export SpreadExport HM Metal Home Metal Import Metal Billet
Market Scrap Margin Market Margin CFR Margin to Scrap
2005 403 503 2006 490 637 2007 577 684 2008 924 419 505 945 440 426 498 7 2009 467 251 216 622 407 276 191 25 2010 582 345 237 716 479 383 199 38 2011 693 423 269 832 562 458 235 35 2012 635 385 250 776 526 411 225 26 2013 595 351 243 728 485 380 214 29 2014 565 340 225 672 446 360 205 20 2015e 413 218 195 521 327 209 203 (9)
Sep-15 345 219 126 490 364 208 137 (11)
Source: SBB Platts, Market Sources & Steel-Insights, LLC estimates
Turkey Rebar Price Scrap Margin Table($ per Metric Tonne)
19
Nucor Corporation Price & Metal Margin Analysis For Sheet & Bar Products
20
550
600
650
700
750
800
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
$ pe
r N
et T
on
Nucor Sheet Average Sales Price
Source: Company Reports
TTMMA
275
295
315
335
355
375
395
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
$ pe
r N
et T
on
Nucor Sheet Metal Margin
Source: Company Reports
TTMMA
600
650
700
750
800
850
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
$ pe
r N
et T
on
Nucor Bar Average Sales Price
Source: Company Reports
TTMMA
325
335
345
355
365
375
385
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
$ pe
r N
et T
on
Nucor Bar Metal Margin
Source: Company Reports
TTMMA
Nucor Corporation Price & Metal Margin Analysis For Structural & Plate Products
21
850
900
950
1,000
1,050
1,100Q
1 20
12
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
$ pe
r N
et T
on
Nucor Structural Average Sales Price
Source: Company Reports
TTMMA
400
450
500
550
600
650
700
750
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
$ pe
r N
et T
on
Nucor Structural Metal Margin
Source: Company Reports
TTMMA
600
650
700
750
800
850
900
950
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
$ pe
r N
et T
on
Nucor Plate Average Sales Price
Source: Company Reports
TTMMA
375
395
415
435
455
475
495
515
535
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
$ pe
r N
et T
on
Nucor Plate Metal Margin
Source: Company Reports
TTMMA
China – The Evil Empire? The All Encompassing Destructive Wave?
22
12th 5-Year Plan (2011-2015) made it a priority to shift back to a consumer based economy. Was industrial and trade based.
Private Consumption Was 50% of GDP in 1980 –New Plan is Seeking to “Catch Up” That Segment
23
“China Needs to Keep Employment High” is the Ubiquitous Comment When the Topic of the China’s Steel Production Overcapacity is Raised
• 1.4 billion people in China compared to the world at 7.3 billion – about 19% of the total.
• In the 1970s, capitalist reforms put in place by Deng Xiaoping started a migration to cities.
• In 2012, more people lived in cities than in rural areas – 691 million. As a point of reference, the entire USA population is under 320 million.
• Young people in China are leaving government jobs and heavy industry in favor of finance.
24
China Will Be Shifting Jobs Out of the Steel Industry Into Other Areas
• The incentives have been, and will continue to be diverted away from the steel industry.
• September 2013 President ordered “self-criticism”.
• January 2015 steel export rebate removed.
25
Pangang Chengdu Steel & Vanadium Company Closed in April 2015, Cutting 16,000 Jobs
• China’s Shift Away From Industry Drains Life From a Steel Town. Company towns dependent on closed factories are being uprooted, reminiscent of Rust Belt America. WSJ, September 8, 2015
• Has China Finally Started Curtailing Steel Production? MarketRealist, August 27, 2015
• It won’t be a quick, or easy process, but it has started to happen.
• China is still a “controlled economy” so the regulators have additional tools to affect change. (Comment: At the recent NABE annual conference in DC, it was discussed that it seems like China is repeating some of the mistakes the USA Fed made in the 1960s, so there will be a learning curve as they make the decisions regarding management of their banking system.)
26
Process Won’t Be Without Challenges
• China was the latest, largest incremental demand of most resources.
• The recent attempt to bring their currency back to “parity” caused a panic in the financial markets.
• Business gets transacted in stable environments. We’re in a period with a lot of instability with parties trying to figure out how to adjust their business practices to “not get hurt”.
27
RMB Is On Track to Become a Reserve Currency
• China Knocks on the Reserve-Currency Door, The Economist, August 5, 2015
• China’s RMB Set to Become the World’s Greatest Currency, Live Trading News, October 19, 2015
• The Yuan as a Reserve Currency? Not So Fast, Forbes, September 14, 2015
• How the Yuan Could Achieve Reserve Currency Even if the USA Objects, Wall Street Journal, April 28, 2015
• IMF Signals Yuan Won’t Become Reserve Currency For At Least a Year, Wall Street Journal, August 19, 2015
• China’s Central Bank Announced It Has Issued 5-Billionn Yuan Denominated Notes in London, the First Offshore Issuance of Such Debts Outside of China, Xinhuanet, October 22, 2015
28
One Criteria Has Been Met, Working on the Second
• Currency must be a significant participant in global trade – China accounted for 12.4% of global exports last year according to JP Morgan.
• Currency must be “stable” and freely used. Recent devaluation and bond offering seem to be steps to fulfil this requirement.
• If a currency meets these two criteria, then just needs a 70% vote to be included. The USA doesn’t have enough votes to block it.
• The UK seems to be supporting the Chinese efforts.• IMF has said it’s more a matter of “when” rather than
“if”.• IMF vote delayed to November from October 2015 seen
as a signal of possible inclusion.
29
USA Trade Weighted Dollar Index Has Appreciated 20% from the Most Recent May 2014 Low
30
60
80
100
120
140
160
Jan-
77Ja
n-78
Jan-
79Ja
n-80
Jan-
81Ja
n-82
Jan-
83Ja
n-84
Jan-
85Ja
n-86
Jan-
87Ja
n-88
Jan-
89Ja
n-90
Jan-
91Ja
n-92
Jan-
93Ja
n-94
Jan-
95Ja
n-96
Jan-
97Ja
n-98
Jan-
99Ja
n-00
Jan-
01Ja
n-02
Jan-
03Ja
n-04
Jan-
05Ja
n-06
Jan-
07Ja
n-08
Jan-
09Ja
n-10
Jan-
11Ja
n-12
Jan-
13Ja
n-14
Jan-
15
Mar
ch 1
973=
100
US Trade Weighted Dollar Index
Source: Board of Governors of the Federal Reserve System
Trailing Twelve Month MovingAverage
U.S. Dollar is the Safest Haven – But Not Strong Enough to Perpetuate Global Trade
• The dollar isn’t strong because the USA economy is strong, but rather because the rest of the world is weak.
• It’s been said that the USA is the cleanest shirt in the laundry.
• Global trade needs a stable currency for all parties to measure value.
• World trade is in decline for the first time since WWII, when currencies displaced barter as the basis for trade.
31
A Secondary Strong Dollar Impact is on the Regional Steelmaking Costs
• Most commodities are priced in US dollars, which has stayed high.
• Most commodity costs are in local currencies, which have declined in “cost” relative to the dollar.
• In a market that is over supplied, classic economic theory dictates that the price will drop until the higher priced supply is removed from the market and a new lower equilibrium price is reached.
• Thus, the lowest cost market will set the price, and the higher dollar value will, by definition, prohibit any strong currency countries from being the low cost producer country.
32
USA Global Trade Policy Highlights
• Export-Import Bank charter up for renewal. Jeff Immelt warned GE would withhold business from states where politicians block international trade and export credit support. In the USA, it looks like now the Congress have the votes to fund and reboot the institution.
• Trans-Pacific Partnership (TPP) – In negotiations since 2009. Expansion of the 2005 agreement with Brunei, Chile, New Zealand ad Singapore. From the Trade Department website: “The United States is negotiating the TPP with 11 other like-minded countries (adding Australia, Canada, Japan, Malaysia, Mexico, Peru and Vietnam) that share a commitment to concluding a high-standard, ambitious agreement and to expanding the initial group to include additional countries throughout the Asia-Pacific region. We are in the endgame of negotiations, making TPP the most promising platform for Asia-Pacific regional trade integration.”
• The USA already has trade partnerships with all of the countries covered in the TPP except Japan. The benefit is that the TPP removes all the current trade tariffs with Japan and the concern is that the benefit will be disproportionate. Mexico has actually picked up trade because it has a tariff free relationship with Brazil. A concern is that China will likely join within the next half decade through its current trade relationships in Asia that will give it automatic access.
33
Strategy for Current Challenging Trade Environment – Focus on What You Can Control
• We’re in a low price, low demand, highly uncertain environment. It’s not just the metals industry but all industries.
• Job One – mitigate risk.– Cut costs where possible.– Use financial instruments to reduce market exposure.
• Every market provides opportunities.– Who moved my cheese?
• It won’t be “business as usual” for some time.• Be creative and cast a wide net.
– Many steelmaking shops are being idled.• In Europe• In the UK• In the USA• Probably in other markets
34
USA Scrap Consumption at 52 Million Tonnes in 2014 Is Down30% From the 2000 Recent Peak of Almost 75 Million Tonnes
35
0
10
20
30
40
50
60
70
80
90
100
110
120
1939
1941
1943
1945
1947
1949
1951
1953
1955
1957
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1961
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1969
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1975
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1981
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1987
1989
1991
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1999
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2007
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2011
2013
Mill
ion
Met
ric
Tonn
es
USA Scrap Production, Exports & Consumption
Production Exports Consumption
Source: Mineral Commodity Summaries, US Geological Survey, US Department of the Interior
USA Scrap Exports at 14 Million Tonnes Are Down 40% From the 2011 Peak of 22 Million Tonnes
36
0
5
10
15
20
25
30
35
40
Jan-
00
Jul-0
0
Jan-
01
Jul-0
1
Jan-
02
Jul-0
2
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Jul-0
3
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Jul-0
4
Jan-
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Jul-0
5
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Jul-0
6
Jan-
07
Jul-0
7
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Jul-0
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Jan-
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Jul-0
9
Jan-
10
Jul-1
0
Jan-
11
Jul-1
1
Jan-
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Jul-1
2
Jan-
13
Jul-1
3
Jan-
14
Jul-1
4
Jan-
15
Jul-1
5
Mill
ion
Gro
ss T
ons
USA Scrap Exports, Monthly Annualized Rate
Source: US Department of Commerce & US Trade Commission
USA Scrap Top Export Destinations - China Dropped Out of the Top 10 in 2014; Top 10 Accounted for 84% Down from 90% Plus
37
2000 2005 2007 2008 2009 2010 2011 2012 2013 2014 % Chg
1. Turkey 0.00 1.50 3.26 4.48 3.53 4.35 5.64 6.40 5.23 3.62 -31%2. Taiwan 0.30 0.29 1.64 2.58 1.77 2.27 3.27 3.21 2.75 2.41 -12%3. Korea 1.44 1.13 1.36 2.64 2.85 2.57 2.87 2.68 2.38 1.59 -33%4. Eqypt 0.00 0.21 0.50 0.87 0.36 0.65 0.90 0.37 0.87 0.84 -3%5. Mexico 1.01 1.50 0.86 0.85 0.53 0.60 0.53 0.71 0.59 0.67 13%6. Canada 1.29 2.16 1.41 1.68 0.55 0.90 0.97 0.78 0.66 0.65 -1%7. India 0.06 0.81 0.78 0.88 1.14 0.79 1.06 0.99 0.40 0.49 22%8. Thailand 0.13 0.35 0.86 1.06 0.38 0.54 0.77 0.31 0.07 0.47 615%9. Kuwait 0.04 0.45 932%10. Malaysia 0.09 0.46 1.21 1.27 0.68 0.79 0.97 0.79 0.51 0.44 -13%
Top 10 % of Total 94% 92% 87% 88% 89% 89% 92% 91% 89% 84%
11. China 1.09 3.54 2.45 2.83 5.34 2.62 3.55 1.41 1.42 0.44 -69%12. Indonesia 0.01 0.19 0.22 0.37 0.36 0.36 0.22 0.48 0.50 0.34 -33%13. Vietnam 0.00 0.03 0.16 0.31 0.69 0.60 0.37 0.48 0.43 0.30 -30%
Total 5.78 13.00 16.48 21.71 19.22 18.02 22.21 19.28 16.78 13.80 Percent Change 10% 11% 32% -11% -6% 23% -13% -13% -18%
(Note: Includes HTS#s 720410, 720421, 720429, 720430, 720441, 720449 and 720450.)(Comment: Data differs by source depending on the categories of scrap included.)Source: USITC DataWeb
USA Scrap Exports by Top 10 Destinations(Million Metric Tonnes)
EU Displaced the USA in 2014 as the Top Scrap Exporter; Each Country Accounts for About A Third of the Market
2006 2007 2008 2009 2010 2011 2012 2013 2014 % Chg
EU-28 10,083 10,566 12,799 15,779 19,033 18,813 19,579 16,806 16,859 0.3%USA 13,978 16,642 21,712 22,439 20,556 24,373 21,397 18,495 15,340 -17.1%Japan 7,654 6,449 5,344 9,398 6,472 5,442 8,586 8,129 7,351 -9.6%Russia 9,797 7,855 5,128 1,202 2,390 4,042 4,349 3,714 5,689 53.2%Canada 4,000 4,100 4,084 4,792 5,154 4,832 4,248 4,510 4,521 0.2%Australia 1,335 1,501 1,708 1,925 1,636 1,745 2,245 2,200 2,362 7.4%South Africa 555 752 1,271 1,144 1,224 1,436 1,632 1,732 1,486 -14.2%Total 47,402 47,865 52,046 56,679 56,465 60,683 62,036 55,586 53,608 -3.6%
EU % of Total 21% 22% 25% 28% 34% 31% 32% 30% 31%USA % of Total 29% 35% 42% 40% 36% 40% 34% 33% 29%
Source: World Steel Recycling in Figures, BIR
Global Scrap Exports by Region/Country(Million Metric Tonnes)
38
USA Supplied Only 1/5 of Turkey’s Scrap Imports in 2014; 56% of Taiwan’s Scrap Imports
USA2006 2010 2011 2012 2013 2014 % Chg %
Turkey 15,100 19,192 21,460 22,415 19,725 19,068 -3.3% 19%Korea 5,621 8,091 8,628 10,126 9,260 8,002 -13.6% 20%India 3,359 4,643 6,175 8,180 5,636 5,699 1.1% 9%Taiwan 4,459 5,364 5,328 4,955 4,453 4,272 -4.1% 56%USA 4,814 3,775 4,003 3,711 3,882 4,215 8.6%EU-28 7,294 3,646 3,714 3,203 3,191 3,137 -1.7% 0%China 5,386 5,848 6,767 4,974 4,465 2,564 -42.6% 17%Indonesia 1,063 1,642 2,157 1,944 2,399 2,137 -10.9% 16%Canada 1,476 2,226 1,911 2,343 1,746 1,520 -12.9% 43%Thailand 1,373 1,282 1,877 1,701 961 1,383 43.9% 34%
Source: World Steel Recycling in Figures, BIR and Steel-Insights, LLC Analysis
Global Scrap Imports by Region/Country(Million Metric Tonnes)
39
2015 USA Scrap Exports Down 17%; But Up In 5 of the Top 10 Markets
40
2014 2015 % Chg
1. Turkey 2,399 2,464 2.7%2. Taiwan 1,664 1,277 -23.3%3. Korea 1,203 742 -38.3%4. Mexico 477 627 31.4%5. India 316 516 63.3%6. Canada 401 293 -26.9%7. Thailand 331 278 -16.0%8. China 320 262 -18.1%9. Vietnam 215 238 10.7%10. Peru 184 218 18.5%
Total 9,484 7,869 -17.0%
(Note: Includes HTS#s 720410, 720421, 720429, 720430, 720441, 720449 and 720450.)(Comment: Data differs by source depending on the categories of scrap included.)Source: USITC DataWeb
USA 2015 versus 2014 Scrap Exports by Top 10 DestinationsYear-To-Date Through August
(Million Metric Tonnes)
Steel-Insights, LLC – “Seeing” What Others Don’t
41
In WWII, American submarine commanders endured despite being outclassed by superior equipment and outgunned (fully functioning torpedoes weren’t available to them for the first 21 months of the Pacific War). In the fog of war, as often is the case in business, decisions with long impacting outcomes have to be made without the luxury of complete or definitive information.
Steel-Insights was formed to assist executive management teams navigate the “noise of battle” by more effectively managing the abundant resources available today and
harnessing those resources to explore thought provoking and penetrating issues in order to magnify the pivotal decisions required for the long-term success of their companies in arguably tough industries that must survive challenging cycles, i.e. training and empowering submarine commanders.
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