TPT January 2013

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Global Marketplace
72 January 2013
Businessweek (9 October), Michelle Yun quoted Chun Chi
Wai, who heads China’s largest scrap dealer, as saying that
this increase would displace some demand for iron ore as
more recycled material becomes available.
Scrap may account for more than 20 per cent of steel
production in China by 2015, from 14 per cent now, which will
put some pressure on iron ore prices, Mr Chun said by phone
from Shanghai the previous day. The company controls about
6 per cent of the fragmented scrap market, he said.
“China’s steel production growth is set to slow from double
digit gains in the past,” Mr Chun said. “Meanwhile, there will
be more and more recycled steel, which will definitely reduce
the use of iron ore.”
Supplying context, Ms Yun noted that China, the world’s
biggest steelmaker, responded to slowing economic growth
by cutting production in August to its lowest level in six
months. Steel prices fell in September to their lowest level
since the 2008 financial crisis.
Mr Chun told Bloomberg that, while such suppliers of iron
ore to China as the British-Australian producer BHP Billiton
and Brazil’s Vale SA have shelved new projects – or plan to
cut output – China Metal Recycling is looking to expand as
steelmakers demand more scrap. His company plans to set
up operations close to Zhanjiang in Guangdong province,
where its customer Baosteel Group Corp is building an $11bn
plant to produce high-grade sheets for automobilve and
appliance applications.
China Metal Recycling was also, Mr Chun said, planning to
introduce an electronic scrap-trading platform by the end of
the year for its network of about 10,000 buyers and sellers.
› Ms Yun cited a July report by HSBC Holdings Plc that, by
comparison with the 60 per cent scrap usage by American
steelmakers, China’s scrap consumption is low. Noting the
greater energy- and cost-effectiveness of using scrap, Mr
Chun of China Metal Recycling estimated that building a steel
mill using iron ore would be at least two-thirds more expensive
than one using scrap.
Steel producers in Brazil, profits
squeezed by rising costs, seek an
export tax strongly opposed by
the scrap metal industry
The Brazilian scrap metal sector, which employs more than
1.5 million people, has launched an initiative to persuade
lawmakers and government officials to block a proposal of the
steel industry lobby to implement an export tax on scrap. The
levy, submitted by Instituto Aço Brasil, or IABr, to the Ministry
of Development, Trade and Industry, is perceived as having
potential to allow mills to control costs by limiting the pricing
power of the scrap producers.
Reporting from São Paulo on 6 November, Guillermo Parra-
Bernal outlined the dispute. Marco Polo de Mello Lopes,
executive president of Rio de Janeiro-based IABr, said in a
phone interview with the Reuters correspondent that the
proposed tax is not an action against the scrap sector but an
effort to impose “a barrier to countries that block our exports
of steel-related products”.
According to Mr Lopes, two-thirds of Brazilian scrap metal
is exported to countries which – like China, India and Iran
– impose restrictions to the entry of Brazilian value-added
products. He said, “Our tax proposal is simply a matter of
trade reciprocity”.
The main constituent of steel produced in electric arc furnaces
is widely used by Gerdau SA, the largest Brazilian producer of
long steel; Votorantim Siderurgia, a unit of Grupo Votorantim;
and the local unit of Luxembourg-based ArcelorMittal. The
opposition view to the steel makers’ position was expressed
by André de Almeida, a legal director for Instituto Nacional das
Empresas de Sucata de Ferro e Aço, a group representing
the scrap sector and known as Inesfa.
Mr Almeida said that scrap producers export 0.2 per cent of
the 10 million metric tons of scrap produced annually in Brazil
and sold at a 33 per cent discount to international prices. In his
view, the largest steel groups want the government to create
the export tax because they are not willing to pay a fair price
for the scrap they consume. He posed the question: “Is it fair
that millions of people have to pay in order to sustain the profit
margins of those groups?”
› Grappling as they are with a domestic output glut and
rising costs for such raw materials as coal, Brazil’s steel
makers seem likely to stand fast in a dispute that Mr Parra-
Bernal said underscores the high level of protection that local
industrial conglomerates enjoy.
He wrote, “President Dilma Rousseff’s administration has
stepped up protection of steel and other industrial groups by
hiking taxes on imports of some products, slashing taxes on
payrolls, and ensuring demand for flat and long steel products
by home appliance and auto makers as well as homebuilders.”
For his part, IABr’s Mr Lopes denied that his group and the
mills in general are against exports of scrap. He insisted,
“What is motivating us is a trade issue, nothing else”.
Pennsylvania clamps down, hard,
on breaches of its Steel Products
Procurement Act stipulating
75 per cent domestic content
“If you build something with Pennsylvania tax dollars, state law
says you have to use American steel.”
Summarised by Rich Lord of the Pittsburgh Post-Gazette, this
“domestic content rule” governs municipal building projects in
a leading iron and steel producing state. Mr Lord would go on
to show the rule in action. (“State Sues McKeesport Firm for
Not Using Domestic Steel,” 20 October)
Pennsylvania’s Steel Products Procurement Act demands that
steel products used in state-backed public works be at least