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Scandinavia

The winter and summer months in Scandinavia are when activity in the recycled steel industry is at its lowest. Cold weather and considerable snowfalls in some areas put a natural dampener on activity levels in the early months of the year, such as in the construction sector.

Over the winter period in 2022/23, activity has also been impacted by sharply rising inflation and interest rates among the Scandinavian countries. Inflation in Denmark was 7.7% in 2022. The rising cost of living has a direct impact on the supply of recycled steel materials, as both the public and companies postpone investments. The logic is simple: if heating costs rise as strongly as was the case in 2022, then replacing the family car will be postponed and its life will therefore be extended; and when the business environment is uncertain, industrial investments are shelved accordingly. This is the primary reason why available recycled steel volumes have been relatively low in 2023 when compared to previous years.

The Turkish recycled steel market (through the Turkish Steel Index or TSI) is largely the price-setter for HMS qualities in Scandinavia. In January, prices were between US$ 400 and US$ 422 per tonne CIF Turkey but increased sharply in the latter part of February, possibly as a result of the devastating earthquakes in southern Turkey, such that by the end of that month the TSI stood at US$ 452.50 per tonne. This rising price trend continued into March, peaking on March 14 at US$ 463 per tonne. Since then, however, prices have been on a downtrend, driven primarily by falling demand for finished steel. At the time of writing, the price has dropped below the US$ 400 mark.

The Indian market for recycled steel has been relatively stable over the last year, generally being considerably less volatile than is the case for Turkey; recently, however, Indian prices have also followed a downward trend. In Pakistan, meanwhile, the depreciating local currency is currently limiting the possibilities of taking out larger letters of credit.

In Europe, capacity shutdowns have been seen at several steel mills while others are operating at 50% utilization rates, with the main reason again being lack of demand for finished steel.

The current downward pressure on container freight rates is making it cheaper for exporters to reach markets in India and Pakistan. For bulk shipments, the freight rate is more stable and at a significantly lower level than was the case during the COVID pandemic. Rates are expected to remain at a relatively low level over the coming months, probably as a consequence of generally decreasing freight activity.