Global Scrap Market: Vietnam Now Major Scrap Buyer

In Q3 2019, Vietnam was second only to Turkey as a buyer of scrap on the global market.

This Steel Market Update quarterly analysis uses data from the Iron and Steel Statistics Bureau (ISSB) in the UK. We believe that to improve our understanding of the gyrations of the domestic scrap market, we should be aware of where the U.S. stands as a global player. Some nations are slow to report, which results in our analysis being two months in arrears. But we believe it gives a valuable perspective of global trends and is the foundation of where we are today. All tonnages in this report are metric.

In this analysis of global scrap trade, we have excluded movements within the EU from the global total. Figures 1 and 2 show the total tonnage of global trade since Q1 2000 and the volume of the top five suppliers. These five are the U.S., the EU, the UK, Japan and Russia, and since 2002 they have accounted for over two-thirds of the total. Figure 2 is the same as Figure 1 with the total removed. Total global trade in ferrous scrap has declined slightly in the latest seven quarters, but the U.S. export tonnage has trended up in the same time frame.

Figure 3 shows the global market share of the top five exporters. After declining for seven years from 2008 through 2015, the U.S. share increased in the 3½ years 2016 through Q3 2019. The U.S. has been the highest volume exporter every quarter since Q4 2005.

Figure 4 shows the correlation of 74.4 percent since 2010 between the U.S. share of global scrap trade and the domestic scrap price. This relationship decoupled in Q2 and Q3 2019. Figure 5 shows a negative correlation between the Broad Index value of the U.S. dollar and the U.S. share of global trade. There is a causal element to this relationship, when the dollar strengthens, U.S. scrap on the global market becomes more expensive and the U.S. share should decline. Prior to Q4 2014, there was a negative 71 percent correlation between the U.S. dollar and U.S global share. Since then the two have decoupled, which we believe is due to a stronger U.S. economy that has boosted mill output and by extension domestic scrap demand, along with the distortive effects of Section 232 tariffs.

Table 1 identifies the top 12 scrap importers ranked by total tonnage since Q1 2018. Turkey consistently consumes a quarter of total global scrap trade. South Korea is in second place, Vietnam is third and the U.S. is fourth. In the single quarter of Q3 2019, Vietnam moved up into second place. Of the U.S. scrap imports, 70.1 percent came from Canada and 14.5 percent from Mexico.  

Figure 6 shows the tonnage received by the four major importing nations (excluding the U.S.). Turkey is by far the largest global scrap buyer and in most quarters since Q1 2010 has been in the range 4-5 million metric tons per quarter. The growth of Vietnam is clearly shown since Q4 2006 to the point that in Q3 2019, Vietnam accounted for 8.8 percent of total global scrap trade.

Figure 7 quantifies the volume of the three major scrap suppliers to Turkey since the year 2000. Since Q1 2016, the EU has strengthened its position as the U.S. and Russia have been erratically stable.

In the course of these analyses, we will keep our eye on what is going on in China. In the third quarter of 2017, China became a net scrap exporter, according to data published by their trade administration (Figure 8). Since then China’s exports have declined to almost zero. In 2018 almost all scrap exporters were fined or jailed for evading taxes on the value of the material and currently scrap exports are restricted. Eventually this will change as the balance of BOF and EAF capacity in China will not be able to absorb the volume of obsolete scrap produced.