CONflDENTIAL -
4
bl O)
FOR: Dr. Edwin Hullander
Assistant Director
Council on International Economic Policy
Demand for US Ferrous Scrap5
1. Attached is the information you requesed on foreign demand for US ferrous scrap Termination of the US quota system for ferrous scrap is not expected to result in any significant increase in imports by Japan, South Korea, or Taiwan. Canada and Mexico probably would boost imports somewhat above present quota levels. Demand for scrap from the EC is likely to decline aboutn the first half5 over the last half These countries currently account forf total US ferrous scrap exports.
2. Theewcomer to tho US scrap market, could boost imDorts5 byons above tho level This would depend, however, on the success of some face-saving arrangement over China's current refusal to purchase US scrap under the present quota system.
3.
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do not assistance on hesitate to can this matter.
Attachment: As stated
of Economic Kescarcn
APPPCVEE TV? PE LEASE EATE:4
COfti'lCCiTIAL
US DOMESTIC STEEL SCRAP4 (Composite price for Chicago, Philadelphia, Pittsburgh)
February
per long-ton
July
October
May
March
May June July August
-4
i|
;|
Ii
1M
ra|
if 1.
Japanese, Canadian, South Korean and Taiwanese US Scrap Imports Requirements5
Termination of the US quota system for ferrous scrap exports is not expected to result in any significant increase in scrap imports by Japan, South Korea, or Taiwan. Canada would probably boost imports somewhat above present quotas.
The Japan steel industry has projected crude steel output for first half5illion tonsunchanged from4 first half. Scrap imports from the US, which account forf Japan's total scrap imports, are estimatedillion tons for first Imports during the second half are expected to decline toillion, totalingillion tons for the full yearabout the same level Imports in the first half are expected to increase because Japaneseproducers want to replenish scrap inventories which fellillion tons
Canada, which imports virtually all of its scrap from the us, should import at least its quota level and possibly more if restrictions were lifted. Canada's steel industry has been operating at near capacity levels and is expected to continue this level of operation Canadaet importer of steel and any softening in domestic steel
demand probably would be reflected in reduced imports.
South Korea alsoelatively strong domestic steel market, and this coupled with additional steel making capacity5 is expected to increase scrap imports from the USons during the firstoughly what present quotas would permit. Taiwan, however, is not expected to measurably change4 level of scrap imports from the US.
Scrap Imports from US
etric tons)
Japan Canada South Korea Taiwan
First Half
Second Half
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Impact of Termination of US Export Controls on Latin American Ferrous Scrap Imports
Termination of US export controls on ferrous scrap probably would not leadignificant increase in Latin American imports ol us scrap
Mexico, which absorbsf US ferrous scrap
exports to Latin America, was able to obtain virtually all
4 needs from the United States under its quota. 5 according4 estimate by the Mexican Iron and Steel Institute, the Mexican steel industry's requirement for imported scrap will amount toillion short tons, only slightly4 imports from the United
States.
Mexican Imports and Stocks of US Ferrous Scrap
Short Tons
Stocks
(estimate)
(November)
(requirement)
EC DEMAND FOR US5
Because of softening domand, the European coal and Steel Community (SCSC) estimates that EC steel production will increase only slightlyn view of the continued deepening of the present recession, we believe that steel output probably will decline slightly from this year's levelespecially through the first half
The pace of new orders for steel is already softening. Order backlogs should be worked off byin an easing of steel output and demand for scrap inputs. Changes in the composition of demand, occasionedarked slump in automobile and appliance sales, has pushed steel producers more strongly into heavy-product areas and out of rolled steel. This shift has resulted in more use of continuous casting operationsorresponding decline in reliance on electric furnaces, which heavily consume scrap.
esult of these recent trends,scrap prices have declined sharply. European quotations for US steel scrap feller ton in Novemberthe lowest level since February. Pricos are expected to decline further in
The EC Commission Steel Office is forecasting a
US scrap import requirement of
tons for the first half% lower than that for
.the lost half This estimate is boned on a
slight increase in steol output during the period.
In the more likely event that steel output declines
slightly, first-half imports from the United States
would fall toons.
Effective import demand for US scrap was restricted
Imports probably would have been higher than
the quota limit at least through the third quarter.
The decline in import demand forecast for the first half
5 nonetheless should hold true even if US export
controls are lifted, because of the softening in overall
steel demand and the changing composition of output.
Scrap import needs vary widely by country. West
Germany, Belgium, and the Netherlands are net exporters
of scrap and require no imports from the US. France
generates much of its own scrap and relies on EC
most of
scrap exporters for/the rest. The United Kingdomet importer of scrap even though it exports to other EC nations. Italyarge scrap importer and depends heavily on the US.
ESTIMATED EC REQUIRED:ITS OF US SCRAP First5
(Thousand Metric Tons)
EC
Italy
United Kingdom - 87
France
West Germany 0
Netherlands
Belgium
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*
USSITE .SCRAP PRrCESJ_^jeQESAlj. OI'OTATIOIn'S (dollars/ton)
September
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CONFIDENTIAL
PRC Demand for US5
Total Scrap Demand
The demand for iron and steel scrap by the PRC (People's Republic of China) is expected to rise over the next few years, but US firms may have difficulty dealing with China until differences over earlior contracts are settled.
China's imports of scrap began 6 andotalons argely because of the initiation of large imports from theonstotal imports jumpedons. PRC scrap imports4 are expected toons.
The PRC will probably import increasing amounts of scrap in future years because:
the sectors of tlie steel industry which consume scrap (crude steel furnaces) are growing faster than China's ability to produce domestic scrap.
the PRC is pressing for particularly rapid growth in special steel production; the high quality scrap used to produce special steels in electric furnaces is rare in China and must be imported.
China's pig iron production is falling behind her domestic needs. Large open hearth furnace capacity will allow the Chinese to substitute scrap for pig iron in steel raw material mix.
The Affect of Lifting US Controls
Even if US scrap export controls are lifted, US-China
scrap trade could continue to be inhibited by the position
the PRC has taken with regard to previous contracts. The PRC
began to import scrap from the US inlowly at first, but by summar large purchases were being arranged.
Because China is a
newcomer to the scrap market, the US government has offered
special treatment with regard to quotas, .but the Chinese
have remained adamant, purchasing no scrap under the quotas. The PRC is maintaining that it will purchase no more US scrap until the annulled contracts are fulfilled at the original contract pricesa bargin in todays market. China is likely to maintain this stance at least until scrap prices further recede. If some face-saving arrangement can be worked out, China could purchase as muchons of scrap from the US
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Original document.
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