Brazilian scrap exports rise in August while domestic demand remains subdued

Story originally published on Fastmarkets.com

Published by: Ana Enis

Source: the economic times agency

Steel scrap exports in Brazil remain on an upward trend, with local scrap sellers resorting to the export market to compensate for a contraction of the domestic market, national scrap association Inesfa said on Friday September 15.

Exports of steel scrap totaled 64,731 tonnes in August, up by 10.8% from 58,376 tonnes in July, and by 109.7% from 30,864 tonnes in August 2022, according to figures from the Brazilian foreign trade ministry, MDIC.

At the same time, domestic demand continues to be weak and is expected to fall by 30% by the end of 2023, according to Inesfa’s estimates.

Usually, the scrap sector prioritizes selling to domestic consumers, resorting to exports only in downturns of the local market, Inesfa president Clineu Alvarenga said.

“Even though many of Brazil's economic indicators are, in fact, growing, the manufacturing sector shows the opposite,” he said. “The steel industry is slowing down. The automotive sector has been suffering, and vehicle sales are decreasing. Consequently, scrap is suffocated, and the solution is to export.”

Thus far this year, steel scrap exports amounted 476,493 tonnes, 29% more than Brazilian shipments during the whole of 2022, when exports totaled 369,309 tonnes. These numbers should “reach higher levels by December,” Alvarenga said.

On the other hand, local consumption has been falling year over year. Data from national steel association Aço Brasil shows that the use of iron and steel scrap in Brazil fell to 8.9 million tonnes in 2022, from 9.3 million tonnes in 2021.

The downtrend in the steel market also leads steel companies to prioritize raw materials produced by their own subsidiaries, instead of using scrap.

“Steel mills are using their own input in steel manufacturing, and using less recycled material collected and sold by collectors and recycling companies,” Alvarenga said.

For 2024, a reaction from the recycled inputs market is possible, but expectations are still pessimistic. Inesfa's president said that "the early fall in Brazilian interest rates and the improvement in employment rate brings some hope, especially in the construction sector, but we remain concerned."

The price of rebar, the main product of steel scrap in Brazil, is also uncertain; Fastmarkets’ sources said that steel mills have been trying to increase prices by 8%.

As of September 8, Fastmarkets’ price assessment for steel reinforcing bar (rebar) domestic monthly, delivered Brazil was 3,760-3,960 Reais ($754-794) per tonne, unchanged from the previous month.