At the recent BDSV annual conference, the top representatives of the BDSV commented on the general economic conditions in the industry, the energy crisis, the preservation of free world trade and other important topics of the industry.
General economic conditions in the steel recycling industry
While the German economy defied the adverse circumstances in the first half of 2022, the economy has been cooling off significantly since the summer. Gross domestic product grew by 0.8% in the first quarter compared to the previous quarter. The slight plus is mainly due to strong investment activity. Only a weak plus of 0.1% was recorded in the second quarter. It was driven in particular by private and government consumer spending.
The gas supply stops from Russia, and the resulting drastic price increases are hampering the expected catch-up effects after the corona pandemic. The industry also experiences a setback in the summer. On the one hand, ongoing delivery problems with raw materials and preliminary products are hampering production. On the other hand, demand is suffering from high prices and the global economic slowdown. Nevertheless, the order books of the companies are still well above average. The high energy costs, a still high level of sick leave and ongoing supply chain problems mean that the order backlog is only being processed slowly. There are signs of a clear downturn in the construction sector. In addition to the high construction costs, the turnaround in interest rates is also contributing.
In many places, the steel industry is reacting to the high energy prices and weaker demand with massive production cuts, so that the hoped-for recovery after the company holidays in the summer and the price increases for scrap expected for September will not materialise.
In the first eight months of 2022, at 25.4 million t, almost 5% less crude steel was produced in Germany than in the same period of the previous year. In the year to date, this is around 1.3 million t less than in the same period of 2021. At 2.97 million t, crude steel was produced in August, 2% less than in the same month last year. In particular, the scrap-intensive electric steel production recorded a sharp decline of 8.6% to 715,000 t, while the oxygen steel production remained almost constant at 2.2 million t (-0.1%).
With the outbreak of the Ukraine war in February and the lack of raw material deliveries from Russia, Ukraine and Belarus, the global demand for the recycling raw material increased sharply. Above all, good qualities are in demand as a substitute for pig iron deliveries from the war regions. In the spring, prices for steel scrap worldwide reached their highest level in decades. However, the exploding energy costs and the worsening of the supply chain problem lead to high uncertainties along the entire value chain.
Large, expensive stocks are avoided as far as possible. The market participants drive on sight. The steel trade is acting cautiously. The most important steel scrap importer, Turkey, is increasingly concentrating on cheap billet imports due to the high scrap prices so that the impetus from the export market is missing, and a downward price correction sets in May, which continues through the summer and is often not stopped until August.
The holiday month is characterized by quiet trade. The inflow of scrap is low in many federal states due to company holidays so a low volume is offset by weak demand from steelworks at home and abroad, and prices find a bottom. In September, market events are no longer dominated by the question of scrap prices, but by the question of sales opportunities, since more and more steelworks are stopping production or significantly reducing it. Poor sales prospects for finished steel for Turkish consumers mean little movement in the deep sea market. The production location in Germany is penalized by the, also in a European comparison, high energy costs in terms of competitiveness. Low water in summer exacerbates ongoing logistics bottlenecks and leads to higher demand for rail transport. Due to the prioritization of energy transport by rail from autumn, there is hardly any relief in sight in the medium term.
Trading in steel scrap is preparing for a difficult final quarter. High energy costs are still to be expected. However, the climate-friendly and resource-saving raw material from recycling are in demand worldwide. Free trade in steel scrap is a prerequisite for being able to compensate for domestic fluctuations in demand.
Exploding energy prices are threatening steel recycling in Germany and Europe
The skyrocketing electricity and gas prices in Europe pose major challenges for steel recycling and jeopardize the ambitious goals in terms of climate neutrality and circular economy at both national and EU levels. Like many other companies, the BDSV member companies are increasingly running the risk of no longer being able to produce economically. If politicians do not quickly defuse the situation, this could mean permanent job losses. In addition, rising energy costs and the unsecured availability of energy are threatening companies in the steel-producing and steel-processing industry, which has a direct negative impact on the amount of recycling raw materials.
The reactivation of the Economic Stabilization Fund (WSF) presented by the federal government on September 29, 2022, to alleviate the consequences of the drastically increased energy prices for business and private consumers is an important first step in the right direction. It is now important that the announced energy price break works quickly and sufficiently effectively for medium-sized companies as well.
At EU level, the principle of the merit order must be changed as quickly as possible so that the electricity price is no longer linked to the gas price. In addition, the BDSV and its partner associations have called on the Commission to include recycling in the list of economic sectors eligible for EU aid.
Threatening trade barriers due to the revision of the EU Waste Shipment Regulation (WWA)
Maintaining free world trade in scrap steel is a topic of central importance for the BDSV and its partner associations at EU and federal levels. The BDSV has repeatedly pointed out that free world trade in steel scrap is of vital importance to German and European recycling companies. Currently, only around 80% of the steel scrap produced in Europe is taken by steel works and foundries. Almost 20 million tons of the climate-friendly raw materials from recycling are exported from the EU to OECD and non-OECD countries. In addition, access to international markets is of crucial importance for the steel recycling industry to balance the cyclical demand, the same also applies to the steel-producing and steel-processing industry.
A restriction of trade and the associated foreclosure of end markets for recycling raw materials will have a negative impact on waste collection, recycling and investments to expand recycling capacity. The proposed export restrictions risk significant job losses in an industry whose competitiveness depends largely on its ability to commercialize recycled feedstock to recover the costs of proper waste management. The BDSV, therefore, requires the legislator to differentiate between raw materials from recycling and untreated waste in connection with the VVA.
Stricter export restrictions are expressly welcomed for problematic waste streams. However, we criticize the fact that imported primary raw materials such as coke and ores are not included in the CO2 border adjustment mechanism (CBAM), while the export of climate-friendly steel scrap is to be restricted. Recycling raw materials are thus further disadvantaged compared to primary raw materials. This approach jeopardizes the goals of EU recycling and a functioning circular economy in Europe and Germany.
The BDSV member companies, which supply the steelworks with high-quality secondary raw material steel scrap, are ready to do their part to decarbonize steel production. In the case of carbon steel, the steel industry can save an average of 1.67 tons of CO2 per tonne produced by using steel scrap – with stainless steel, this is even 4.3 tons of CO2.
It is already possible today to increase the use of scrap in the blast furnace route from the current 20% to 30%, as is being done successfully in the USA and China. The steel recycling industry expects additional CO2 savings through the increased expansion of the electric furnace route for steel production. A good example of this is Georgsmarienhütte GmbH near Osnabrück, which switched steel production from blast furnace converter operation to the direct current electric arc process in the 1990s.
Instead of coke and iron ore, up to 100 percent scrap is melted down here, with around 80 percent fewer greenhouse gases being emitted than in the blast furnace route. The BDSV is in exchange with the steel industry in order to counteract climate change together. In addition, the BDSV has campaigned for the “scrap bonus” to be integrated into the European emissions trading system. From the point of view of the association, this would be possible, among other things, by linking free certificates to the use of scrap and taking them into account in the CO2 border adjustment mechanism (CBAM).
Persistent logistic problems
The ongoing logistics problems on the road, rail routes and waterways in Germany have been a burden on the steel recycling industry for a long time, but this year has been particularly severe. In the summer of 2022, due to the low water levels, many scrap transports could only be carried out to a limited extent by inland waterway vessels. The member companies were forced to switch to other modes of transport, which were also scarce and expensive. The priority given to energy transport by rail as part of the energy supply crisis will further aggravate the already tense logistics situation on the rails. A lack of rolling stock and too few staff are already factors that have had a strong negative impact. Nevertheless, the BDSV is sticking to its initiative to shift more scrap transport to rail. Innovative concepts such as the m2 wagon are intended to make combined transport easier. Road transport, which is unavoidable for many freights, is also heavily burdened by high fuel costs and the acute shortage of drivers.
Staff shortages in the industry still acute – and the trend is rising
The issue of staff shortages remains acute in the steel recycling industry, and the ongoing demographic change will continue to have an aggravating effect here. Surveys by the BDSV training institute ISM GmbH have shown that around 40% of those questioned have difficulties finding suitable staff. In order to counteract the shortage of personnel, the ISM is currently developing suitable concepts together with the BDSV member companies and offers a wide range of further training. This includes, among other things, the development of a special further training initiative for career changers and climbers, an employer brand for the companies in the sector, support for member companies when they appear at vocational training fairs and the target group-specific approach of those interested in jobs and training places. New in the offer of the ISM GmbH is, that since mid-September 2022, 75 different eLearning courses have been offered in addition to online and face-to-face seminars. The advantage for the learners is the time and location-independent further training and the electronic proof of qualifications that require proof.
Lengthy approval procedures hinder investments
Complicated and lengthy environmental and building law approval procedures hinder many BDSV member companies in their investments – and the trend is rising. In the association’s most recent industry survey, 22% of the member companies surveyed stated that planned investments in future technologies of the circular economy were abandoned because of such obstacles. Abandoned investment projects include the introduction of new recycling processes, the construction of new treatment plants, BImSchG permits, extensions of existing permits, changes in storage areas and the construction of storage and production halls. The flexible increase in storage capacity to bridge market fluctuations, e.g. B. caused by the corona pandemic or the energy crisis, causes problems for many member companies. The BDSV calls on the federal states to allow unbureaucratic, legal exceptions to increase storage capacities so that acceptance stops can be avoided and the recycling cycle is not interrupted.
In addition to the general acceleration of the approval process, the BDSV believes that steel recycling companies that make a significant contribution to reducing CO2 emissions should be given more support overall. Just like the steel industry, the steel recycling industry needs funding for research projects which, among other things, are intended to research the requirements for steel scrap as part of the transformation of the steel industry. so that acceptance stops can be avoided, and the recycling cycle is not interrupted.
FAR – Recycling electric vehicles in focus
The FAR car reassembly specialist group continues to work towards strengthening the certificate of destruction. The specialist group expects far-reaching changes from the revision of the EU end-of-life vehicle directive, including in the area of manufacturer responsibility and solutions to the illegal recycling of end-of-life vehicles. In addition, the FAR is working intensively on the changes in the approval law through the use of electric vehicles and the necessary qualifications for this.
Lithium-ion battery: risk of fire often underestimated – and the trend is rising
When disposing of old electrical devices, the lithium-ion batteries they contain are often not properly removed and then often end up as so-called “waste” in the recycling streams of the steel recycling industry. This development means that many companies in the BDSV have firefighting operations several times a year, sometimes with considerable damage caused by lithium-ion batteries. As a result, companies’ insurance premiums are rising, and it is becoming increasingly difficult to find an insurer. However, the actual problem already arises during the development and marketing of the products. The avoidance of battery fires is an extremely important topic for the BDSV member companies.