***NOTES FROM BRUSSELS: BIR delegates examine the future for Fe scrap

The Bureau of International Recycling (BIR) meeting in Brussels last week was the association’s second gathering of the year.

Most delegates were in and out, just taking a few hours to meet their customers and suppliers, sit down and chat about which way the wind is blowing in the market.

The weather is looking gusty. So the sector isn’t looking far ahead. Right now, it’s all about managing risk.

Most players in the recycling sector have worked hard to keep their inventories low, only booking material as its required.

Forming any kind of long-term forecast, then, is difficult.

“All we need a bit of stability,” one merchant told MB on the sidelines of the event. Like many other attendees, he had become exasperated by the numerous peaks and troughs prices have navigated in the past year.

Most of them see increased market volatility as a threat.

For some, though, it has presented opportunities.

Greater volatility in prices also brings much higher levels of risk. But, for those who are brave, this can also mean much higher rewards as well.

The growing use of containers to transport ferrous scrap has made it easier for smaller players to get involved, taking small slices of business away from larger companies.

These participants are happy to settle for thinner margins than their peers. In some cases, they’ll make deals for no profit at all, just to win the business, market participants say.

More established players in the market are worried.

Now a few transactions of just a few thousand tonnes aren’t going to leave them out in the cold. But these deals disrupt the market and make life harder for the larger merchants.

Fortunately the pie is getting bigger.

The World Steel Association’s latest forecast puts steel demand rising through 2011, and merchants at the conference reckoned steel mill stocks are low.

If meltshops start ramping up production, demand for ferrous scrap seems almost certain to grow.

And steelmaking from an electric arc furnace makes sense. Blast furnaces need feeding with difficult materials like iron ore and coking coal. Quarterly contracts have made these components harder to handle.

Increased demand will come from development in difficult locations, like inland China, where infrastructure is poor. Supplying this from a locally-erected mini-mill makes more sense than hauling in steel from integrated steelworks near the coast.

The long-term picture looks bright. But short-term volatility seems certain to remain.