Derichebourg // 2020-2021 Universal Registration Document

1

Presentation of the Group and its activities Environmental Services business

Steel and ferrous scrap metal trade flows The ferrous scrap metal market is also sensitive to international steel and ferrous scrap metal trade flows. The intensity of Chinese and Turkish steel exports significantly influences the European steel market and consequently its need for ferrous scrap metal. Starting in mid-2016, China has sharply reduced its steel exports to Europe due to its strong domestic demand, which has allowed European and Turkish steelmakers to improve their production and sales in their local market. The Group’s European customers, and indirectly the Group, benefited from this situation from mid-2016 to end-2018. Since then, exports of Turkish steel to Europe have increased sharply, because of the weak Turkish domestic market as a result of the economic crisis affecting the country. These exports compete with European steelmakers, and, therefore, the Group’s main customers by volume. The introduction of quotas in the European Union on imports from Turkey has made the situation more balanced for European steelmakers, who have also benefited greatly from business recovery in 2021. Turkey is the world’s largest importer of ferrous scrap metal. It produces 36 Mt of steel, 69% of which comes from electric steel mills, with insufficient local raw materials, and imports about 23 Mt/year of ferrous scrap metal (23% of the global trade). Unlike domestic markets, where price negotiations with steel mills occur monthly, the Turkish market buys ships on the spot market (up to 40,000 t). This means that changes in Turkish prices have an effect on the supply regions of the United States and Europe, which have a surplus of ferrous scrap metals. The economic situation in Turkey is also a factor that influences the ferrous scrap metal market. In recent decades, globalization and the liberalization of international trade resulted in the virtual disappearance of customs tariffs. Consequently, it was marginal demand that influenced world prices. Since the spring of 2018, the situation has changed, with the introduction of customs tariffs by the United States on the majority of steel imports. These tariffs are due to be removed on January 1, 2022. The ferrous scrap metal recycling market is perceived as relatively volatile, insomuch as price and volume trends often compound: increased ferrous scrap metal demand by steelmakers will result in scarcity of the additional metric tons sought and put upward pressure on prices. If demand falls, the opposite happens.

The table below summarizes the price changes in shredded ferrous scrap metal (E40) in recent years:

€420

€370

€320

€270

€220

€170

oct.

oct.

oct.

feb.

apr.

feb.

apr.

feb.

apr.

dec.

dec.

dec.

june

june

june

aug.

aug.

aug.

2019

2020

2021

E40 ex 33 (shredding product)

Source: Derichebourg.

Waste supply End-of-life consumer goods (around 80%, including industrial demolition) and production waste from steel processing (around 20%) provide ferrous scrap metal purchasers with their supplies. The level of general economic activity therefore influences the availability of ferrous scrap metal. For the Derichebourg Group, the breakdown of site inflows by type of supplier is as follows:

Others 16%

WEEE

5%

Scrap dealers 38%

Private people/ peddlers 12%

Industry 17%

ELV/Garages 13%

Source: Derichebourg. Note: All of Derichebourg España’s purchases for 2020 have been made with scrap dealers.

DERICHEBOURG 2020/2021 Universal Registration Document 17