The case for firmer steel scrap prices

by on
scrap steel

smilekorn/Adobe Stock

Pandemic-related lockdowns constrained the global scrap market earlier this year. Consequently, operations were restricted or closed down.

But even as containments have eased, the market has been slow to come back — resulting in rising prices for steel and base metal scrap over the summer.

Stop obsessing about the actual forecasted steel price. It’s more important to spot the trend. See why.

New EAF capacity coming onstream

Steel, in particular, is facing not one but two constraints.

On the one hand, as new electric arc furnace (EAF) steelmaking capacity has come onstream — with more planned to come onstream in the years ahead — steel scrap demand in the U.S. is likely to remain robust, even if the wider finished steel market remains under pressure from imports and only slowly recovering demand.

Meanwhile, China has not historically been a large producer of steel via the EAF route. However, the flexibility that the process affords and its lower environmental impact is attracting significant investment, spurring the country’s demand for more scrap.

As a result, steelmakers in China and their trade associations have been taking measures to make imported ferrous scrap shipments more welcome. They are trying to have scrap reclassified as a “resource,” according to Recycling Today.

Differing perspectives on nonferrous vs. steel scrap

Traditionally, China has treated metal scrap imports rather like general waste imports.

China in the past has even branded imported non-ferrous scrap as “foreign garbage,” according to the aforementioned article. The country has limited volumes with strict quota rules, which will decline to zero for base non-ferrous metals by 2021.

On the other hand, China is reviewing its steel scrap quotas, with a view toward relaxing them. Most expect import volumes to surge from early next year. As a result, that could potentially putting pressure on prices in an already constrained global market.

Scrap prices rose last month in Europe when Turkish buyers came back into the market. Those buyers had to bid for packages, even as their traditional U.S. sources were also facing limited availability.

All this is not to suggest we are facing runaway inflation in steel scrap prices.

Steel production generally is muted in most markets. Furthermore, finished steel prices are under pressure. However, there is a growing case, both economically and environmentally, for EAF production over the traditional iron ore-based blast furnace route.

That means there will be more buyers bidding for the finite supplies in the year ahead.

Are you under pressure to generate steel cost savings? Make sure you are following these five best practices!

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.