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US ferrous markets set to gain from infrastructure boost

The resurgent US economy and a growing shift to ‘green’ steel using scrap metal are being seen as positive drivers for the recycling sector in America.

These were two key themes during a session at the 2021 ISRI convention and exposition considering trends in the ferrous markets– the first time the event has been held in a virtual setting.

The first speaker was Ben Pickett, general manager for public affairs at Nucor. He said the steel and scrap markets were in a great position and that recycling ‘would be key for what President Biden calls building back better’ with his US $2 trillion (EUR 1.66 trillion) national infrastructure strategy.

But he expressed surprise that many political leaders in the US appeared unaware that more than two-thirds (69.7%) of steel produced in the country was made from electric arc furnaces (EAFs) using scrap (‘green’ steel). The comparable figures for China and India are 10.4% and 56.2% respectively. He noted his own company Nucor was responsible for 24% of US steel production but only 8% of industry’s direct greenhouse gases.

‘It may seem obvious but it is vital our policy makers realise that the steel being produced now is the greenest out there,’ Pickett said. ‘The American steel industry has the lowest carbon intensity of the top seven leading steel-producing countries in the world. We have a great story to tell and we are sharing that with policy makers.’

As a result, he added, recyclers were ‘in a position of strength and extremely well placed to help rebuild America.’

Pickett also supported the current ‘Buy America’ drive to ensure the economy was less reliant on foreign producers, learning lessons from the current pandemic about an over-dependence on global supply chains, notably with China. He was particularly critical of China, accusing it of using unfair subsidies to distort global markets.

Asked about the Section 232 tariffs used by US administrations to tackle imports of products that are seen as threatening national security, Pickett said they were an effective policy and had to stay in place to prevent ‘a new surge’, especially if the Biden infrastructure package led to increased steel imports.

‘232 helped the US to invest in cleaner steel technology instead of importing dirty steel,’ he argued. ‘Lifting the tariffs without resolving excess capacity will open the floodgates.’

The second speaker was Blake Hurtik, editor of Argus Metals, who said it had been a fascinating year. He noted that in April /May 2020, steel utilisation fell from a typical 80% to 50% until the economy picked up later in the year.

‘When demand came back, there was a lot of hand-to-mouth buying and demand outpaced what was available for the mills,’ he said. ‘Now, with prices where they are, service centres and distributors are in a tough spot. No one wants to go long at elevated prices with the expectation that they could correct down, so they’re keeping inventories pretty low.’

Higher steel prices were also prompted to some extent by the Section 232 tariffs and shipping delays. Scrap prices had also risen but to a less pronounced degree. ‘This has been a fantastic last quarter for US steel makers and EAF owners.’

Hurtik looked at the markets over the past 12 months. As the pandemic kicked in, prices for hot rolled coil fell from about US$ 600 per short ton to US$ 450 in August. Since then, though, prices had spiked to US$ 1 400. He also pointed out that bushelled and shredded steel prices had diverged at a record pace, ending 2020 with a spread of US$ 140 per ton, compared to previous spreads of around US$ 30-40.

US ferrous scrap exports in 2020 reflected the continued prominence of Asia as a quality scrap destination. Hurtik also pointed out that Turkey had imported four million tonnes of ferrous scrap, up 3% year over year. Taiwan imported two million tonnes last year, a 12% decline from 2019. Mexico was 2020’s biggest gainer, importing 1.9 million tonnes, a 32% year-on-year gain. Bangladesh, Canada, and Pakistan also took more US scrap. Vietnam posted the biggest loss, importing 990 000 tonnes, down 21% on 2019. India, Pakistan, and South Korea also imported less scrap in 2020.

Looking ahead, he warned that the international shortage of semi-conductors required by the auto industry was ‘a massive issue and this is expected to last for another six months’. This mattered for the scrap industry, he pointed out, because fewer vehicles being built would hit demand for secondary steel.

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