Volatility has characterized many scrap markets this year, including ferrous scrap. Prices plummeted at the onset of the COVID-19 pandemic in April and May, particularly as manufacturing shut down in light of lockdowns. But by June and July, ferrous scrap prices began to inch upward, and, as of August and September, ferrous scrap prices are looking more optimistic.
During the ISRI 2020 Commodities Roundtable Forum: Ferrous Spotlight, hosted by the Washington-based Institute of Scrap Recycling Industries (ISRI) Sept. 14-17 in a virtual format, Blake Hurtik, editor of Argus Media, reported that steel mills have higher levels of demand for ferrous scrap than they had prior to the start of the pandemic. Hurtik said ferrous markets saw a “healthy $30 to $50 per ton increase” this month, adding that obsolete and shredded scrap performed well and busheling scrap prices are up by about $10 this month. He added that “export markets are hot” as well.
“You see rebound in demand prices coupled with the export market,” he said. “Supply has been the driver for scrap prices much of the summer.”
As of August, Hurtik said Midwest hot-rolled coil (HRC) and busheling prices rose to about $300 per ton, with a little bit of a downtick in September. “For September trade, we saw heavy trading volumes, eager to buy volumes ahead of what we’re seeing on order,” he said.
During the ferrous spotlight panel discussion, panelists all noted concern surrounding recovery in the energy marketplace and how that could affect ferrous scrap. Tom Knippel, vice president of commercial industrial at Orange, California-based SA Recycling, said he’s doubtful the energy market will recover anytime soon, and that’s affecting steel demand for pipe production and plate rig counts.
“It’s still down with no signs of recovery,” he said, noting that West Texas Intermediate prices are down quite a bit and oil prices are below recent norms.
Spencer Johnson, London Metal Exchange (LME) trade desk analyst at New York City-based INTL FC Stone, added that the economic outlook for the energy sector is “uncertain.”
“There’s a lot of risk, more so in terms of downside and upside price risk,” he said, adding that, “Right now, the levels of uncertainty are driving a risk-off approach.”
Overseas demand for ferrous scrap
With export markets, Turkey is driving the steady rise in pricing, Hurtik noted, adding that strong domestic rebar demand is helping to sustain pricing in Turkey.
In Asia, he said container prices into Taiwan are steadily rising as well. India’s lockdowns related to the pandemic are also easing up, and some steel demand is reemerging there a little bit.
Another trend is China emerging as a player in the pig iron market, he said. Prior to the fall of 2019, China was not heavily involved as a purchaser of pig iron. But this year, that nation has purchased a lot more pig iron in response to elevated iron ore prices. Hurtik added it’s uncertain how long China will remain a large purchaser of pig iron.
“China is not the 900-pound gorilla, but it’s the 9,000-pound gorilla,” Knippel said in the panel discussion, noting that China is expected to produce 1 billion tons of steel this year. “They have always been the main driver of steel at the end of the day. Five years ago when China was exporting heavily and looking at what that did to steel prices, we’re in the same boat today. We benefit from China, whether we like it or not. Strength in the China market has kept steel prices high enough that China was an importer of steel in July when they normally export. It’s kept scrap in the country to reduce costs and pollution. They drive the world steel market.”
Johnson added, “We can set up trade barriers but China will still have an impact” on the steel market in the U.S.
Capacity on the horizon
Steel mill capacity utilization rates also are trending upward. At the start of the pandemic, that rate dropped from the low 80 percent rate to near the 50 percent mark. But Johnson said that has inched up throughout the summer and is at nearly 65 percent now.
Hurtik noted that a lot of steel mills were taken down at the onset of COVID-19, but many of those are starting to come back online as summer comes to a close. As of September, Hurtik reported that the following blast furnaces have restarted:
- U.S. Steel Mon Valley No. 1, with 1.5 million tons per year of capacity;
- U.S. Steel Gary Works No. 8, with 1.2 million tons per year of capacity;
- U.S. Steel Gary Works No. 6, with 1.36 million tons per year of capacity;
- ArcelorMittal Indiana Harbor No 4, with 1.72 million tons per year of capacity;
- ArcelorMittal Burns Harbor C, with 2.73 million tons per year of capacity; and
- Cliffs/AK Steel’s Dearborn blast furnace, with 2.2 million tons per year of capacity.
As of mid-September, U.S. Steel has two blast furnaces still down—its Gary Works No. 4, with 1.5 million tons per year of capacity, and its Granite City A, with 1.4 million tons per year of capacity—and ArcelorMittal has two blast furnaces down—its Cleveland No. 6, with 1.51 million tons per year of capacity, and its Burns Harbor D, with 2.73 million tons per year of capacity. However, all of these are expected to come back online at some point.
Hurtik added that at least four electric arc furnaces (EAF) went down at the onset of the pandemic, including Gerdau’s EAF mill in Monroe, Michigan; Gerdau’s EAF mill in Jackson, Michigan; Tenaris’ EAF mill in Koppel, Pennsylvania; and JSW USA’s EAF mill in Mingo Junction, Ohio. None have come back yet except Gerdau’s Monroe mill. He noted that the Tenaris and Mingo Junction mills are making investments to improve their capabilities.
“They aren’t down for the count, but they will come back with the idea of improving for the long run,” he said.
Despite the pandemic, there is also a lot of optimism for new EAF capacity in the works. Hurtik of Argus Media said the following mills have EAF capacity expansions planned in the near-term future:
- Nucor’s Sedalia, Missouri, greenfield site will add 450,000 tons per year of capacity and was expected to come online in the first quarter of 2020.
- Nucor’s Frostproof, Florida, greenfield site will add 450,000 tons per year of capacity and is expected to come online in the fourth quarter of 2020.
- U.S. Steel’s Fairfield, Alabama, site will add 1.6 million tons per year of capacity and is expected to come online in the second half of 2020.
- SDI’s Sinton, Texas, greenfield site will add 3 million tons per year of capacity and is expected to come online in mid-2021.
- Big River Steel’s Osceola, Arkansas, site will add 1.6 million tons per year of capacity and is expected to come online in the fourth quarter of 2020.
- Nucor’s Gallatin, Kentucky, site will add 1.4 million tons per year of capacity and is expected to come online in mid-2021.
- Nucor’s Brandenburg, Kentucky, greenfield site will add 1.2 million tons per year of capacity and is expected to come online in 2022.
- North Star BlueScope’s Delta, Ohio, site will add 850,000 tons per year of capacity and is expected to come online in 2022.
- ArcelorMittal’s Calvert, Alabama, site will add 1.6 million tons per year of capacity and is expected to come online in the second half of 2022.
- Commercial Metals Co.’s Mesa, Arizona, site will add 500,000 tons per year of capacity and is expected to come online in 2023.