Pressure Builds for Scrap Export Restrictions

The soaring price for scrap metal is resulting in a group of domestic consumers banding together to develop a strategy to reduce the problem.

Published February 23, 2004

 

The soaring price for scrap metals has generated growing concern on the part of domestic scrap metal consumers who have been hard hit by the higher price and tighter supply.

 

In an attempt to combat the problem, a group of steel makers, as well as steel consumers have formed a group called the Emergency Steel Scrap Coalition. The group is contemplating calling for President Bush to provide protection for domestic consumers. One step that may be proposed is creating a quota on scrap exports

 

According to press reports, several of the groups and companies that have united to form the group include the Steel Manufacturers Association, DaimlerChrysler, and the Foundry Association, among others. The SMA is an association made up of minimills throughout North America.

 

In its call for a quota of exports, the law firm of Wiley Rein & Fielding, which will be overseeing the new steel scrap industry coalition, will look at various legal options available under trade law, including domestic scrap controls, actions against foreign scrap export restraints and negotiations with U.S. trading partners.

 

In promoting its position, the newly formed group wrote that the U.S. scrap processing and consuming industries are facing a steel scrap export crisis. Scrap exports from the United States have doubled since 2000, rising from 6.3 million tons in 2000 to approximately 12 million tons in 2003.

 

This sharp increase in steel scrap exports has caused U.S. steel scrap prices to surge to unprecedented levels, and has led to serious and growing concerns about scrap unavailability.

 

Prices for U.S. No. 1 heavy melt scrap (an industry bellwether) have more than doubled, rising from $77 per ton in early 2001 to $156 per ton in December 2003. More ominously, current spot market prices are skyrocketing: according to recent reports, U.S. No. 1 heavy melt scrap has sold for prices as high as $300 per ton – levels that are simply unprecedented in this industry.

 

These sharp price increases and the potential for scrap shortages are having significant, harmful effects on important manufacturing sectors of the U.S. economy.

 

All manufacturers, buyers and consumers of steel scrap, steel, or finished steel products are directly harmed by the rising cost and increasing unavailability of steel scrap, which in turn results in sharply higher prices for steel products such as sheet steel, plate, structural steel beams, reinforcing bar, and finished bar products. In particular, two mainstays of the U.S. economy, construction and automotive manufacturing, face direct harm from sharply increased steel scrap prices. Companies of all sizes, from the Big Three automakers to small family-owned steel parts makers, are impacted by the crisis.
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