world of steel A Division of Ellias International

Home > Latest Steel News

First link in the chain

First link in the chain

News is brought to you by Mr. Shailesh Karia

Published on date 11th Sept 2020.

emolition contractors see scrap iron and steel in projects related to dismantling and obsolescence. Once it crosses the scale at a scrap yard, however, the same material begins a new role as the first link in a supply chain vital to producing the shiny new cars and appliances populating automobile showrooms and retail stores across the country.

The nearly unprecedented interruptions to global economic activity caused by COVID-19 unmistakably affected the construction and demolition sectors. The scrap metal market also coped with abrupt interruptions, and those changes consequently moved through the supply chain.

As the U.S. and global economies chart paths to economic recovery in the wake of the virus, their ability to create enough discarded material to keep basic material supply chains intact will be one of the measures watched by economists.

It may not glitter, but . . .

“Scrap is a product of affluence,” veteran ferrous scrap trader Nathan Fruchter told the Recycling Today Media Group in a May interview, referring to the impact of humming factories, demolition job sites and traded-in vehicles and appliances on regional and global flows of scrap metal.

In the second quarter, that affluence was largely absent in North America and Europe, as both continents dealt with COVID-19 and subsequent workplace shutdowns. The ripple effects of the COVID-19-related decline in scrap generation provided a case study that backs Fruchter’s observation and demonstrated the valuable role of scrap metals in the global economy.

In the ferrous scrap market, even as steel mills scaled back output dramatically, scrap prices rose by $30 to $50 per ton in early May because scrap collection had dropped even faster.

Governments in some parts of the world—recognizing the value and current scarcity of scrap—began to impose or propose banning the export of scrap metals. The United Arab Emirates placed such a ban on ferrous scrap in mid-May, and South Africa banned the export of both ferrous and most nonferrous scrap metals starting in mid-July.

Longer term, a recent analysis by Arlington, Virginia-based B. Riley FRB Inc. predicts a potential shortage of high-grade ferrous scrap in the United States as additional higher-grade electric arc furnace (EAF) steelmaking capacity comes online in the next couple of years.

For demolition contractors, the appreciation for scrap iron in high places could lead to medium-term healthy pricing as economies rebound and try to recover from the COVID-19-related damage.

Even in China, whose government has waged a high-profile campaign against imported scrap materials, steelmakers and trade associations have been taking measures to make imported ferrous scrap shipments more welcome by trying to have scrap reclassified from “waste” to a “resource.”

One source tells the Recycling Today Media Group that steel firms there are increasing their EAF capacity, and are particularly eager to be able to bring in imported ferrous shredded scrap. Even some Chinese policy makers “realize that it is more effective than importing iron ore because of economic issues as well as environmental issues,” says the source.

Heating up slowly

At the onset of summer, some of those wider global factors were having an impact on the scale price demo contractors were experiencing at their local scrap yards, while uniquely American aspects of the market also came into play.

After the May rise in scrap prices, caused by America’s excruciatingly non-affluent April, the subsequent rise in scrap yard scale traffic and a restart in demolition and construction activity helped boost supply, causing prices to head back down about $40 per ton in July.

The summer months prompted a series of push-and-pull factors that impacted prices, with some economic activity ramping up while other sectors stayed dormant. Globally, export buyers—as they often do—waited for a monthly drop in prices to then come back into the market and bid prices right back up again.

The ability of Americans to buy cars (and actually be able to drive them somewhere) has always tied into scrap supply and prices, as a new car or pickup truck in the driveway means another could be headed for the salvage yard. Along with construction and demolition activity, it is a sector that has a major impact on both scrap supply and demand (measured by steel melt shops churning out steel for vehicle parts or beams and rebar for buildings.)

On the automotive front, an analysis of American auto purchase and maintenance habits by London-based IHS Markit, released in late July, concluded the average age of light vehicles in operation in the U.S. has risen to 11.9 years, about one month older than in 2019.

Underlying weakness in several segments of the market combined with increased vehicle prices have provided upward pressure on the average age of vehicles, as some consumers hold on to their vehicles for a longer period of time, the study concluded.

For steel mill melt shops that rely on a steady stream of scrap, it might mean that as the economy (and steel output) ramps up, scrap supply will lag initially, prompting a rise in prices.

As of early August, steel mill output in the U.S., as measured by the Washington-based American Iron and Steel Institute (AISI), was just beginning to rebound in an attempt to reach pre-COVID-19 production levels.

The steel mill capacity rate in the U.S. reached 59.3 percent during the week ending Aug. 1, rebounding from a COVID-19-related weekly low of 51.1 percent in the week ending May 2. The steel output figure for the week ending Aug. 1 of nearly 1.33 million tons represented a 16.5 percent increase from the 1.14 million tons of steel produced during the week ending May 2.

The early August figure is encouraging, but in pre-COVID-19 America, as measured by the week ending Aug. 1, 2019, production was closer to 1.85 million tons of steel. Thus, the year-to-year output decline in steelmaking comparing those two weeks was 39.1 percent


Source :


     Home  |  About  |  Contact  |  Terms of Use  |  Privacy Policy
World of Steel® is a Registered Trademark in USA, China, India and EU