by MAURA KELLER
The current economic global environment, combined with the ongoing war in the Eastern region of Europe is affecting today’s scrap metal industry.
According to IBISWorld’s analysts, who monitor the industry impacts of current events in real-time, the prices of metals is expected to remain volatile throughout 2022, resulting in a revenue decline for the scrap metal recycling industry as a whole.
However, during a press briefing at the BIR Congress in Barcelona, Spain, Tom Bird, president of the Bureau of International Recycling, a global recycling industry federation representing more than 30,000 companies around the globe, said that scrap metal prices may now be bottoming out following recent high volatility.
What’s more, at the BIR Congress, BIR Statistics Advisor Rolf Willeke said that combining the steel scrap use of steelworks and iron/steel foundries, total consumption last year was around 700 million tons. As BIR indicates, while China’s steel scrap consumption had fallen by 2.8 percent in 2021, it remained the world’s largest scrap user. Meanwhile, there were significant steel scrap consumption increases last year in the EU, the U.S., Turkey, Japan, Russia and the Republic of Korea.
In the U.S. specifically, according to the U.S. Department of the Interior, in February 2022, “Purchased steel scrap receipts increased by 3 percent, recirculating scrap production decreased by 10 percent, and iron and steel scrap consumption was essentially unchanged compared with those in January 2022. Stocks of purchased and home scrap increased slightly from those at the end of January 2022.”
In its most recent Mineral Industry Survey, the U.S. Department of the Interior reported that exports of iron and steel scrap in February 2022 increased 10 percent from those in January 2022. Turkey was the leading destination for exports, accounting for 30 percent of the total tonnage, followed by Bangladesh (15 percent) and Mexico (14 percent). Imports of iron and steel scrap in February 2022 decreased by 13 percent from those in January 2022. Canada was the leading country of origin, accounting for 76 percent of the total tonnage of imports, followed by Mexico (15 percent).
Founder and chief executive officer of iHaulJunk, Matt Fitch, has more than 10 years of industry experience operating a high demand, service based waste remediation business. Starting at ground zero in 2013, and with no hauling experience, Fitch successfully managed to scale a local service business to what is now a nationwide network of more than 30 independent haulers operating crews in major U.S. cities. Over the years Fitch has trained more than 150 haulers as direct employees and as independent subcontractors working remotely and they all haul away scrap metals daily.
With the key understanding of the daily scrap metals market, Fitch said that current prices for both ferrous and nonferrous scrap metal are in a state of flux. “The price of iron and steel are up because production is down while demand is still high, however both inflation and supply chain issues have created an unstable market,” he said.
Jamie Knight, chief executive officer of DataSource Hub, said the scrap metal market is doing relatively well, overall, with today’s scrap metal markets exhibited a combination of high prices and low supply, but things are beginning to level off as compared to the markets during the pandemic years of 2020 and 2021.
Nonferrous metals, such as copper and aluminum, are doing better than ferrous metals, such as steel and iron. This is mainly due to the high demand from China and the low production costs of these metals.
“The main drivers for this are inflation and the war in Ukraine. Ferrous metals are doing a bit worse, but this is mainly due to the price of oil, which is affecting the steel market,” Knight said. The war in Ukraine is definitely a factor in current prices, but raw material shortages also are of equal concern.
Specifically, as Fitch said, uncertainty around the war in Ukraine and instability in the Eastern region as a whole is creating anxiety in consumers globally and the trickle-down effect is being felt across most industries, and the scrap metal industry hasn’t been left out.
“The scrap metal market is being driven by two main factors: inflation and the war in Ukraine,” Knight added. “Inflation is causing companies to recycle more metals in order to save money, while the war is causing a shortage of metals, which is driving up prices.” Shipping and supply chain issues, due to the pandemic, have also wreaked havoc with the scrap metal market, but experts believe this will level off in the coming year.
Regardless of the challenges facing the scrap metal market, a projected growth of 7 percent between 2020 and 2025 still seems likely, but it will depend on the war’s continuance and what role that will play on the supply chain.
As such, Fitch says that recycling companies should focus on targeting the types of customers who are going to bring them the most valuable metals.
“If you have storage, hold onto the metals that have dropped in value recently and we should see a recovery coming in early 2023 for all scrap metal prices,” he said.
Knight said recycling companies should expect to see continued growth in the scrap metals market over the next few years. “This growth will likely be driven by continued demand from China and new sources of supply coming online as old sources are depleted or become less accessible due to geopolitical issues like war or sanctions.”
In response to the fluctuations within the ferrous scrap market, some large steel producers are acquiring scrap businesses. In late 2021, Cleveland-Cliffs finalized the acquisition of the Processing and Trading Company, one of the largest processors and distributors of prime ferrous scrap in the U.S., processing approximately three million tons of scrap per year.
Likewise, in December 2021, BlueScope, an Australian steelmaker acquired the ferrous scrap steel recycling business MetalX, based in Indiana. The company will operate under the name BlueScope Recycling and Materials and hopes the deal will help strengthen its position in America.
In addition, ArcelorMittal, a steel and mining company, with a presence in 60 countries and primary steelmaking facilities in 16 countries, recently acquired Scottish recycling business John Lawrie Metals Ltd., as part of the company’s strategy of increasing the use of scrap steel to lower CO2 emissions from steelmaking.
In response to the acquisition, ArcelorMittal Europe chief executive officer, Geert Van Poelvoorde said, “We have identified strong potential for growth in the ferrous scrap processing business, with demand growth in Europe facilitated by the European Union’s initiatives to achieve higher metal recycling rates, reduce CO2 emissions and underpin the EU’s net-zero ambitions. We are therefore very pleased to announce the acquisition of John Lawrie Metals, which represents a further step in our strategy to increase the use of scrap steel across our steelmaking sites.”
Looking Ahead
Pandemic recovery, ongoing war, increasing inflation and supply chain issues aside, Fact.MR, a provider of market research and competitive intelligence, recently released a report evaluating the future outlook for the ferrous scrap recycling marketplace. This report takes a look at the current market scenario facing the ferrous scrap market, while also evaluating historical data to develop a market forecast for the industry.
According to the report, Fact.MR estimates that the scrap recycling market will experience a 5.5 percent growth rate to reach $103B between 2021 and 2031.
Published in the July 2022 Edition