Pittsburgh—Open market demand for ferrous scrap could grow by nearly 9 million metric tons through 2023 as slated electric arc furnace capacity expansions come online.
Some projects like US Steel's EAF in Alabama and the recently acquired Big River Steel's phase two expansion have already been completed. Nucor micro-mills in Missouri and Florida have also come online.Still, the bulk of major expansions are set to come online starting in the second half of this year through 2023. The wave of impending EAF capacity is set to fuel ferrous scrap demand, increasing competition for the key raw material.
The growth in EAF-based production is not a new trend with mini-mills beating out traditional blast furnaces in overall share of US production for the first time in 2002. EAFs accounted for more than 70% of US production in 2020, according to the American Iron and Steel Institute.
EAF vs. BF Production Share50.7%49.3%56%44%61.3%38.7%62.7%37.3%70.5%28.9%Record steelmaking profits in 2018 helped to fuel the new wave of US capacity expansions finally coming to fruition. The new EAF capacity could increase open market scrap demand by 8.75 million mt/year, according to S&P Global Platts estimates.
Open market scrap demand excludes scrap generated by the mills during steelmaking as well as alternative metallics like HBI, DRI and pig iron.
Total open market scrap demand in 2019 was estimated at 48.6 million mt using BIR and ISRI data and accounting for an estimated 20% scrap generated internally and scrap substitutes.
Following the completion of slated capacity expansions, Platts estimates open market scrap demand could increase by 6% from 2019 levels to 51.8 million mt/year by 2023 when using the ten-year average of the AISI mill utilization rate.
The estimate accounts for the rated steelmaking capacities of the different mills, scrap consumption mix by product produced and average historical utilization rate.
Overall open market scrap demand could grow by nearly 12.2% to 54.5 million mt/year when estimating a utilization rate of 78.3%, reflecting a single standard deviation change above the 10-year historical average. This level of production would be more reflective of market conditions in 2019 when the utilization rate averaged 79.9%, according to AISI data.
On the lower end, estimating an average utilization rate of 70.5%, open market scrap demand would grow approximately 1%.
Prime scrap demand set for largest growthNearly 90% of the capacity expansions between 2020 and 2023 will be focused on flat-rolled steel products, primarily sheet steel. These types of steelmaking expansions mean much of the increase in scrap demand will be for higher quality scrap.
Prime grades of scrap could see as much as 3.7 million mt/year of additional open market demand once capacity expansions are completed in 2023, according to Platts estimates. The growth would account for 42% of all new open market demand generated by new steelmaking capacity.
Demand growth is estimated by using the overall rated production capacity of all the capacity expansions with scrap mix adjusted by type of production.
Shredded scrap would account for the second-largest share of additional demand growing by as much as 2.9 million mt/year from the capacity expansions, while cut grades would grow by a maximum of 2.1 million mt/year.
