The success of the US steel industry comes down to investment and location management, whereas Europe has fallen behind in this regard. With electric arc furnace-based flat steelmaking capacity growing, competition will increase for prime grade scrap, which mills in the US South will start importing. So says Turkish Flat Steel Import, Export and Industry Association (Yisad) chairman Tayfun Iseri.
US mills have reinvested bumper profits into building 10 million tonnes/year of EAF capacity in the last five years. They have taken obsolete blast furnaces offline and invested into EAFs amid the push for decarbonisation. Europe has meanwhile fallen behind, implementing improvements to existing production processes rather than greenfield investments, according to Iseri.
While most BFs were built in the Midwest and Great Lakes areas, the new EAFs have been built in the South. Midwest/Great Lakes BF capacity shrunk from 44.5m t/y in 2019 to 39.6mt in 2023, while EAF capacity in the South rose from 34.8mt to 38.3mt. This will result in reduced US scrap exports.
“Most EAF investments in the US are coming from flat steel. You need better scrap for this. Higher knowhow, better raw material. Everything is possible in an EAF. If somebody tells you it’s not possible, it is possible!” Iseri told delegates at Kallanish Steel Scrap 2024 in Istanbul on Thursday.
While prime grade scrap competition will increase, local generation will decrease amid consumers holding onto their cars for longer, and car ownership reducing in general. Mills in the South will therefore import the required scrap through Gulf of Mexico ports, Iseri continued.
Increasing Mexican EAF capacity will also compete with US mills for scrap supply, which will lift prices. Meanwhile, “Europe is not ready to consume its prime scrap yet”, so will continue to export material, Iseri noted.
Overall, the US and EU will continue generating more scrap than they can consume, meaning export restrictions are unlikely to be implemented, as “they can’t sit on this big pile of scrap”, he added.
Iseri also challenged the assertion that Turkey dictates scrap prices. Since US mills have bought out multiple scrap collectors, they control 60% of the US scrap market. “The US dictates what the price will be,” he concluded.
Adam Smith Poland