North America steel mills are worried about procuring enough high-quality ferrous scrap to feed their growing production capacity, and the predicted scarcity presents opportunities for scrap processors, Kallanish learns from attending Scrap Expo in Louisville, Kentucky.

During the “Commodity Focus: Ferrous” panel, the speakers addressed strategies to allay the steel mills’ fears that feedstocks will be insufficient.

“Their single biggest concern is security of supply,” comments Rob Whistle, regional manager at Gerdau Steel North America. “They also want to make sure the price that they’re paying is equal in the market. They don’t want to pay a premium” over what competitors are paying.

Additionally, “the push for quality is going to be accelerated [with growing] demand for low-residual prime scrap,” he says. “There’s no secret. There is going to be a shortage of prime material.”

The surge in North America flat roll capacity means scrap processors will be asked for more low-copper shred. Whistle says the coil mills are already paying a $20-$30/tonne premium for that grade, which improves the efficiency of their furnaces.

The market already has experienced what happens when the supply of scrap decreases and cost increases, notes Steve Deacon, chief commercial officer at EMR. The challenge for processors is to maintain their procurement flows and identify new sources.

“I don’t expect this to get easier,” Deacon says.

Panelists emphasized the push for better technology, and even the introduction of various artificial-intelligence applications, to detect and measure impurities at the scrapyard level.  

A key solution is “looking at all the equipment and looking at all the ways we can innovate to improve the quality of our material,” notes Bill Sulak, president at Ferrous Processing & Trading.

Mills in closest proximity to regions with net-positive supply availability are likely to be at a cost advantage compared with mills that must procure scrap from far away.  

“Scrap will flow to the most freight-logical home,” Whistle says.