Market Analysis – 11191602 – Basic steel scrap

Executive Summary

The global market for basic steel scrap is valued at an est. $128.5 billion in 2024 and is a critical input for decarbonizing the steel industry. Projected growth is strong, with a 3-year historical CAGR of ~5.2%, driven by the global expansion of Electric Arc Furnace (EAF) steelmaking. The primary strategic consideration is extreme price volatility, which is directly linked to global steel demand, energy costs, and shifting trade policies, representing both a significant risk and a tactical sourcing opportunity.

Market Size & Growth

The global market for steel scrap is substantial and poised for steady growth as it is the primary feedstock for lower-carbon EAF steel production. The market is forecast to grow at a compound annual growth rate (CAGR) of 4.9% over the next five years. The three largest geographic markets are 1. China, 2. European Union, and 3. United States, which collectively account for over 60% of global scrap consumption and generation.

[Source - Internal analysis based on data from Bureau of International Recycling (BIR) and market research reports, Mar 2024]

Key Drivers & Constraints

1. Demand from EAF Steelmaking: Growing adoption of EAFs, which use 70-100% scrap feedstock, is the primary demand driver. EAFs account for ~30% of global steel production but are projected to exceed 40% by 2030, driven by decarbonization targets.
2. Decarbonization Regulations: Government mandates and carbon pricing mechanisms, such as the EU's Carbon Border Adjustment Mechanism (CBAM), incentivize the use of scrap. Scrap-based steelmaking can reduce CO2 emissions by up to 75% compared to traditional blast furnace methods.
3. Industrial & Construction Activity: Demand is directly correlated with output from the construction, automotive, and industrial machinery sectors, which are the largest consumers of finished steel products.
4. Trade & Export Policies: National governments increasingly view scrap as a strategic raw material. Export restrictions or tariffs, particularly from major suppliers like the EU or potentially China, can significantly tighten global supply and increase regional price disparities.
5. Input Cost Volatility: The profitability of scrap collection and processing is highly sensitive to fluctuations in energy (diesel, electricity) and logistics costs, which are passed through to the final price.

Competitive Landscape

The steel scrap market is highly fragmented, featuring a mix of large, integrated global players and thousands of smaller, regional collectors and processors. Barriers to entry are Medium-to-High, primarily due to high capital intensity for shredders and logistics fleets, extensive environmental permitting, and the need for established collection networks.

⮕ Tier 1 Leaders * Nucor (The David J. Joseph Company): The largest recycler in North America, vertically integrated with its own EAF steel mills, ensuring stable internal demand. * Sims Limited: Global presence with operations in North America, Australia, and the UK; strong focus on technology and circular economy solutions. * Commercial Metals Company (CMC): Vertically integrated EAF steelmaker and recycler, primarily focused on the US market with a strong construction rebar segment. * EMR (European Metal Recycling): A private, global leader in metal recycling with significant scale in Europe and the US, known for advanced processing capabilities.

⮕ Emerging/Niche Players * Regional consolidators (e.g., SA Recycling in the US Southwest) * Technology startups focused on AI-powered scrap sorting and quality verification * Specialty processors focusing on high-purity or non-ferrous scrap streams

Pricing Mechanics

Steel scrap pricing is determined by local supply and demand dynamics but is heavily influenced by global benchmark indices, such as the Platts US Midwest #1 busheling scrap price. The price is not centrally fixed and is negotiated based on grade, quality (cleanliness and chemistry), volume, and logistics. The price build-up typically consists of the cost of acquisition from sources (industrial, demolition, consumer), collection and transportation costs, processing costs (sorting, shredding, baling), and a margin that fluctuates with market conditions.

The most volatile cost elements are tied to macroeconomic factors and have seen significant recent movement: 1. Benchmark Steel Price: The underlying value is tied to finished steel demand. Hot-Rolled Coil (HRC) steel prices have fluctuated by >25% over the past 12 months. [Source - CME Group, Mar 2024] 2. Ocean & Domestic Freight: Logistics can account for 10-20% of the delivered cost. US domestic truckload rates have decreased ~15% YoY but remain volatile. [Source - Cass Freight Index, Feb 2024] 3. Energy Costs: Diesel for collection fleets and electricity for shredders are major operational costs. US industrial electricity prices have increased by ~4% in the last 24 months.

Recent Trends & Innovation

• "Green Steel" as a Market Differentiator (Ongoing): Steelmakers are increasingly marketing low-carbon steel produced from scrap. This is creating a premium for high-quality, low-residual scrap grades (e.g., busheling, plate & structural) and driving investment in better sorting technology.
• Consolidation M&A (Aug 2022): Major steelmakers are acquiring scrap processors to secure feedstock. For example, steel producer BlueScope acquired the ferrous scrap business of MetalX in Indiana and Ohio to vertically integrate supply for its North Star EAF mill.
• AI & Sensor-Based Sorting (2023-Present): Companies are deploying advanced sensor technologies (X-ray, LIBS) and AI to automate scrap sorting. This improves the purity of scrap bundles, removes undesirable elements like copper, and creates higher-value furnace-ready products.

Supplier Landscape

Regional Focus: North Carolina (USA)

North Carolina presents a robust and highly strategic market for steel scrap. Demand is exceptionally strong, anchored by Nucor, which is headquartered in Charlotte and operates multiple EAF mills and recycling facilities across the state. The state's rapidly growing construction and manufacturing sectors further bolster demand. Local capacity is well-established, with a competitive landscape that includes Nucor's own recycling division (DJJ), Radius Recycling (formerly Schnitzer), and numerous independent yards. The state's favorable business climate and well-developed transportation infrastructure support efficient collection and logistics, though competition for skilled labor and adherence to state-level environmental regulations for scrap yards are key operational considerations.

Risk Outlook

Actionable Sourcing Recommendations

1. Mitigate Price Volatility with a Portfolio Approach. Secure 60% of projected 12-month volume via index-linked contracts with 2-3 core national suppliers. This provides supply assurance and budget predictability. Source the remaining 40% on the spot market from qualified regional suppliers to capitalize on market dips and reduce freight costs. This hybrid model balances stability with cost-saving agility in a high-volatility environment.

2. Strengthen Regional Supply & ESG Alignment. Qualify one new, mid-sized regional supplier in the Southeast within 9 months, focusing on North Carolina or a neighboring state. Mandate suppliers provide evidence of environmental certification (e.g., ISO 14001) and advanced sorting capabilities. This action will reduce inbound freight costs by an estimated 5-10%, improve supply chain resilience, and provide access to higher-quality scrap to support corporate ESG goals.