Domestic scrapyards, facing increasingly strict requirements by U.S. steel mills, are instead opting to feed the insatiable appetite of offshore steelmakers, a move that is changing the recipe of the scrap mix.
Scrap dealers have little or no problems with the heavier cut ferrous scrap grades like 5-foot plate and structural scrap, but the same can't be said for No. 1 heavy melting steel. The main problem lies in the specifications for the heavy melt, which can vary from mill to mill, one western Pennsylvania dealer said.
"Heavy melt is what's left over if you can't bale it or turn it into a structural," he said. "Everything that doesn't qualify as a better grade goes into heavy melt—shafts, gears, sealed units. If it is old, then it's going into the heavy melt. If it is new steel, it often can be sheared or baled and sold as No. 1 busheling or a No. 1 bundle."
In the past, integrated mills never bought heavy melt for their basic oxygen furnaces. Now, both integrated steelmakers and the electric furnace (EF) melt shops are using computer programs that recommend what to buy. These programs weigh the prices and availability of various grades in a region and suggest the cheapest scrap mix to buy for the type of steel products the mill plans to produce that month.
"Integrated mills never took much heavy melt in the past," another Midwest dealer said. "Now, they buy heavy melt and shredded, scrap that was mainly going to mini-mills and other electric furnace-based steel mills."
But the domestic mills, particularly those making sheet products, are demanding quality material that meets their chemical and size specifications. Many now buy what is often called a mixed No. 1 and No. 2 heavy melt, as long as the percentage of the thicker material is higher. It is normally cut to 3-foot lengths, not the 5-foot material called for in the Institute of Scrap Recycling Industries' specifications for No. 1 and No. 2 heavy melt. Also, while most mills accept the material as long as it is at least a quarter-inch thick, some mini-mills require the pieces of scrap in the heavy melt mix be no thicker than 2 inches, one dealer said. Heavier scrap requires more time to melt in electric-arc furnaces and can stretch out the tap-to-tap time, a key benchmark of daily steel output at EF mills.
Another trend has arisen to further skew the heavy melt market—increased demand from overseas. Foreign steel mills have a near-insatiable appetite for scrap like heavy melt and shredded. Many are makers of rebar and other steel products with chemical specifications that are less strict than those applied by domestic mills, particularly the sheet steel producers.
The export yards normally obtain much of the scrap they export from their own feeder yards or smaller local dealers. With the increases seen in offshore demand in recent years, they have pushed further inland. This is particularly the case along the U.S. East Coast, where the competition for scrap between mills and exporters is more intense. On the West Coast, most of the ferrous scrap goes to steelmakers in the emerging economies in the Far East. Nations like Vietnam and Malaysia lack much domestic scrap to feed their new steel mills, and compete against each other for ferrous scrap from the West Coast export yards.
The strength of export demand, also spurred by the chronic weakness of the U.S. dollar on the world market, has seen annual shipments of ferrous scrap double to more than 20 million tonnes annually in the past two years from an average of about 10 million tonnes per year at the start of the decade.
As a consequence, several dealers said they have found it easier to sell scrap to exporters. Anything that is questionable and might be rejected by domestic mills get tossed into the heavy melt and shipped to the export market. Strong demand from export yards and less-onerous specifications aren't the only factors that play a role in the decision to sell scrap at the docks. Prices and a yard's handling costs also figure into a decision.
"The domestic mills are as tough as ever on the quality of the heavy melt that they buy," one scrap industry executive said.
On the scrap dealer's side, if the mills say they're paying $330 per long ton for No. 1 heavy melt and the exporters are paying $350 per ton, most will sell all they have to the exporters, he said. Even if the mills are offering $350 per ton and the docks are at $330 per ton, it's still a judgment call, he said. "If the numbers are reversed, then I have to evaluate it. How much cleaning? Is it worth it? Are they going to make me buy a heat if they screw up and miss the required chemistry?"
Overseas demand isn't the only factor that has changed the scrap dealers' recipe for heavy melt. The closure of many of the iron foundries has created an abundant supply of cast scrap—not only auto parts, but also old cast iron radiators and bathtubs, some auto parts and some of the older and unwanted machine tools like lathes—that has fewer homes in this country. Previously, yards would buy the material that they called yard cast or heavy breakable cast. The yard's equipment operators would drop a huge heavy iron ball on the material and break it into pieces that could be easily charged in the foundries' smaller cupola furnaces.
Mini-mills normally restrict the amount they will take, one central Ohio-based dealer said, not just because of the thickness but also the chemistry problems with, say, enameled coatings and oily parts. Some have found that, once again, the export yards don't have as much trouble with the cast scrap. Some said they've sold as much as 30 percent of a truckload or railcar made up of cast scrap and it hasn't been rejected, as it would with domestic steel mills.
The cast scrap also might be helping to fill what some dealers see as a steadily declining supply of the materials that make up the heavy melt grades. Some of the lighter iron scrap that would be labeled No. 2 heavy melt is now shredder feedstock, and even some of the quarter-inch-thick plate can be rammed through the big new megashredders.
"The supply has not evaporated and probably never will, but we don't see nearly as much of the material that we would tossed in the heavy melt pile," one Midwest dealer said. MICHAEL MARLEY