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
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
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
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
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.