So far this year it has essentially been a tale of two
coasts as European and Asian buyers present different
After a relatively stagnant January, East Coast
exporters reported a February bonanza and March and April
provided enough demand to keep yards relatively busy. But on
the West Coast, a drop in demand from China had exporters
scrambling to find other homes for their
Beyond the issue of demand, exportersas well as
domestic yards that have come to rely on selling to the coasts
or shipping out their own containersface a host of
issues, from transportation costs and international currency
fluctuations to government regulations and in-house business
But first some background:
The United States currently exports about 30
percent of all the ferrous scrap it generates, leading the
world in ferrous (and stainless steel) scrap
Despite the fall-off in the national economy
and the scrap microeconomy, 2011 was a record year for scrap
exports by weight, according to the Institute of Scrap
Recycling Industries. After exporting a then-record 21.5
million tonnes in the scrap boom year of 2008, sellers followed
that up with 22.4 million tonnes in 2009, 20.5 million tonnes
in 2010 and a record 24.3 million tonnes last year, U.S.
Commerce Department data show.
However, the value of the scrap shipped
overseas dropped between 2008 and 2009, and while prices are up
this year they are running behind the 2008 average, in large
part because of a strengthening of the U.S. dollar, which
suppressed international prices for scrap. In 2008, exported
scrap was worth about $10 billion; in 2011, it was worth around
$11.4 billion, ISRI numbers show.
In order, Turkey, China, Taiwan, South Korea
and India were the top five importers of U.S. scrap last year,
and continue to offer the only potential for serious growth in
the current climate.
The historical changes also are breathtaking.
Just 20 years ago, less than 10 million tonnes were moving out
of U.S. export yards annually. Ten years ago, that number had
fallen to just over 6 million tonnes. Estimates so far for 2012
are that exports will top 22 million to 23 million
Scrap exports are shipped from more than two
dozen ports in the United States along the East, Gulf and West
coasts. The ports handling the most material last year were Los
Angeles, New York, San Francisco, Oregon, Boston, New Orleans,
Seattle, Houston and Philadelphia.
Looking at all U.S. exports of any type of
finished or raw material, seven of the top 100 exporters are
shipping scrap metal. Sims Metal Management Ltd. alone is the
13th-largest exporter of goods in the country, according to
U.S. Census data.
What all this adds up to is that the current climate
makes entering the export game a risk that numerous yards and
brokers find worth taking. In fact, in todays market any
yardno matter how smallcan become an exporter.
Booming demand, the availability of containers, affordable
shipping costs and changes in technology have allowed many
yards to sell directly to foreign buyers. This has created new
opportunities to sell scrap outside of a domestic environment
becoming dominated by consolidation and a vertical integration
of the scrap supply chain into corporate mill
A business that plays it right can benefit from the
current environment as well as the healthier one that might
emerge as 2012 moves into the second half.
For many yards, the investment in dollars and training
that becoming a direct exporter requires is small enough to
make it an attractive alternative to selling only to the mill
down the block.
Because of this new reality, mills are forced to
compete in the world of export pricing, as happened during the
record-setting year of 2011, so even those dealers who sell to
bulk export shippers or exclusively to mills see some benefit.
But those also willing and able to fill containers and send
them to export yards are in even better shape.
Container shipments have broken the stranglehold that
bulk shippers maintained on the export market. By using
containers, scrap dealers and smaller brokers are able to
bypass bigger companies on the coasts and make their deals
directly with foreign buyers. Long-term outlooks are nearly
unanimous: Exports will continue to increase in the coming
years, and any scrap business gearing at least part of its
operations with this in mind is likely to do well. However, the
short-term viewpoints are a little less certain. While
Chinas economy is still growing and Turkey and India are
not far behind, U.S. ferrous scrap exporters face competition
from producers of alternative iron units, as well as European
Much of this is dependent on the fluctuations in
foreign currency, the value of the U.S. dollar and
transportation availability and cost. The short answer? If
youre thinking longer term, most experts bet on exports.
Worried more about next quarter? Do some close-to-the-bone
business planning before committing.
Even more than domestic mill demand, foreign demand
has set the pace for pricing in recent years. This has led to a
situation in which prices can rebound even when local mills
arent dramatically increasing their buying programs. It
doesnt take a lot of increased foreign demand to drive
prices back up, especially when scrap itself is in somewhat