Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

The US steel industry is expected to extend its bullish run that began in early 2021 amid strong demand and an anticipated infrastructure bill that could potentially increase the consumption of steel. 


During a keynote address at the Institute of Scrap Recycling Industries (ISRI) Gulf Coast Chapter conference on Jun 10, Russ Rinn, executive vice president of Steel Dynamics (SDI) and chief operating officer of Omnisource said that the strong demand for steel will also rub off on the demand for ferrous scrap, which is used as raw material in steel production. 


China growing in EAFs

Rinn noted that China could become a disruptor for the ferrous scrap market if it opts to mandate more blast oxygen furnaces (BOFs) to install electric arc furnaces (EAFs) in the production structure. 


The net effect of China’s increased demand for scrap would affect prices moving forward in the short term. In the long-term, though, China is anticipated to become a large producer of ferrous scrap to supply its domestic demand. The fear of a “scrap tsunami” in 2017, which anticipated China becoming a net exporter of scrap has diminished given the environmental policies to support EAFs and the likelihood that the Chinese government will limit its ferrous exports for domestic use, which will minimize disruptions to the global trade flows and prices. 


The cost-efficiency of steel scrap has also been bolstered by the high iron ore and coke prices in the production of pig iron and BOF manufacturing. EAF production is gaining market share in China and indicating improved profitability.


SDI in 2021

Record backlog in finished steel orders and anticipated high demand through 2021are expected to help the company establish new records this year. 


Southern US will also be impacted by the commissioning of the new Sinton SDI steel plant. Rinn elaborated on the new 3mn nt Stinton flat-rolled steel mill in Texas that is anticipated to launch operations in Q3 2021 and ramp-up to full production by mid-2022. 


At all of its locations, the company has focused on adding value-added services along the supply chain, which has resulted in its growth in downstream processing. In 2020, value-added services resulted in 1.7mn nt shipped to smaller processors directly, a business revenue source that would have otherwise gone to a third-party processor. 


SDI is investing in two paint lines and two more galvanizing lines one in the Midwest and another in the South with both expected for commissioning in 2022.


Focus on procurement

Omnisource, the SDI scrap processing arm, has 60 locations in North America including the US and Mexico with 10 operating shredders and an additional four non-operating shredders that will allow for organic growth. In 2020, Omnisource processed about 5mn gt of ferrous with an additional 1.5mn gt brokered. 


Rinn noted that volumes in 2020 were low and the goal this year is to process nearly 6mn gt of ferrous and 1.2-1.4mn nt of non-ferrous scrap and achieve close to 2mn gt of brokered ferrous. 


Omnisource is the scrap procurement agent for the Sinton mill, which will consume about 2mn gt of scrap annually. The project began in 2019 with the purchase of 2,600 acres and is now approaching completion on core thresholds including the co-location of customers on its campus. These companies will take advantage of prompt delivery and no freight costs due to proximity to the SDI plant. 


Thousands of tons of structural steel, rebar, and rail-road steel have been sourced from SDI’s Columbia City, Indiana location along with its other steel mills. Forty acres at the Stinton campus have been designated for onsight scrap processing for feeding the mill.

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