Final Thoughts: As steel prices soar, why is scrap still grounded?

Many of my colleagues and other players in the recycled iron and steel industry have asked me why a projected increase in demand for scrap hasn’t been realized considering the increased electric arc furnace (EAF) capacity added or scheduled to be installed in the US. They note that despite a surge in steel prices and an increased melt rate, the price of ferrous scrap has only marginally improved.

Over the last 30 years, there has been a proliferation of EAF steel mills constructed in the US that use ferrous scrap as their main melting stock. This growth in scrap-consuming steelmakers spawned predictions of dramatically increased demand for scrap. As more and more EAF mills came on line in the 1993-2004 time period, prices for scrap did increase by roughly $200 per ton from the depressed levels of the previous decades.