Junk Yard Silver Lining

It’s hard to find a silver lining in the shredded international supply chain, but here’s one.

Argus Media, the U.K. company that tracks commodity markets, has its eye on a trend suggested by eight ships hauling scrap metal — four of them bound for the Alabama State Port Authority, outbound from Brazil, Russia and Ukraine.

Add to that another “likely” load of scrap headed for Mobile from Tyne Dock in the U.K.

“The uptick in imports comes at a time when U.S. electric-arc furnace steelmakers face an increasing shortage of prime scrap as a result of automotive and other manufacturing shutdowns that started in March in reaction to the spread of COVID-19,” notes Argus. “U.S. auto plants are tentatively scheduled to resume operations at various times in May, but at lower-than-normal capacity.”

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The auto shutdown led to sharp reduction in mill capacity, says Argus, but mostly at integrated steel mills. By contrast, demand is rising at electric arch furnaces, like the ones run by Nucor at three mills in Alabama — Birmingham, Tuscaloosa and Trinity, in north Alabama, near Decatur. Electric arch furnaces melt scrap into steel plate at lower costs than integrated mills, which fire steel from raw materials.

“Even with higher pig iron and scrap imports in May, prime scrap prices are widely expected to rise next month from April levels because of the supply crunch,” Argus reports.

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