A trend to watch in 2022 is the continuation of U.S. steelmakers buying scrap yards to help ensure a steady supply of raw material amid rising demand for steel products and supply chain challenges.
The end of 2021 saw a wave of large acquisitions as steel mills flush with profits snapped up scrap metal recycling operations around the country.
Pent-up demand for commodities including steel has U.S. manufacturers scrambling buying scrap yards to secure raw material supplies.
Steelmakers have been paying a premium for scrap due to these demand increases. According to the consulting firm Metal Strategies, for the first three-quarters of 2021, steelmakers’ scrap purchases increased 17 percent over the previous year. Accordingly, the average price for steel scrap rose as well. The average price for a ton of post-consumer scrap increased by 26 percent from 2020 to 2021, according to the consulting firm World Steel Dynamics. That firm also concluded there was an increase of 34 percent over the same time period for industrial scrap. A strategic move to increase competitiveness in this environment is to bring scrap supply in house to ensure a steel company’s scrap requirement is met.
The following is a list of some of the recent or notable acquisitions reported by The Wall Street Journal and Barron’s.
- North America’s largest steel producer, Cleveland-Cliffs, in November acquired the recycler Ferrous Processing & Trading Co. in a deal valued at $775 million. According to The Journal report, Cleveland-Cliffs is the largest supplier of steel to the automotive industry.
- Nucor Corp., the largest steel producer in the U.S., has operated a scrap company for a number of years and is expanding its scrap yard investments as it seeks to expand its steel production. Nucor’s scrap business this fall acquired Garden Street Iron & Metal Inc. in Florida and Grossman Iron & Steel Co. in St. Louis. These latest purchases give Nucor scrap sites in areas where it is building new mills or looking to expand production at existing mills.
- North Star BlueScope Steel purchased MetalX LLC steel scrap processing operations in Indiana, near a North Star mill, for $240 million in November.
These purchases add up to more than $1 billion to purchase steel scrap processors in 2021.
In 2020, Steel Dynamics Inc. bought a scrap company in Mexico to help supply a new mill in Sinton, Texas.
According to industry analysts at the commodity price reporting agency Fastmarkets, the Nucor, North Star and Steel Dynamics investments alone are expected to increase scrap demand by more than 440,000 tons per month once they are up and running next year.
Using scrap for new steel capacity is the preferred approach compared to making steel from virgin iron ore. As steel makers and scrap businesses know, using scrap is a lower-cost, lower-emission process, requiring far less energy than using newly mined material. Scrap metal recycling of junked cars, old appliances and manufacturing and construction waste continues to pave the way for meeting steel demand in the coming years. Accordingly, industry analysts predict there will be more mergers and acquisitions on the horizon in 2022.
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