CMC’s Barbara Smith answers seven questions on the US steel scrap market

The steel scrap market is undergoing a monumental shift as the pull of decarbonization, growing market consolidation and supply shortages propel steel scrap into 'hot' commodity status

In this exclusive interview, we asked Barbara Smith, Chairman of the Board, President and Chief Executive Officer at Commercial Metals Company (CMC), about her thoughts on looming scrap supply shortages, green steel pricing and the future of the United States (US) steel scrap market.

Barbara will be speaking on the decarbonization of the steel industry and the future of the US scrap at Fastmarkets’ Scrap & Steel North America Conference in January.

The US steel market is going through a generational shift that could potentially change steel raw materials strategies forever. Rebar has always enjoyed being electric-arc furnace (EAF) scrap-based — but as the rest of the market catches up, is there a risk to future scrap supply?

1. As EAFs replace blast furnaces (BFs) over time, is there a danger that obsolete scrap will struggle to meet demand over the next ten years?

Our analysis would suggest there will be a sufficient supply of obsolete scrap moving forward. As developing countries build out their infrastructure and build a consuming economy, they will begin to develop a scrap reservoir of obsolete scrap. There is always the opportunity for supply dislocations in certain markets but I believe, longer term, there should be a sufficient supply of scrap or scrap alternatives.

2. Will the US start pulling more scrap from Mexico and Canada to support growing EAF production or perhaps offshore?

The US is currently a net exporter of scrap, so the first logical step would be for this scrap to be retained in the nearby markets. However, there may be a possible path for Mexico and Canada to increase scrap supply into the US.

3. What are some of the regional differences and trends you have observed in supporting decarbonization?

The US steel market is much further along than other regions. Up to 70% of steel production in the US is already EAF based, which utilizes scrap to produce a far greener product than traditional BF production.

On the other hand, China is at the other end of that spectrum. Although they are in the process of switching to scrap‐based EAF production, there are still around 247 steel‐producing BFs in China. China has a much bigger journey and a lot of investment ahead of them to effectively decarbonize its steel industry.

The EU is about half and half in terms of EAF scrap‐based steel production. I feel the green energy movement is a bigger focus in Europe, but the Europeans are not as far along as the US when it comes to EAF deployment.

One of the major challenges facing converting to scrap‐based EAF steelmaking is the redeployment of the workforce who will be displaced by this transformation. All countries will need a plan to deal with the employment shift as well as the capital investment required before making the switch.

How will the BF workforce be redeployed? China and EU may struggle the most as governments often provide incentives to traditional steelmaking operations that are guaranteed to support employment and economic stability. It may be challenging for countries to come together on strategies they can all support.

4. How are buyers responding to ‘green’ steel products like RebarZero?

We have received an interesting and positive response to RebarZero. Developers, owners and contractors have a growing interest in products that are proven to lower greenhouse gas emissions.

5. Where is the strongest pull for green steel products, and how could this influence mill/buyer relations moving forward?

I would say the most significant pull comes from the major consumers of steel products. The construction industry consumes 60% of the steel produced in the US. A close second would be the automakers, many of whom have set aggressive goals to be net zero. They cannot achieve their goals without green steel.

6. Do you foresee the market collectively ever paying more for green steel? If so, when and what would it look like — premium vs. built-in pricing?

This is a hard one — supply and demand of these products will ultimately determine the answer to this question. I think there is an opportunity for green premiums with consumers as demand increases. Still, as soon as others can offer a competing product, you can lose that premium opportunity over time.

7. When will CMC’s new Arizona mill open and use 100% renewable energy?

Our second Arizona mill will be commissioned in the Spring of 2023. We will be working alongside our local energy providers to utilize renewable energy. Arizona has a lot of green energy and we are diligently working with the local utility companies on ways we can bring more reliable, renewable energy directly into our facility.

Join Barbara Smith in January at Scrap & Steel North America 2023 and kick-start 2023 at the only event in the market dedicated to scrap and the wider steelmaking raw materials.

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