Steel Scrap Markets in Europe and the USA

Abstract

The objective of this paper is to provide an overview of the market for steel scrap (or ferrous scrap) for steelmaking. A simple theoretical discussion of scrap markets is outlined, and it constitutes the basis for a discussion of consumption and supply behaviour, international trade patterns and the development of scrap prices over time and across world regions. The geographical scope is essentially world‐wide, but particular attention is paid to market behaviour and outcomes in Europe and the USA. In pursuing the above, the paper also reviews past research efforts on steel scrap markets and identifies topics for future economic research in the field. It is emphasized that improved knowledge of scrap markets ought to provide important lessons for public policy measures aimed at further increasing steel recycling rates, as well as for environmental impact assessment studies.

Acknowledgements

The research undertaken in the preparation of the paper has formed part of the multi‐disciplinary research programme ‘Towards Sustainable Waste Management’, hosted by the IVL Swedish Environmental Research Institute Ltd and funded by the Swedish Environmental Protection Agency. Valuable help and support from Tomas Ekvall is gratefully acknowledged, as are constructive comments from an anonymous referee. Any remaining errors, however, reside solely with the authors.

Notes

1. It is useful to distinguish between carbon steel, a combination of iron and carbon where other elements are present in quantities too small to affect the properties, and stainless steel, which is a term for a variety of alloys which are corrosion resistant due to a chromium content of at least 10.5 per cent (Cunat 2004). The present paper focuses primarily on carbon steel but also comments briefly on the market for stainless steel scrap.

2. Integrated companies experienced their last surge of expansion during the early 1970s when steel demand was high. However, as demand growth slowed down towards the end of the decade, these investments proved to be very uneconomical (Crandall 1996).

3. The main principles of the supply of home scrap are essentially the same as those presented for new scrap.

4. Still, at higher price levels the short‐run curve will be above the long‐run curve since producers at some point encounter capacity constraints (Tilton 1992).

5. Evans (2006) used a univariate approach with periodic autoregression and concluded that the regional US scrap prices also are tied together in the long run. Any short‐term movements away from this trend are corrected quickly.

6. They did, however, estimate a separate supply function for home scrap, but found no statistically significant relationship between the supply of home scrap and the price of scrap. In other words, they could not reject the null hypothesis of a zero own‐price elasticity of home scrap supply (Barnett and Crandall 1986).

7. These authors found that US scrap prices increased by 2 per cent during the winter and then fell by 1.3 per cent during the spring (Albertson and Aylen 1996).