The 's' word: Recycling scrap metal's image

Scrap metal is changing its status, its image, its price and even its name.

"Rag and bone" men with carts no longer shout around the houses for "any old iron, any old iron?" – at least not in the UK, and scrap merchants are no longer "scrappies" but increasingly up-market "recyclers."

Technological advances and electronic sorting may still be badly needed in some quarters. But scrap – or secondary metal's – essential place as an energy-saving decarbonization tool is being recognized in the effort to establish a circular economy, or as the jargon puts it, "to close the loop."

Ferrous scrap is the "new gold" key for production of green steel, said Fernando Espada, president of European steel distributors' association Eurometal, at a recent association meeting in Barcelona.

At the latest Bureau of International Recycling event, also in Barcelona, BIR President Tom Bird proclaimed "a Golden Age for recycling," alluding, we might be forgiven for thinking, to Spain's important golden age of literature.

The grand transformation is at least partially linguistic.

The "s" word is out of favor and could eventually disappear. With help from the decarbonization crew information campaigns on what scrap and secondary metal are, and their energy-saving attributes, are still needed.

The metals community must make the public aware that steel produced using scrap in electric arc furnaces may produce just one-third of the CO2 emissions of steel made from iron ore and coal in a blast furnace. And that production of secondary, or recycled, aluminum – now used for a wide variety of finished products – requires just 5% of the energy and creates just 5% of the emissions of primary aluminum production using bauxite and alumina, according to sources including the World Economic Forum.

References to scrap metal as "waste" look set to be short-lived, given the current emphasis on energy savings.

China has stopped using the term "solid waste" and is going even further: replacing "ferrous scrap" with "recycled steel."

The new name has already taken off in parts of the US, where the "s" word and the "w" word are out of vogue. "Resource" is another new option.

"We never dare use the word 'waste'. It's 'recycled metal' in California," said John Morgan, chairman of US recycling organization Institute of Scrap Recycling, or ISRI.

Europe still needs to catch up with the new lexicon. The European Commission's "Waste Shipment Regulation" – designed to reduce the cost of ferrous scrap to EU steel mills and ensure sufficient regional supplies for decarbonization by curbing exports – is as unglamorous in sentiment as in name.

Import/export curbs set value

The quantity of trade restrictions emerging on scrap is an indicator of its growing value. Various countries have announced export restrictions, perceiving the importance of keeping at home more recycled raw materials for their steel and metals production.

China, the biggest producer and consumer of recycled steel, tightly restricted in 2018 to 2020 imports of both ferrous and non-ferrous scrap, importing only material of a high enough quality to remelt easily, without deleterious or unwanted elements. This move very much set world standards.

In line with adoption of the "recycled metal" name, China now has a new set of national standards that sets out in detail for the first time the sources of the scrap, its dimensions as well as limits for content of hazardous material, a clear move away from previous standards under which merchants shipped all kinds of waste to the country.

China removed some blanket bans on scrap imports in 2021 as its Blue Skies policies obliged it to use more secondary material to produce metals with lower energy consumption and carbon emissions. But strict customs quality controls remain in place.

Major metals and steel producer Russia has applied quotas or taxes on scrap exports since the start of 2021. It will extend curbs on ferrous scrap exports outside the Eurasian Economic Union until end-2022, to provide domestic steel mills with sufficient scrap in the face of sanctions, even though recycling association Ruslom forecasts a 43% on-year drop in domestic demand for scrap this year amid a severe economic decline sparked by the country's invasion of Ukraine.

Japan is preferring to keep scrap, especially high grade, for domestic use due to decarbonization pressure, while South Korean mills are heard boosting their domestic scrap usage to 70% to reduce reliance on imports and for greener steelmaking.

Other countries or regions recently imposing or holding serious discussions about export curbs – particularly on ferrous scrap – include South Africa, Iran, the UK and the European Union.

The latter is widely expected to introduce legislation restricting scrap exports via amendments to its unfortunately-named "Waste Shipment Regulation," which the EC is due to vote on in October. This is expected to be opposed by EU and international scrap communities alike: it has potential to distort markets globally and reduce price incentives to produce scrap within the EU where there would be more local availability.

EU-27 was the world's leading steel scrap exporter last year, growing outbound shipments by 11.5% on year to 19.46 million mt, according to BIR statistics. The main buyer was Turkey at 11.3 million mt, up 11.3%.

Demand is growing worldwide for recycled steel. Statistics from trade departments and German steelmaking association WV Stahl show that global external steel scrap trade – including internal EU-27 trade – reached 109.6 million mt last year, 9.7% higher than in 2020.

According to Michael Lion, chair of BIR's International Trade Council, the EU's curbing of scrap flows would deprive developing nations of the raw materials they need for decarbonization, running counter to the green cause within the EU and elsewhere in both business and sustainability terms.

"Export controls would be the most tragic development in the industry for the last 40 years," Lion claims.

New price levels

Complex supply-demand dynamics are fostering price volatility: S&P Global Commodity Insights Platts' assessment of Turkish imports of premium heavy melting scrap 1/2 (80:20) fluctuated between $665/mt and $320/mt in the four months following the start of the Ukraine war. The range is still well above the $207/mt of March 2020, indicating a new price threshold has been reached following the COVID-19 markets slump, as decarbonization gathers pace.

The volatility has sparked new interest in derivatives markets.

London Metal Exchange's Steel Scrap CFR Turkey contract, based on the Platts assessment, traded 2.6 million mt in Jan-July, up from 2.7 million mt for the whole of 2021 and 2020's 2.8 million mt.

Interest will grow further as the refrigerators, cars and cookers of China's initial consumer boom of the early 2000s start to be recycled. China aims to boost recycled steel usage with a five-year goal of reaching 320 million mt of annual scrap usage by 2025, from 233 million mt consumed in 2020, reducing its steelmakers' reliance on imported iron ore, and helping the country reach peak carbon emissions goals by 2030.

Singapore Exchange aims to launch a China recycled steel derivatives contract in two to three years. Greater scrap quantities will then be entering the market, driving visibility. For the contract to be successful China has to be a net exporter of scrap, SGX Head of Commodities Will Chin said.

The contract's name? "Scrap's changed its image in China. Call it what you will, it's important to drive market acknowledgement that this is the most recycled material there is," Chin said.

With reports from Joanne Ju and Keith Tan