Global steel, pig iron supply snags boost ferrous scrap demand: Schnitzer

Global steel and pig iron supply chain disruptions are boosting ferrous scrap demand, Schnitzer Steel CEO Tamara Lundgren said April 6.

Lundgren said demand and pricing for recycled ferrous metals have been particularly supported since supplies of semifinished steel and alternative metal raw material units have been cut off from the Black Sea region due to Russia's military invasion of Ukraine.

"While we continue to be impacted by supply chain disruptions, global demand for our products and services remains very high," Lundgren said during Schnitzer's fiscal second quarter earnings call with industry analysts. "Our outlook is strong, and we expect our third quarter results to benefit from both higher sales volumes in all our product lines and the strong current price environment."

The S&P Global Commodity Insights daily US Midwest No. 1 busheling assessment settled at $705/lt on a delivered basis on April 5, up from $600/lt at the beginning of the year. The daily Platts TSI US Midwest shredded scrap index settled at $610/lt on a delivered basis on April 5, up from $530/lt over the same period.

Portland, Oregon-based Schnitzer has also seen its ferrous scrap shipment volumes rise as scrap and steel supply from China has tightened due to recent coronavirus-led lockdowns in the country, Lundgren said.

Other factors benefitting the short-term outlook for the ferrous scrap market include pent-up demand for various consumer goods, such as automobiles, and "the effect of years of underinvestment in industrial metals and mining, which has created a structural shortage," she said.

The positive trend for the ferrous scrap market in 2022 builds on fundamentals from the last several quarters.

"During [Schnitzer's fiscal] Q2, market prices for recycled ferrous metals remained at historically high levels with a dip in the beginning of the quarter followed by a strong reversal towards the end," Lundgren said.

Schnitzer's ferrous scrap sales totaled 1.07 million lt in its fiscal Q2, up from 977,000 lt, a year ago.

The metal recycler and steelmaker reported a net income of $38 million on sales of $783.2 million in fiscal Q2, compared with an income of $46 million on sales of $798.1 million in the year-ago quarter.