Competition for prime scrap will remain stiff in 2024 as a wave of new electric arc furnace (EAF) steelmaking capacity comes on line in the US, further driving underlying support for the low-residual prompt industrial scrap grade.
Next year is poised to mark the culmination of large investments in EAF capacity expansion with numerous projects targeted to be completed and ramping up.
Of the nearly 22mn short ton (st)/yr capacity additions announced by steelmakers since 2020, about 60pc is slated to hit in 2024 or is currently in the ramp-up phase.
The US is projected to add nearly 16.1mn st/yr of new EAF capacity from the fourth quarter of 2023 through 2025, according to Argus estimates.
Capacity additions are largely concentrated in flat-rolled products with the sector accounting for 14.1mn st/yr of the additions, while 2.1mn sty/yr will be long products.
EAFs account for over two-thirds of current US steel production capacity and are poised to take a greater share over the next two years as major expansions come on line, including the 3mn st/yr flat-rolled mills by Big River Steel 2 in Osceola, Arkansas, and Nucor's 3mn/yr [sheet mill](https://metals.argusmedia.com/newsandanalysis/article/2291173) in Mason County, West Virginia.
The steep surge in scrap-intensive melting capacity will help fuel more competition for prime grades after battles for the high-purity scrap grade have been building over the last few years.
From aggressive bidding wars for industrial accounts to growing premiums for low-residual #1 busheling, the demand landscape is expected to continue to heat up next year.
Steelmakers have honed raw material supply chains over the last few years, after record profits in 2021-2022 fueled major acquisitions and industry consolidation, along with an increasing focus on decarbonization of steelmaking.
Growing EAF demand for prime scrap will have also been joined with rising interest from basic oxygen furnace (BOF) steelmakers looking to optimize production and reduce greenhouse gas emissions.
Increased scrap demand will not necessarily come hand in hand with higher production capacity, as evidenced this year when some major steelmakers reported slightly lower shipment data over the first nine months of the year from a year earlier despite having increased melting capacity.
A similar trend has also been seen in US steel production data, which is on track to be down or nearly unchanged in 2023, despite adding more capacity this year.
The World Steel Association estimated total US steel production year to date through November at 73.9mn metric tonnes (t) (81.5mn st), down 0.5pc from the same period last year, while the American Iron and Steel Institute estimated production at roughly 87mn st through the third week of December, little changed from a year earlier.
Regardless of the slight variations in estimatedtotal steel production this year, the increasing share of US EAF capacity in 2024 will likely continue to fuel demand for prime grades and push steelmakers to continue exploring cheaper alternatives like low-copper shredded scrap, which has gradually grown in market share over the last few years.
