Viewpoint: US tariffs, new EAFs may alter scrap flows

A wave of new electric arc furnace steel mills coming on line next year could transform scrap flows in North America, while looming US import tariffs could stunt cross-border trade.

Six steel mills in the US and Canada, accounting for about 9.9mn short tons (st)/yr of electric arc furnace (EAF) production, are ramping up from late this year or scheduled to start up in 2025.

The new EAFs, mostly along the Mississippi River and in Ontario, could be magnets for scrap and reshape flows across the southeast, Midwest and Canada, as scrap-fed EAF steelmakers continue to expand their role in North America, which was historically dominated by coal and iron ore-fed blast furnaces.

Although some scrap dealers are optimistic about markets in the new year, market participants are carefully monitoring the effect president-elect Donald Trump's hawkish trade policies could have on scrap trading. Trump has pledged to impose 25pc tariffs on US imports from Canada and Mexico that could further shift North American scrap flows.

Canada is the largest shipper of ferrous scrap into the US at an average of 3mn metric tonnes (t)/yr since 2021. Prime scrap imports between January and October this year averaged 47,000t/month, while shred imports averaged 70,000t/month, US customs data shows.

The import tax would drive up the cost of Canadian scrap for US buyers and potentially reduce supply available to steel mills in the Midwest. Scrap traders noted that Trump can be unpredictable and may be using the threat of tariffs as leverage.

"I'm pretty tepid on the first quarter," one Midwest dealer said. "People are trying to figure out how serious Trump is on tariffs."

New EAFs to drive scrap demand

The new scrap-fed EAFs in North America include Algoma Steel in Ontario, Hybar in Arkansas, and Nippon Steel's and ArcelorMittal's joint venture in Alabama.

US Steel's Big River Steel began melting scrap at its second Arkansas EAF in October. EAF steelmaker Hybar plans to open its 630,000 st/yr reinforcing bar mill in northeast Arkansas in the summer of 2025. Hybar, along with Big River Steel and three Nucor mills already in the region, could further bolster the lower Mississippi River basin as a major scrap market.

"I'm looking forward to next year because of the increased competition," a Midwestern scrap dealer said. "It's always good to have options."

The new consumption could position northeast Arkansas and Tennessee as perhaps the top scrap consuming region, making it an industry barometer in 2025. Chicago has historically held that position and has been the benchmark region in contracts.

Shifting flows in Canada

Algoma Steel plans to begin ramping up two new EAFs in Sault Ste Marie, Ontario, in March next year to continue making hot-rolled coil and steel plate.

The EAFs could eventually bring that facility's maximum steel production levels to 3.7mn st/yr once they fully replace Algoma's blast furnaces.

The steelmaker will likely focus on low-copper shred and prime scrap grades to keep up the iron content in its melt mix as it transitions to EAF steelmaking, one Canadian scrap consumer said. Algoma may also continue to rely on raw inputs like direct reduced iron and hot briquetted iron as it ramps up its scrap buying to feed the EAFs.

Market participants in Canada expect the mill to buy scrap from the prairies west of Sault Ste Marie, as well as from the greater Toronto area to the mill's east, though Algoma will face competition to pull scrap from the latter region.

Scrap dealers in the upper Midwest are also keen to supply Algoma Steel because buyers in that region are scarce. A Midwest dealer noted that Algoma may ship in scrap from US ports on the Great Lakes.

Algoma did not respond to requests for comment on its raw material plans. In 2021, the company set up a joint venture with Triple M Metal, a Canadian scrap dealer with 45 yards, that will likely supply scrap for Algoma Steel in Sault Ste Marie.

By James Marshall and Brad MacAulay