However, forecasting the price of recycled steel can be challenging due to the continuously uncertain world economy. Understanding the factors that affect the price of recycled steel is the best way to deal with this challenge.
The price of recycled steel and iron scrap products was approximately $415 per metric ton in the U.S. in 2022. However, the prices fluctuated between $196 and $ 418 per metric ton over the 2010 to 2022 period due to factors like demand and supply, location, and purity.
In the rest of this article, I’ll discuss the factors affecting the price of recycled steel. This will help you estimate how much you should pay in 2023. Let’s get started!
Recycled steel is a more eco-friendly material than virgin steel and conserves energy while diverting construction and demolition waste from landfills. Consequently, eco-conscious builders are increasingly turning to recycled steel for construction to reduce their environmental footprints.
For this reason, the demand for scrap metal is expected to increase.
The ongoing sustainability campaigns by governmental and non-governmental organizations to combat climate change will likely convince more people to adopt green building. Therefore, you can expect higher demand for greener materials like recycled steel, raising prices.
Most U.S. steel recycling firms source scrap steel from vehicles. Almost 100% of cars are recycled for their steel scrap, and prices vary based on the quantity purchased.
Moreover, the fluctuating price of raw materials like iron ore affects the cost of recycled steel. The raw material’s availability depends largely on global supply and demand within the mining industry.
The table below shows variations in the prices of recycled steel in the U.S. from 2010 to 2022:
|Year||Price in U.S. Dollars Per Metric Ton|
U.S. steel and Iron prices per metric ton from 2010 to 2022. Source: Statista
The price of scrap metal varies greatly depending on the market. This explains why it’s hard to accurately predict the exact price of recycled steel for a given period.
The best way to predict the price of recycled steel is by understanding the factors that affect it.
Here are the factors influencing the price of scrap and recycled steel:
This basic economics principle holds true for scrap metal — prices increase if there is more demand than supply, and vice versa.
The production of recycled steel is subject to the availability of scrap steel for recycling. If more steel scrap is available, more recycled steel can be produced.
The higher the supply, the lower the price of recycled steel.
Let’s look at it from the other side; if there is less supply of scrap steel for recycling, there will be less production of recycled steel, lowering the supply and increasing the price.
On the demand side of this equation, the higher the demand, the higher the price because more buyers are competing for a given amount of recycled steel.
Fastmarkets evaluates the supply and demand forces in the recycled steel market and predicts that the commodity’s prices are expected to rise by 6.3% due to less supply of steel scrap.
The availability and cost of raw materials like iron ore and coal affect the overall quantity of steel produced, influencing the supply side of the supply-demand equation.
Recycled steel manufactured by re-melting scrap steel is identical to new steel made from iron ore. It can be sold for the same purposes and to the same customers as new steel, so the reduced overall supply of steel due to scarcer raw materials raises the price of all types of steel, including recycled steel.
The purity of scrap metal affects its price.
In the metal industry, purity refers to the state of metallic element alloy.
A pure metal is one that has not been alloyed with other metals — its purity must be at least 99%.
Pure steel is used to manufacture high-grade, specialized products like household and hospitality materials. Therefore, it’s more valuable than impure steel metal. Consequently, its price is higher than impure steel metal.
Recycled steel made from pure steel scrap is also more expensive than a product made from impure scrap metal.
Purity could also be thought about in the context of the waste stream. If the scrap steel is mixed in with other materials, it will have to undergo more processing before being re-melted, which is costly and pushes the price upwards.
The cost of recycled steel varies depending on location because scrap metal prices differ based on region.
Location-based price variation is highly affected by the cost of production and per capita income. The higher the production cost for recycled steel, the higher its price.
Per capita income determines the cost of labor to produce recycled steel and how much people are willing to pay for the commodity in an area. Therefore, places with high per capita income will have higher recycled steel prices.
For instance, the per capita income for New York was $78,089 in 2022, while that of Mississippi was $49,111. Thus, you should expect to pay more for recycled steel in New York than in Mississippi.
What will happen if the raw materials for steel production are cheaper?
The likelihood is that more firms will shift to using raw materials to manufacture virgin steel. As a result, there will be less recycled steel production and higher prices.
If raw materials are expensive, more firms will shift to steel scrap metals, increasing the supply of recycled steel. A high supply means lower prices.
That said, electric arc furnaces generally use scrap steel rather than iron ore to produce recycled steel, so such plants are less able to utilize raw materials such as iron ore and coal in their production process.
Forecasting the price of recycled steel is a complex process. You can only attempt this by understanding the factors that affect the commodity’s price.
You should pay attention to the availability and cost of raw materials, supply and demand, and purity when it comes to the price of recycled steel.
Moreover, if you want a cheaper option, source your recycled steel from a low per capita income area, provided increased transportation costs don’t outweigh any savings.