The southern US emerged as the nation's top steel producing region in 2020, the culmination of a steady shift away from traditional steelmaking regions in the north and their legacy pricing references.
Raw steel production in the south averaged nearly 601,000 short tons (st)/week in 2020, far outpacing Great Lakes output of nearly 535,000st/week, according to data from the American Iron and Steel Institute (AISI). In 2019, the southern region produced just shy of 700,000st/week of raw steel, while the Great Lakes region produced a little less than 699,000st/week.
The south's steelmaking lead will continue to widen, with 6.2mn st/yr of additional flat-rolled capacity expected in the region from late 2020 through 2022, compared to 3.65mn st/yr of flat-rolled/plate capacity to be added in the Midwest/Great Lakes over that span (see table).
The changing regional dynamics have been driven by increasing electric arc furnace (EAF) steel production capacity in the south and curtailments or idling of blast furnace capacity in the Great Lakes region. EAFs require less capital to build and generally have lower labor costs than legacy blast furnaces.
The push southward in steel production also brings implications for steel and ferrous scrap pricing.
Traditionally, US hot-rolled coil (HRC) has been priced on an ex-works Midwest basis, a broad geographical region reflecting steel sold from mills near Chicago, Detroit, Cleveland and Pittsburgh.
But with more HRC being produced in southern states, pricing for those volumes can diverge. The first Argus assessment for southern HRC published yesterday showed this difference, standing at $1,297/st ex-works US south compared to $1,286.50/st ex-works Midwest.
The Argus US south HRC assessment reflects steel produced in Alabama, Arkansas, Mississippi and South Carolina.
A regional HRC assessment also reflects how mill margins can differ based on location. On a Midwest basis, HRC premiums to prime scrap #1 busheling were $784/st this week, while the southern HRC premium to the Argus #1 busheling delivered southeast mill assessment was $804/st.
The new southern EAF expansions also will likely drive scrap demand higher, particularly for prime grades, potentially leading to higher prices for #1 busheling relative to obsolete grades. The trend that has already emerged in 2021 as cutbacks in US auto production crimp scrap generation and boost EAF mill demand.
Southern mills will likely cast a wide net for busheling, utilizing the US river system to compete for primes via barge farther north and east, while also importing scrap. The latter was a key factor in Steel Dynamics' acquisition of Mexican recycler Zimmer, which secured Mexican prime scrap supplies to feed a new 3mn st/yr flat-rolled mill in Sinton, Texas, near Corpus Christi that will begin production this summer.
Source : https://www.argusmedia.com/en/news