UNITED STATES April 20 2016 4:45 PM     

NEW YORK (Scrap Register):  Institute of Scrap Recycling Industries (ISRI) Chief Economist Joe Pickard  testified at a United States Trade Representative/U.S. Department of Commerce  hearing, “Policy Recommendations on the Global Steel Industry Situation and  Impact on U.S. Steel Industry and Market.” The two-day hearing featuring nine  panels is related to the global steel industry situation and its impact on the  U.S. steel industry and related industries, including the U.S. ferrous scrap  industry. Pickard’s remarks as prepared for delivery are as  follows:

Recycled iron and steel products, also known as ferrous scrap,  is by far the largest recycled commodity group processed by our industry, with  scrap recyclers – who are located in every congressional district – typically  processing between 70-75 million tons of ferrous scrap annually. According to  U.S. Geological Survey estimates, the total value of ferrous scrap processed in  the United States in 2014 was $26.1 billion, but for 2015 USGS reports that  figure declined to $18.3 billion as scrap prices and volumes declined due to a  range of domestic and global market factors.

Although the United States  is the single largest exporter of ferrous scrap in the world, it’s also  important to remember that most of the ferrous scrap that is processed in this  country is consumed here as well. The United States is by far our industry’s  most important market. In 2015, just over 80 percent of all the ferrous scrap  processed by our industry was consumed by the U.S. steel industry. In turn, U.S.  steel mills heavily depend on ferrous scrap as a vital raw material input, with  scrap supplying 60-70 percent of steel mills feedstock in recent years. The  health of the U.S. steel and scrap industries are therefore closely  inter-twined.

In contrast to the United States, ferrous scrap accounted  for just 11% of the raw material supply for steel producers in China in 2014.  For now, the vast amount of steel production in China is made from iron ore and  primary materials, not from ferrous scrap. Given the vast environmental benefits  of using scrap versus primary material including reduced energy consumption and  GHG emissions, the excess production of steel in China comes not only with  significant economic costs but with unmistakable environmental costs as  well.

Many factors, including the surge in Chinese steel production to  more than 800 million tons annually has resulted in some of the most difficult  market conditions faced by scrap recyclers and the steel industry in a decade.  Even as Chinese steel output has crested, U.S. exports of ferrous scrap to China  plunged from approximately 5.5 million tons in 2009 to less than 400,000 tons in  2015. Cheap iron ore prices have not only provided incentives for Chinese steel  mills to produce excess amounts of steel that have weighed on prices along the  global ferrous supply chain, it has also dis-incentivized ferrous scrap usage in  China.

Given the combined impacts of global and domestic market factors,  scrap processors have seen their profit margins erased amid continued industry  consolidation, with a growing number of scrap recyclers either scaling back  their operations, merging with other companies or closing their doors  altogether.

Due in no small part to global oversupply of steel, ISRI  estimates that in just the last two years well over 100 scrap recycling  facilities have shuttered and Labor Department data confirm that more than  11,000 recycling jobs have been lost since early 2015, representing lost income  of more than $500 million, which does not include other indirect job losses,  lost tax revenues, reduced domestic and export sales, and other economic costs.  Collectively, market conditions have significantly harmed the scrap recycling  industry.

A global economy contemplates the trade of ferrous scrap across  international borders. Such trade must be conducted in a free and fair manner.  ISRI is a forum for information exchange and education on issues related to such  trade. Artificial barriers to the free and fair trade of ferrous scrap  commodities have a detrimental effect on our economy. The global ferrous scrap  market is one of the purest examples of supply and demand economics. Any attempt  to artificially alter that cycle will, at best, do no good. Instead, history  indicates that it can do unanticipated harm. It is also consistent with ISRI’s  policy to raise documented unfair or illegal trade practices with the  appropriate government agency.

ISRI and its members are well aware of the  state of crisis impacting the U.S. steel industry. These are our most important  customers and the livelihood of the U.S. ferrous recycling industry depends on a  healthy domestic steel industry. ISRI supports the strongest measures to protect  the steel industry from illegal dumping and unfair subsidies that have direct  and indirect negative economic impacts throughout the steel manufacturing supply  chain.

ISRI calls for vigorous enforcement of trade laws and other  efforts by the U.S. and other trade leaders in the OECD to ensure that China  remains committed to reign in excess production capacity for crude steel.  Immediate action is needed to prevent growing trade tensions and recurring  crisis. Lastly, ISRI thanks the U.S. Trade Representative and the Department of  Commerce for taking timely action to understand and address the difficult global  impacts on the U.S. steel and scrap recycling industries and ISRI is committed  to assisting our government agencies on this and other pressing trade issues  going forward.