Institute of Scrap Recycling Industries (ISRI) Chief Economist Joe Pickard
testified today 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
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
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
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.
The Institute of
Scrap Recycling Industries, Inc. (ISRI) is the Voice of the Recycling
Industry™. ISRI represents more than 1,600 companies in 21 chapters nationwide
that process, broker and industrially consume scrap commodities, including
metals, paper, plastics, glass, rubber, electronics and textiles. With
headquarters in Washington, DC, the Institute provides safety, education,
advocacy, and compliance training, and promotes public awareness of the vital
role recycling plays in the U.S. economy, global trade, the environment and