... And the South rises

On a hot August afternoon, the ground over a large swath of land in Osceola, Arkansas, was being leveled to start construction on a rebar mill being set up by Hybar. The company raised $700 million recently, of which around $470 million are being used to build the plant that will use ferrous scrap to produce 630,000 net tons of rebar per year once operational.

The mill will include a water treatment facility, substation and technology to help Hybar produce material with the lowest possible carbon footprint. The company says it expects its carbon emissions to be the lowest among North American steel producers.

Less than 200 miles away, in Little Rock, Arkansas, construction is in full swing at Cleveland-based Federal Metal’s $17.8 million facility that will recycle postconsumer aluminum copper radiators (ACRs). This is the copper-based cast alloys producer’s first foray into Arkansas.

The facility, with the capacity to process around 3,000 metric tons of ACRs per month, will be commissioned in September, company President Peter Nagusky says.

The plant will specialize in processing large volumes of ACRs to generate Federal Metals’ proprietary PSA 020 aluminum and high-purity copper granules. “Mechanical installation of the primary equipment is complete,” Nagusky says. “We are working on the electrical installation now, as well as the ductwork, baghouse, and additional downstream sortation capabilities.”

To the east, Steel Dynamics Inc. (SDI) is setting up its first aluminum flat-rolled mill in Columbus, Mississippi. The $1.9 billion, 650,000-metric-tons-per-year plant is expected to begin operations by the end of 2025. The mill will operate at 50 percent capacity in the first 12 months, reach 80 percent in the subsequent 12 months and achieve the final 20 percent capacity utilization within two years of startup. Mississippi is a strategic location for SDI’s aluminum mill. During the company’s April earnings call, Chairman and CEO Mark Millett said finished aluminum products from this mill would not only satisfy demand from the U.S. automotive and industrial sectors but also the beverage industry in Mexico.

The Indiana-based steelmaker also has set up a flat-rolled steel mill in Sinton, Texas, that will operate at an 80 percent capacity utilization rate by the end of this year, with production expected to ramp up to full capacity by 2024.

To the north in West Virginia, Commercial Metals Co. (CMC) has received permits to begin building its fourth micromill. The Texas-based steelmaker operates three micromills: two in Mesa, Arizona, and another in Durant, Oklahoma. The West Virginia mill will have a similar capacity to the existing mills and produce 500,000 net tons of steel products consisting of straight and spooled rebar. The mill will not produce merchant products*.

In Splendora, Texas, South Korean tube and pipe manufacturer Husteel has engaged plant manufacturer Fives to build a new $122 million oil country tubular goods (OCTG) plant, which will begin operations in 2025.

In 2022, Aurubis and Wieland, two of the largest European copper producers, also broke ground on manufacturing facilities in Richmond County, Georgia, and Shelbyville, Kentucky.

Aurubis indicated June 13 during its Capital Markets Day that its copper recycling and production plant in Georgia was on track to begin operations in the third quarter of 2024. The German company expects the plant to contribute roughly 170 million euros ($183 million) to the firm’s earnings once operations begin. It is part of the company’s plans to become a fully integrated copper producer in North America.

Wieland’s 79-acre Kentucky plant is expected to create 75 new jobs in the region. It will melt and recycle copper and copper alloy scrap that can be used to make semifinished products. The company plans to sell these processed materials within North America. The plant, which is expected to begin operations in 2024, will process roughly 100,000 metric tons of scrap annually.

A new hub for scrap

Once commissioned, each project will require an immense amount of scrap. While the region already has many ferrous scrap processing facilities given the presence of big electric arc furnace- (EAF-) based steelmakers in the southern U.S., the commissioning of Wieland’s and Aurubis’ copper plants, Federal Metal’s ACR facility and SDI’s aluminum plant are expected to boost the consumption and processing of nonferrous scrap in the region.

Wieland has used acquisitions to ensure a steady stream of scrap supply for its plant. The company began by purchasing Granite City, Illinois-based Totall Metal Recycling (TMR) in April 2022 and added around 100,000 metric tons of processing capacity to its North American portfolio. Since then, Wieland has completed two more acquisitions.

In January, Wieland bought Pennsylvania-based Hummock Industries and its subsidiaries, Heyco Metals and National Bronze Manufacturing, to expand its copper and bronze portfolio. In July, the company also acquired Farmers Copper, a Texas-based copper, bronze and brass supplier, to enhance its service center network.

Aurubis has not yet revealed acquisition plans for North America, but the company has said it is keen to expand its footprint in the region.

Roland Harings, CEO at Aurubis, said during the company’s Capital Markets Day that its metal shredder supply in North America will grow by 4 percent to 330,000 metric tons by 2030 against 230,000 metric tons in 2021. He added that insulated copper wire supply from the company will increase by 4 percent to 310,000 metric tons from 220,000 metric tons over the same period.

The two plants are expected to require a lot of copper scrap, especially No. 2 copper (birch/cliff) and No. 1 copper wire and tube (berry/candy). Given the export market for these grades, participants expect their spreads to narrow considerably once these plants are commissioned. Spreads for the grades have ranged slightly wider in the domestic markets, but participants say they expect these to either match export grades or tighten further.

For Federal Metal, choosing Arkansas as the location to process postconsumer ACRs also was determined by the region’s proximity to scrap material. “We selected the mid-South of United States due to its proximity to several key customers and its strategic location close to the supply of the raw materials,” Nagusky says. “We want more of these nonferrous units to remain domestic instead of being exported.”

Nearshoring also is one of the reasons California-based SA Recycling, one of the country’s largest scrap processing and trading companies, increasingly has chosen the South to expand its operations, CEO George Adams says.

SA Recycling has more than 130 locations nationwide, many of which are in the South. “Logistics is one of the most challenging factors when one is seeking to place products at attractive prices,” Adams says. “The ports and infrastructure in the southern region help alleviate this challenge for companies and scrap recyclers.”

SA has invested more than $1 billion in the business with multiple acquisitions over the past 10 years, and Adams says the company is prepared to navigate the upcoming expansion in this region.

As with SDI’s steelmaking plants, for which it procures ferrous scrap from its OmniSource division, the company plans to set up its own processing units to obtain and process aluminum scrap for the Mississippi facility.

SDI’s aluminum plant potentially will require approximately 900,000 metric tons of aluminum slabs annually for its finished products. While 50 percent of this supply is expected to be generated within the facility, the remainder will be provided by two satellite aluminum scrap centers in Arizona and Mexico, built with an outlay of $350 million. The Mexico facility is expected to begin operations in 2024, followed by the Arizona plant’s commissioning in 2025.

The addition of the two centers has raised the total cost for the aluminum mill to $2.5 billion. Moreover, Millet has hinted at adding more aluminum processing capacity in the future.

Mexico also has been a key region for SDI’s ferrous scrap procurement. The company acquired Mexican scrap processor Zimmer in 2020, adding around 2 million gross tons of processing capacity for the steelmaker’s ferrous scrap needs.

“The rapid growth of steel manufacturing capacity in the South in conjunction with the continued development of regional micromills bodes well for the continued growth and investment that utilize recycled materials as a primary feedstock,” says Jay Robinovitz, CEO of St. Louis-based Alter Trading Corp. “In a world of global instability, steel independence is an absolute necessity. However, he highlights some of the risks associated with the growing number of steelmakers in the region, especially for the scrap industry. “The risk of concentration in the South is moving ample supplies of raw materials to new facilities in a cost-effective manner, he says. “Additionally, a large increase in steelmaking capacity could cause some oversupply, driving down new steel prices and, in turn, that of ferrous scrap.” Adams believes in the power of competition, saying, “Reshoring steel capacities in the U.S. gives the country’s ferrous scrap business ample opportunity to grow, especially given the growth of EAF-based steelmaking.”

Steel manufacturing activity is growing rapidly in the South and boosting the requirement for ferrous scrap, as well SDI’s Sinton mill is close to the ferrous scrap hubs of Dallas and Houston, giving it a healthy supply of the material for the EAF mill. According to some estimates, the Sinton plant alone will require around 1.5 million gross tons of prime ferrous scrap and 500,000 gross tons of secondary ferrous scrap annually once it begins operating at full capacity in 2024.

In the second quarter of this year, the company, through OmniSource, shipped 1.5 million net tons of ferrous scrap, though its value dropped by 31 percent to $40 million from $58 million a year ago given the low scrap prices.

This is not counting the requirement for other companies’ mills, such as U.S. Steel’s Big River Steel (BRS) and Nucor’s, both based in Arkansas, that will require similar, if not more, ferrous scrap volumes. In fact, BRS has received the first orders for nongrain-oriented (NGO) electrical steel, a product the company plans to begin producing by the late summer of 2023. BRS indicated during the second quarter 2023 earnings call that it plans to produce 200,000 net tons of NGO steel at BRS.

On the other hand, steel companies such as CMC that have operated in this region long before these new plants continue to grow their reach and consumption of ferrous scrap. CMC’s raw material shipments during the nine months of fiscal year 2023 (ending Sept. 30) rose by 2.9 percent to 1.05 million net tons from 1.02 million net tons in the same period of the previous fiscal year.

Barbara R. Smith, chair and CEO of CMC, says the company’s mills are being commissioned at the right time considering the opportunities from the Infrastructure Investment and Jobs Act and the reshoring of demand for the construction sector.

Making business sense

Almost all the companies that are setting up plants or have existing scrap or metal facilities in the region speak in one voice about the ease of doing business there.

“It is much easier to get permits, set up a business and conduct business in the Southern region due to its probusiness policies,” says Adams, whose company has scrap yards in Arizona, Texas, Arkansas, Alabama, Florida, Tennessee, Mississippi, Kentucky and Georgia.

Robinovitz says, for the nonferrous industry, “The intrinsic value of these metals allows them to travel further distance without impacting market values. This has made the Southern region a preferred destination for copper products needed for the shift in auto manufacturing needs as we electrify our vehicles.

“The region also provides reasonably priced labor, housing and, for now, utilities—all critical for providing lightweight materials.”

“After our site selection study and search, we found an excellent facility, and the state officials in Arkansas and local officials in North Little Rock have been very helpful,” Nagusky adds. Like Robinovitz, Nagusky is bullish about access to the skilled workforce his company will need to maintain a “high standard of quality and customer satisfaction.”

“It is better for everybody, and for our planet [and] for the supply chain in the U.S. to apply the latest technologies so these valuable materials increase the recycled content of semifinished copper and aluminum products,” he says.

Radhika Ojha is senior editor at Davis Index and can be reached at radhika.ojha@davisindex.com.

*This article was edited Sept. 21 to clarify that the CMC West Virginia mill will not produce merchant products.