Residuals Eroding Minimills’ Cost Advantage

What goes around comes around, as they say. In the case of the ferrous scrap market, what goes around and comes around again and again are residuals such as copper that complicate the steelmaking process and threaten to erode some of the competitive cost advantage now held by minimills.

Minimill steelmaking has transformed the steel industry in the past few decades and now accounts for nearly 70 percent of the steel made in the United States. Minimills use electric arc furnaces or EAFs to remelt ferrous scrap metal, including cars, trucks, appliances and other metal items recovered from the scrap stream. Integrated mills use basic oxygen furnaces or BOFs to make pure virgin steel from iron ore. The EAF steelmakers have a considerable cost advantage over the BOF mills, but the BOF process produces the highest quality steel. The minimills are continually working to improve the quality of their product with the goal of competing for high-end customers, notably the lucrative automotive industry. While the minimills have made significant inroads with makers of unexposed auto parts, the most demanding application requiring perfect surface quality—exposed auto body panels—remains elusive.