Steel Scrap Metal Market Report: September 2025

US steel scrap prices held flat through September 2025 despite the tensions underneath, with most grades trading inside the narrow bands set over the summer. Heavy melting steel (HMS) No. 1 and No. 2 commanded prices between $0.12-0.18 per pound, while shredded steel maintained a premium at $0.14-0.20 per pound. The most valuable category, stainless steel non-magnetic grades, held steady between $0.30-0.45 per pound on continued specialty demand.

Regional price variations remained modest but reflected the uneven impact of trade policies and local supply conditions. The prompt industrial composite grade, consisting of factory-generated busheling and bundles, reached $501 per ton in the North Midwest region, its first close above $500 since early 2025. That is up from $480 per ton in April, so domestic mills kept buying through the broader uncertainty.

Secondary steel production capacity utilization reached 77.0% through September 6, 2025, up from 76.4% during the same period in 2024. This improvement in capacity utilization occurred despite challenging market conditions, with domestic raw steel production totaling 61.5 million net tons year-to-date, representing a 1.9% increase from the previous year. Electric arc furnace operations, which account for over 70% of US steel production, ran hard as mills processed increasing volumes of both domestic and imported scrap materials.

The pricing environment reflected the complex interplay between artificially elevated finished steel prices due to tariff protection and competitive pressures from imported scrap materials that remained largely exempt from trade restrictions. This created unusual arbitrage opportunities where scrap processors could access lower-cost imported materials while selling into markets supported by tariff-protected finished product pricing.

The construction sector was the largest steel buyer, accounting for over 50% of total steel consumption. Construction spending rose 10.9% year-on-year in April 2025, led by manufacturing construction (17.3%), highway/street construction (16.4%), and educational construction (16.2%). This sustained momentum reflected the ongoing impact of federal infrastructure programs and reshoring initiatives designed to return manufacturing capacity to the United States.

The automotive sector provided the second-largest source of steel demand, representing approximately 14% of domestic steel shipments while consuming roughly 40% of all flat steel output. US automotive steel demand experienced continued growth driven by the ongoing transition to electric vehicles, which require substantially more steel content than traditional internal combustion vehicles, particularly for battery enclosures and structural components. The automotive steel market is projected to expand from $127.6 billion in 2025 to $173.2 billion by 2035, supported by advanced high-strength steel adoption and regulatory requirements for vehicle safety and emissions compliance.

Light-duty vehicle body-in-white automotive steel demand totaled approximately 3.9 million tonnes annually, with passenger vehicles representing 46.2% of automotive steel market revenue. The shift toward electric and hybrid vehicles has created specialized demand for thermally stable and corrosion-resistant steel grades, supporting premium pricing for high-quality scrap materials meeting stringent automotive specifications. US domestic production of light vehicles is projected to reach 10.45 million units in 2025, up 1.16% from 2024, providing sustained demand support for automotive-grade steel products.

Manufacturing sector demand held up, supported by federal policies encouraging domestic production and supply chain resilience. The machinery and equipment sector accounted for 3% of steel shipments, while appliances represented another 3%, collectively providing baseline demand stability. Energy sector applications, including renewable energy infrastructure and grid modernization projects, continued to generate incremental demand for specialized steel grades.

Domestic steel production capacity faced ongoing challenges from energy costs, environmental regulations, and international competition. The US operated approximately 104 million tons of annual raw steel production capacity, with integrated mills concentrated in 12 locations and electric arc furnaces distributed across 105 minimills. Indiana accounted for an estimated 24% of total raw steel production, followed by Ohio (12%), Pennsylvania and Texas (5% each). Four states make roughly half the country's raw steel.

The electric arc furnace sector demonstrated particular strength, leveraging its flexibility to respond to market conditions and ability to process 100% scrap feedstock. EAF steelmaking requires approximately 400-440 kilowatt-hours per tonne of steel produced, making operations economically viable primarily in regions with reliable, competitively priced electricity. Many EAF operators scheduled production during off-peak hours to take advantage of lower electricity pricing, providing operational flexibility while managing energy costs.

Scrap supply conditions remained adequate despite concerns about long-term availability. Steel recycling rates in Canada exceeded 66%, providing a substantial source of raw materials for North American mills. However, the industry faced challenges from increasing product complexity, particularly in automotive and electronic applications where mixed materials complicate separation and processing. Transportation and storage costs continued to pressure margins, particularly for smaller processors lacking economies of scale.

The influx of imported scrap materials created both opportunities and challenges for domestic processors. While imported scrap remained exempt from the 50% tariffs applied to finished steel products, this created competitive pressure on domestic scrap pricing while providing mills with access to lower-cost raw materials. The differential treatment of scrap versus finished products under the tariff regime created market distortions that benefited some participants while pressuring others.

Federal Reserve monetary policy expectations provided a supportive backdrop for steel demand through September 2025. Interest rates above 5% throughout the previous year had created headwinds for construction and automotive sectors, but expectations of policy easing supported market sentiment. The construction sector, being particularly sensitive to interest rate fluctuations due to financing requirements, showed signs of responding to anticipated monetary policy changes.

The 50% tariff on steel imports, increased from 25% in June 2025, changed steel trade flows and pricing. The 50% tariff on steel imports, increased from 25% in June 2025, created artificial price supports for domestic steel production while simultaneously encouraging imports of scrap materials that remained exempt from tariffs. This policy structure created complex arbitrage opportunities and distorted traditional supply chain relationships.

Global steel overcapacity continued to weigh on international markets, with China expected to generate a surplus of 50 million tonnes in 2025. Chinese steel demand is projected to decline by an average of 5-7 million tonnes annually over the next decade as the economy transitions away from infrastructure-intensive growth models. That shift in the world's largest steel market left more export steel competing with US mills.

International trade relationships remained strained, particularly with traditional partners. Canada implemented tariff-rate quotas on steel mill products imports, subjecting excess volumes to 50% surtaxes. The European Union continued to express concerns about trade disruptions and threatened retaliatory measures, though specific actions remained limited. These tensions reflected the broader realignment of global steel trade patterns resulting from US trade policies.

The near-term outlook for US steel scrap markets through the fourth quarter of 2025 remains cautiously optimistic, though significant uncertainties persist around trade policy sustainability and demand durability. Industry participants anticipate continued price stability supported by the current tariff structure, though questions remain about the long-term viability of artificially elevated pricing in a globally interconnected market.

The Federal Reserve's anticipated monetary policy easing could provide additional demand support by reducing financing costs for construction and automotive applications. Historical precedent suggests steel markets respond favorably to lower interest rates, particularly when combined with infrastructure spending initiatives. The construction sector's sensitivity to financing costs makes monetary policy changes particularly relevant for steel demand projections.

Seasonal factors typically support steel scrap demand in the fourth quarter as construction activity accelerates ahead of weather-related slowdowns and automotive manufacturers increase production for model year transitions. However, these traditional patterns may be disrupted by the unusual trade dynamics and policy uncertainties characterizing the current market environment.

The automotive sector's ongoing transformation toward electrification provides the most reliable long-term demand support for steel scrap markets. Electric vehicles require specialized steel grades for battery enclosures, structural components, and crash protection systems, creating sustained demand for high-quality scrap materials. The automotive steel market's projected growth to $173.2 billion by 2035 represents substantial opportunity for scrap processors capable of meeting stringent quality specifications.

Infrastructure modernization initiatives, including grid upgrades and renewable energy installations, offer additional demand support. These applications often require specialized steel grades with specific performance characteristics, creating premium pricing opportunities for processors able to supply appropriate materials. The ongoing focus on domestic supply chain resilience further supports these demand drivers.

However, several risk factors could disrupt the positive outlook. Global steel overcapacity, particularly from China, continues to create competitive pressures that could intensify if trade policies change. Environmental regulations, while necessary for long-term sustainability, may impose additional costs on domestic producers and processors. The complexity of modern products containing multiple materials presents ongoing challenges for efficient scrap processing and separation.

For US steel scrap processors and recycling operations, success in this environment requires strategic positioning around high-value applications while maintaining operational flexibility to adapt to policy changes. The current market rewards specialization in automotive and infrastructure grades while punishing commodity-focused operations facing competition from imported materials. Investment in advanced sorting and processing technologies remains critical for maintaining competitiveness and accessing premium market segments.

The industry's long-term success depends on continued innovation in processing technologies, development of new applications for recycled steel, and adaptation to evolving regulatory requirements. Environmental compliance, while challenging, creates barriers to entry that protect established operators willing to invest in sustainable practices. The circular economy trend supports steel recycling's fundamental value proposition while creating opportunities for companies able to demonstrate environmental leadership.

Key variables to monitor include Federal Reserve policy implementation, potential modifications to the tariff regime, and progress on infrastructure spending initiatives. The sustainability of current pricing levels depends heavily on policy continuity, while demand fundamentals from electrification and infrastructure modernization provide longer-term support regardless of cyclical economic factors. Success requires balancing short-term policy benefits with long-term strategic positioning for a market increasingly focused on sustainability and efficiency.