South Korean shredder industry faces pressure from feedstock shortages and rising costs

• Some processors shift to guillotine operations 
• Steelmakers’ buying strategies squeeze shredder profits

SteelDaily: South Korea’s shredder industry is facing increasing pressure as rising feedstock costs, shrinking margins, and lower operating rates weigh on profitability. Market participants noted that competition for lightweight scrap has intensified as steelmakers increasingly prioritise volume procurement over quality, reducing feedstock availability for shredder operators.

Feedstock availability tightens

Industry sources reported that relaxed quality standards and increased direct purchases of lightweight scrap by steelmakers have made it more difficult for shredders to secure raw materials. Combined with weaker scrap generation and growing processing capacity, several operators reported operating rate declines exceeding 20%.

Rising costs erode profitability

Profitability has deteriorated as lightweight scrap prices continue rising while shredded scrap selling prices have failed to keep pace. Market participants noted that steelmakers’ volume-based purchasing incentives have further inflated feedstock costs, squeezing shredder margins.

Guillotine processors gain ground

The narrowing price gap between shredded and guillotine material has encouraged some processors to shift production towards guillotine operations. Industry participants stated that current purchasing practices are making it increasingly difficult for shredders to compete for feedstock and recover processing costs.

Outlook

Market participants highlighted that shredded scrap remains important for South Korea’s long-term decarbonisation goals. However, unless profitability improves and feedstock availability stabilises, the industry could continue facing operational challenges in the coming months.

Note: This article has been written in accordance with a content exchange agreement between SteelDaily and BigMint.