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No near-term downside for scrap: OmniSource

Oct 17, 2013 | 04:38 PM | Lisa Gordon

Tags  scrap prices, OmniSource, Steel Dynamics, Russ Rinn, Mark Millett, shredded scrap, ferrous scrap, nonferrous scrap Lisa Gordon

PITTSBURGH — Scrap prices don’t appear to be showing any sign of retreat ahead, according to OmniSource Corp. president and chief operating officer Russ Rinn.

The "scrap market has certainly firmed up in (the) past few months," he said in a conference call to discuss the company’s financial results, noting that indications are that the market will be firm to maybe up some over the next two or three months.

Turkey has been largely absent from the East Coast export market for the past few months as it is meeting its needs with material from Europe, where it enjoys a more favorable currency exchange rate, Rinn said.

OmniSource, the metals recycling segment of Steel Dynamics Inc., reported lower financial results as higher shipments were unable to offset shrinking margins in a lower pricing environment.

OmniSource posted operating earnings of $11.1 million for the three months ended Sept. 30, down 34.7 percent from $16.6 million in the same period last year despite a 10.7-percent increase in sales to $848 million from $766.1 million.

Overcapacity in scrap metal processing also contributed to the weaker performance. "Profitability from our Midwest operations was actually slightly improved; however, the continued industry overcapacity of shredding locations in the Southeast resulted in a deterioration in earnings for those locations," chief executive officer Mark Millett said.

OmniSource’s Midwest operations account for about 4.5 million tons of the company’s 6 million tons in annual scrap capacity, with the remainder generated by its Southeast operations.

The southeastern unit primarily generates shredded and obsolete grades of ferrous scrap. The division is competing fiercely for shredder feed, more so than the Midwest division, which has a larger focus on prime grades of scrap, Millett said.

Ferrous scrap shipments totaled 1.47 million gross tons in the third quarter, up 9.9 percent from 1.34 million tons a year earlier. Nonferrous scrap shipments rose 5.5 percent to 263.5 million pounds from 249.7 million pounds in the same comparison.

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