Nucor Corp.'s decision to buy its scrap
broker, David J. Joseph Co. (DJJ), came as no surprise. As I
noted in a story following the steelmaker's announcement of the
$1.44-billion deal in mid-February, it had been one of the
longest marital engagements in the steel and scrap industries.
DJJ has been Charlotte, N.C.-based Nucor's scrap buyer since
the steelmaker was formed in 1969.
Unlike rival Steel Dynamics Inc., which
bought major Midwest scrap processor and trader OmniSource
Corp. last October, Nucor will not be oversupplied with scrap.
DJJ has 12 shredders and 35 yards that can process more than
3.5 million tons of ferrous scrap, but that's only a fraction
of the material that Nucor melts each year. The icon of the
mini-mill industry is anything but mini, consuming 22.8 million
tons of iron and steel scrap last year. DJJ won't be able to
feed Nucor's furnaces from its own yards, but its brokers
managed to come up with about 20 million tons of scrap from
other suppliers during 2007.
Others companies, like Commercials Metals
Co., Irving, Texas, have a long history in both scrap
processing and steelmaking. But the speed with which steel
companies are buying up scrapyards today suggests that the
scrap industry is a lot more valuable than its name would
The old timers in the scrap industry used to
call it the "junk business," but that was a name that they used
only among themselves. It was regarded a pejorative term when
it was uttered by others not in the business, much as some of
today's scrap recyclers cringe when labelled "scrappies." It's
just a word, but it's not one they put much value on.
Many are still family or individually owned
and operated, but except for a few big privately held companies
like Alter Trading Corp. and Yaffe Cos. in the Midwest, and
Carolinas Recycling Group LLC in the South, most are midsized
to smaller yards. That was-and for the most part still is-the
The scrap business has changed in the past 20
years and continues to change rapidly from the mom-and-pop
businesses established at the start of the last century. Today,
they are corporate entities. Some stretch from the Atlantic
shore to the Pacific Coast-from sea to shining sea and, soon,
Some have become so large and diverse that
their immigrant founders probably would not recognize the
businesses they started years ago. The reasons for this success
are manifold-some because of the skill and ingenuity of their
founders and owners, some because they happen to be in a city
or town where scrap steel from industry was more abundant. They
were in the right places at the right times.
The first signs of the latest change came not
in the mid 1990s but a few years earlier. Second- and
third-generation family members who had run the yards founded
by their fathers and grandfathers had grown old themselves, and
many had no one in the family interested in taking over the
business. They needed an exit strategy, and often the only deal
to be made was with their competitors across town. Laughter
would echo off the oak-paneled walls of their plush offices if
you asked a steel or auto executive of the past if they would
consider buying a scrapyard.
Their successors are not laughing, for the
times have changed.
Ladd R. Hall, executive vice president of
Nucor's Sheet Mill Group, exemplified that change in his speech
to the Fabricators and Manufacturers Association conference in
mid-February, less than a week after his company said it would
plunk down the money for its scrap broker. "I think mills are
trying to secure their raw material source so they can continue
to try to stabilize a very, very volatile market," he told the
audience. "The buzz phrase today is raw materials strategy, or
what measures must be taken to make sure we have the raw
materials we need to continue to grow."
Nucor's purchase of DJJ will not lead to
lower scrap export volumes, Hall said, nor will it necessarily
end all of the volatility in the market. But there was one
prediction in his remarks. "You will continue to see Nucor and
others consolidate their raw material sources, and it may not
just be in scrap. It may be in scrap alternatives as well," he
No, scrapyards have not become the gold mines
that some yard owners would tell you they are (if you should
want to buy them). They have, however, become an integral part
of the steel production system. Thank the inventors of the
electric furnace and the entrepreneurial spirit of men like
Kenneth Iverson and Marvin Selig, who carved a niche for the
mini-mills in the steelmaking business, a niche that has since
widened into an entire steel industry plateau.