For scrap processors, claims by steel mills about "a crisis situation with respect to steel scrap" amount to a recycling of memories from 2004 and, for old-timers, from 1979 and 1973.
Efforts to obtain government intervention in tight scrap markets in the 1970s were successful the first time, when temporary export ceilings were set, but unsuccessful the second. The 2004 mini-mill initiative faded when participants couldn't agree on whether to seek U.S. Commerce Department intervention, either for export controls or formal monitoring.
Today, the American Scrap Coalition (ASC) is pushing for U.S. trade negotiators to fight for the removal by other nations of their export taxes and quotas. The group, comprised of U.S. mini-mills, argues that such hurdles send Asian and European scrap buyers to U.S. markets instead of countries closer by.
The ASC declines to specify its legal strategy beyond saying it might ask the U.S. Trade Representative "to take action against one or more countries with particularly egregious barriers."
The September decline in scrap prices has taken some of the steam out of the ISRI-ASC debate.
Joel Denbo, chief manager of operations at Decatur, Ala.-based Tennessee Valley Recycling LLC and former ISRI chairman, said he still surmises an eventual quota campaign. "A rose by any other name," he said.
U.S. mills are selling more steel because the weak dollar spurred sales abroad, Denbo said, and recyclers should be able to do the same. "We want to export when export is logical for our product. It's all based on supply and demand. You've got a market dynamic."
The scrap export volumes of early to mid-2008 might seem huge when viewed over a 10-year span, but Denbo said he can personally recall several earlier periods when comparable quantities left the United States.
"Exports of the products ISRI represents are a tremendous benefit toward the balance of trade," he said. "They're good for the United States. Now, does it make our customers potentially have to pay a bit more for scrap? It happens. But it's the dynamic of a free marketplace."
Denbo noted that his own company hasn't exported any ferrous scrap this year except for stainless steel and a high-manganese alloy.
The free market has been hard on the steel industry during the past 10 years, he said, but the outcome argues for leaving government on the sidelines. "The steel industry got its head knocked in and suffered some hellacious times" over the past 10 years, Denbo said. "The strong survived and the weak went by the wayside. In the end, the domestic steel industry is much stronger than it could have ever been if that had not taken place."
James Macaluso, an ISRI board member from the ferrous division and president of Cleveland Scrap Metals, Cleveland, said some people felt scrap was overpriced in early 2008 but that the run-up was caused less by export markets than by a slowdown in several of the manufacturing industries that generate prime grades of scrap.
"Export has taken a lot of our scrap, but with industry slowing down the prime scrap is just becoming harder and harder to find. I think that is going to continue" until the next economic recovery, he said. "I don't think it's going to be long term."
Macaluso does see some merit in the ASC's analysis, though. "On the other side, there's not a lot of scrap moving from other countries because of taxes. They want to keep their scrap in the different countries. They don't want to export, so (foreign consumers seeking to import scrap) have to come here to buy more. They have to go somewhere for it," he said.
ISRI, as an organization, favors eliminating barriers but cautions against linking it to claims of a spurious "steel scrap export crisis."
"We have long taken an active position in support of free and fair markets by advocating for the removal of export controls around the world," ISRI president Robin Wiener has said.
Emanuel Bodner, president of Houston-based scrapyard Bodner Metal & Iron Corp., said that this year's high prices for prime industrial scrap derive partly from domestic causes. "If you're not building cars, if you're not building buildings, if you're not building appliances, the scrap is going to be reduced," he said. The impact was amplified, Bodner said, by international demand for iron units.
But Bodner doesn't see any availability issue with regard to obsolete scrap. "There are sufficient supplies to address both domestic and international markets," he said. "There is no shortage of scrap. The market itself consistently sorts itself out. The market will determine at what price scrap changes hands. It always has and it always works."
U.S. export quotas on ferrous scrap in a tight market wouldn't work and would probably backfire, Bodner said, adding that he thinks foreign countries' export taxes on ferrous scrap are equally objectionable and he would encourage U.S. negotiators to push for their removal. PAUL SCHAFFER