Iron foundries, although there are fewer and
fewer these days, face a dual challenge enforcing their
more-demanding scrap specifications and being dwarfed in the
market by their big brothers-scrap-consuming steel mills-when
"Our specs have not changed in the past five
years," a scrap buyer at one pipe mill said. "But we do keep
trying harder and harder to enforce our scrap specs and make
sure our suppliers meet them."
What makes that difficult for a widely
available grade like shredded scrap is the small volume that
foundries consume compared with the appetites of some steel
mills. All of the foundries combined consume only 8 million to
9 million tons of shredded scrap annually, just a small portion
of the 60 million tons of scrap purchased by integrated and
mini-mills, according to the Steel Recycling Institute,
Since a steel mill typically buys more scrap
in one month than a foundry consumes in a year, shredders don't
give it that much attention. They spend more time, energy and
effort trying to please their big steel mill customers rather
than foundries, the scrap buyer said.
Foundries like his are very demanding on
shredded quality, as well as with any purchased ferrous scrap,
while steel mills are much more tolerant from a chemistry
standpoint. Foundries watch the copper content, but that's just
one factor, he said. Chrome, tin and other so-called tramp
elements are just as important, if not more so, than copper.
"We are right in line with steel mills with copper. We are not
any different on our copper demands than a mill would be right
now. It is 0.2 percent. But for chrome, tin and manganese, we
are much more demanding than a steel mill would be." Chrome and
tin are problems, he said, because they can affect the
foundry's ability to anneal-heating and then cooling products
to make them less brittle.
His foundry is charging much the same mix of
ferrous scrap that it has used for the past decade, but it has
enlarged its shopping list to include a small tonnage of some
cheaper grades like cupola cast. It isn't a huge volume of
material, he said, but the pricing is lower than shredded and
that helps to reduce the scrap composite price. It is strictly
a pricing issue.
Strong offshore demand for ferrous scrap,
especially shredded scrap, has drained melting-grade materials
away from both foundries and domestic steel mills. Exports of
shredded scrap through the first three quarters of 2007 totaled
almost 3.5 million tonnes, a 42-percent increase from the same
period a year earlier.
That competition with scrap exporters has
driven some mills and a few foundries to install their own
shredders to safeguard their supplies of fragmented scrap, but
not all foundrymen agree that a shredder is needed. "I'm not a
believer in owning a shredder as an extension of our melt
facilities," one foundry source said.
Instead, steel mills and foundries that own
and operate shredders should make sure they are a for-profit
operation like those in many of Commercial Metals Corp.'s
scrapyards. These aren't captive of the steel mills that CMC
also owns, as the Irving, Texas-based company also sells its
scrap on the open market.
The foundry source said his melt operations
aren't impacted as much by export yards because most of the
operations are a distance from the coastal regions. What has
affected his buying is the rising number of inland yards making
use of containers to ship scrap overseas. "That gives virtually
every scrapyard and every shredder out there the ability to be
an exporter," he said, noting that in the past six months many
of his shredded scrap suppliers have used their access to
containers "as a rub"-in other words, they have threatened to
export scrap rather than take the price he has offered.
Another buyer pointed to price negotiations
with scrap suppliers as his major hurdle each month, not the
supply of material. "I don't have to go out and find the scrap,
they do it," he said. But his melt shops are starting to use
briquettes of borings and turnings, he said, and they also are
buying back production scrap from some of their customers as a
means to ensure the quality of their melt material.
Making sure that shredded meets his
specifications is a more demanding task, he said, but his
foundry has no plans to install a shredder and produce its own.
"We're not scrap manufacturers and brokers. We're a foundry. If
you line up good suppliers and buy from them each month, month
after month, pretty much the same tonnage, you are assured of