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 they buy.
"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, Pittsburgh.
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 good material."