PITTSBURGH A steep
decline in scrap selling prices, reduced flows into scrapyards
and renewed export activity seem to have brought balance to the
scrap market, Nucor Corp. executives said, noting that the
pricing downturn that started in mid-January appears to have
"Theres been over a $110
(per ton) drop in scrap over the past couple of buys and some
of that may be given back to the market. That remains to be
seen, how much, if any," Nucor chairman and chief executive
officer Daniel DiMicco said during a quarterly earnings
conference call. "There seems to be some indication of
stabilization in scrap after the last combined drops."
Scrap prices have inched down
all year but the pace accelerated with June and July purchases,
when they declined in total by more than $100 per gross
Fortunately, more visibility in
the market is expected in the near term, DiMicco said. "How far
it has fallen and whether it stays there or goes back up is
something we should know better over the next 15 to 30 days,"
The lower scrap prices and hot
weather has recently put the brakes on unprocessed material
entering Nucor-owned scrapyards, executives said on an earnings
"One thing we watch is the flow
of material across our scales at our yards to get some sense of
whats happening going forward, and we have seen that slow
down as a function of the decrease in pricing and the extreme
heat. All of that is bringing some stability to the market,"
said John Ferriola, president and chief operating officer.
The return of offshore buyers
shopping for U.S. scrap also is contributing to market
stability, DiMicco said.
Independently owned scrapyards
that have felt the sting of declining inventory value may take
solace in noting that Nucor scrap subsidiary David J. Joseph
Co. is facing the same situation.
"Lower scrap pricing has
depressed the profitability of our scrap processing business,"
said Jim Frias, chief financial officer, executive vice
president and treasurer, even as the lower scrap prices are
helping the companys cash flow.
"Nucor benefits as lower scrap
and steel prices reduce capital investment during downturns,"
Frias said. "Third-quarter results should benefit from lower
scrap costs if scrap stabilizes as we expect."
In the second quarter, Nucor
reported net income of $112.3 million, down 62.5 percent from
$299.8 million in the same year-ago period (amm.com,
The Charlotte, N.C.-based producer does not break out
operating earnings for its recycling and brokerage assets.