recyclers with auto shredding operations are facing supply and
financial pressures, and would be well served to shutter scrap
assets that cant turn a profit, Steel Dynamics Inc. vice
president of ferrous resources and logistics Rich Brady
"Rationalize ineffective assets.
I know that is difficult. The structural changes are typically
the last one to be acknowledged," Brady said at
AMMs 6th Annual Steel Scrap Conference in
Bradys comments come at a
time when headwinds in securing feedstock have increased due to
the sheer rise in the number of shredders and growth in the
export arena, he said.
Scrap exports have increased
exponentially to nearly 24 million tonnes last year from 9
million tonnes prior to the 1990s, resulting in the erosion of
a once plentiful and steady supply to domestic electric-arc
furnace (EF) operators, he said.
"Export docks now represent a
third of U.S. demand," Brady told conference attendees. An
increase in containerized scrap activity is also adding
pressure as smaller yards and shredders now have an additional
place to market their material.
Auto bodies are another factor
adding pressure to the challenging market, Brady said. With
auto fleets staying on the road for a decade, shredders are
being forced to turn to other feed sources like appliances,
white goods and light structural grades.
"Scrap isnt mined, it is
traded. If you have a scrapyard, you dont have scrap; you
have a pipeline to obtain scrap," Brady said.
Securing enough feedstock in
todays environment requires shredders to expand their
reach, he said. "This has promoted many shredders to cast a
broader net," Brady said, noting that going outside a
traditional market increases fuel costs, as well as rail and
Some scrap companies are also
chasing tons with their wallets, which can lead to overpaying
"As I make observations about
the marketplace, there is a heightened demand for the resource
that didnt exist before. Unfortunately, in some cases we
have a situation where people are just going after tons. Volume
isnt everything and does not always get you to
profitability," Brady said.
Given todays challenges
and related margin compression, the market should be "getting
back to basics and bringing a new focus on operations," Brady
advised attendees, noting that maximizing technology, including
downstream nonferrous sorting systems, can help maintain
"There is an old adage that
scrap is bought and not sold. That long-standing tenet remains
as important today as the first guy who realized this. If you
dont buy it right, you cant process profit into the
processing activity," he said.
Companies also need to recognize the importance of their
intellectual capital, since retaining experienced talent is a
key to success. Seasoned veterans in the industry can train the
new generation and transfer the knowledge that made them
successful, he added.