CHICAGO U.S. ferrous
scrap exports and low scrap inventories at domestic mills are
contributing to volatility in both supply and prices, according
to speakers at a Chicago conference.
Lynn Lupori-Gray, managing
consultant at Mississauga, Ontario-based consulting firm Hatch
Ltd., said there are three primary reasons U.S. scrap exports
have grown 200 percent since 2002: The United States has a lot
of scrap; it has a lenient export policy; and it has a
sophisticated supply chain.
Several speakers at Platts
second annual Scrap Seminar agreed that even being located in
the center of the country is not a significant obstacle to
moving tons offshore.
Lupori-Gray noted that Russia,
for example, considers scrap a valuable resource and closed two
major ports as export venues, leaving one smaller port open to
handle scrap. The move benefited Russian electric-arc furnace
producers by reducing competition for the material, lowering
their production costs.
In the United States, companies
are moving shredders or building them closer to the coasts in
order to take advantage of export opportunities, said Brian
Williams, director of business development at Cleveland-based
steel distributor Flack Steel Ltd.
The scrap market is
"flow-based," said Jason Redden, executive vice president of
commercial at Steel Dynamics Inc. recycling subsidiary
OmniSource Corp., so a company that is close to a consumer or
to low-cost freight options can do well.
Mills count on scrapyards to
have inventory, and having what sometimes averages out to less
than one months supply at their own plants breeds
volatility in pricing, Redden said. One trend he noted is that
steel mills are buying less prompt industrial scrap, or prime
scrap, and more lower-grade material in order to cut costs.
As a result, "there is a
tremendous opportunity for small players to grow," Redden said.
"Price is price and quality is quality," so a small but savvy
dealer can compete with a national supplier, such as
OmniSource, if it has the right mix of desired grades, even at