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 lower volumes.