CHICAGO The U.S. scrap
market "is the most opaque in the world, and rumors influence
the price more than supply and demand because the industry
loves to gossip," according to Severstal North America Inc.'s
general manager of metallics purchasing Sachin Shivaram.
"There is not enough reliable
information," Shivaram said March 12 at the Platts 9th Annual
Steel Markets North America Conference in Chicago. "There is
only a little bit of information, and everyone is trading on
that same bit."
Shivaram recalled hearing the
same three rumors from the same source this month. "Rumors are
not helpful because they are cheap," he said. "If people put
their money where their mouth is"by hedging scrap
futures"that becomes valuable," he added.
Noting that the Dearborn,
Mich.-based company purchases scrap every day, Shivaram added
that the company "would do more (large) midmonth buys if there
wasnt this stigma that says if you buy midmonth,
youre short," he said.
Judging a good buy is tough, he
said. "If we win (a purchase), its a Pyrrhic victory
because you have buyers remorse the next day, thinking
Regarding hedging, Shivaram said
that the company is in "support (of) a robust futures market,"
adding that "now there is no way for a counterparty to manage
Shivaram also brought up
Charlotte, N.C.-based Nucor Corp.s direct-reduced iron
(DRI) plant, which is scheduled to open soon and is a source of
some consternation among scrap suppliers who worry that these
iron units will mean less business for them with steel
"(One hears that) the
flood of scrap substitutes is coming, but I want to
inject some skepticism into that scenario," Shivaram said,
noting that Severstal North America consumes 3.5 million tons
of scrap and iron per year.
"The DRI story is old, but
its had a resurgence," he said. "Were looking at
DRI, too, but we shouldnt get ahead of ourselves. There
has been no major investment except Nucors. Its not
the solution for everyone. Its only economical if
consumed at the same site its produced because it does
not transport well."
Asked if vertical integration
might work for Severstal, Shivaram said, "Sure, there is a pull
to buy scrapyards. But didnt other mills overpay?"