PITTSBURGH The start-up of Nucor Corp.s direct-reduced iron (DRI) plant could eventually put downward pressure on prime grades of scrap metal, although nearer term, a recent blast furnace outage may push scrap prices up, according to the top executive at Commercial Metals Co. (CMC).
"Whenever demand and supply are interacting, there will be an impact. This (DRI facility) may free up stocks or availability of prime scrap so it could have an impact but we will wait and see," CMC chairman, president and chief executive officer Joseph Alvarado told investors on a June 27 call to discuss the Irving, Texas-based companys financial results.
Charlotte, N.C.-based Nucors 2.5-million-ton-a-year DRI facility in Louisiana is set to start production late in the third quarter (amm.com, April 19). The industry has been waiting to see whether its commissioning will curb U.S. pig iron imports or lower prime scrap prices by reducing demand.
Nearer term, however, the scrap price outlook could be more toward the upside, Alvarado suggested.
Although Alvarado was evasive in providing an outlook for Julys scrap prices, he did acknowledge that the AK Steel Corp. blast furnace outage in Middletown, Ohio, could drive up scrap demand as electric-arc furnace mills aim to fill any resulting void.
"(But) its always too early to know until we start transacting," Alvarado said.
In the companys third quarter ended May 31, CMCs Americas Recycling division was able to turn a profit in the face of weaker revenues and fewer shipments in a lower selling price environment.
The segment recorded an adjusted operating profit of $3.2 million on $341.7 million in sales, down 19 percent and 17.1 percent, respectively, year on year.
The segment shipped 588,000 tons of scrap in the quarter, down 9.3 percent from the year-ago period. Of the total, 532,000 tons were ferrous scrap, which saw prices down 10 percent year on year, and 56,000 tons were nonferrous scrap, CMC said.
Average ferrous selling prices of $331 per ton were 6 percent lower than in the third quarter of 2012.