PITTSBURGH Nucor Corp.s direct-reduced iron (DRI) plant in Louisiana scheduled to come online later this year will initially impact imports of alternative iron units and wont put pressure on prices of prime scrap grades, according to OmniSource Corp. executives.
"It has got to go through startups, but I am thinking that it will impact pig iron and other substitute markets. Until it comes on line and produces in the marketplace, it is too hard to tell," Russ Rinn, president and chief operating officer of OmniSource, Steel Dynamics Inc.s recycling subsidiary, said during an earnings conference call.
Imported pig iron could come under most pressure from the new source of material from the Nucor facility. "It will either depress it or make it unaffordable to bring in," Rinn said.
Key drivers for scrap in the near term are domestic mill utilization rates as well as currency exchange rates, Rinn noted. Scrap flows have been steady and inventories at mills and scrapyards are thin.
Lower ferrous scrap shipments and virtually flat nonferrous shipments were unable to stymie OmniSources second-quarter results.
The metals recycling division posted operating earnings of $15.8 million for the three months ended June 29, more than triple earnings of $5.1 million in the same period a year earlier although down 37 percent from the first quarter. Sales fell 9.4 percent to $794.8 million from $876.7 million a year ago.
Ferrous scrap shipments totaled more than 1.33 million gross tons in the second quarter, down 10.2 percent from nearly 1.49 million tons a year earlier, while nonferrous shipments slipped just 1.7 percent to 254.5 million pounds from 258.9 million pounds as lower pricing restrained the flow of copper and stainless steel scrap.
Chinas Operation Green Fence, which places strict regulations on scrap imports, contributed to the decrease in shipments, Steel Dynamics president and chief executive officer Mark Millett said.