Helped not only by the recent strong market fundamentals but also because of the nimbleness that occurs from being much more vertically integrated than other scrap metals companies, 110-year-old Schnitzer Steel Industries, Inc has been continuing to build upon the momentum it experienced in fiscal 2017, when it achieved its best financial performance in six years.
Schnitzer Steel achieved its three-year plan to grow its ferrous scrap volumes organically to 4.3 million long tons in just two years and now plans to increase that volume to about 5 million tons by the end of 2020. It has also been successfully growing its automotive salvage business and increasing the amount of non-ferrous metals that it extracts from its shredded scrap. Because of this and Schnitzer Steels ability to adapt to both upward- and downward-trend market conditions American Metal Market has given the company its 2018 Scrap Company of the Year Award for Steel Excellence.
In the scrap industry, the temperature might change, but the seasons dont, Tamara Lundgren, Schnitzer Steels president and chief executive officer, declares. We have seen environments where demand is strong and where prices are strong, making it easy for scrap companies to grow and deliver strong operational and financial performance. But there are also times when demand and prices are low and when it is difficult for us to achieve our objectives. She says it is because of this that Schnitzer Steel is committed to staying very nimble.
While most scrap companies are just focused on scrap Schnitzer Steels activities are more diverse. Lundgren notes that while it is still not totally vertically integrated, in 1984 Schnitzer acquired Cascade Steel Rolling Mills, an electric arc furnace (EAF)-based long products steelmaker that uses scrap as its major raw material. And in 2003 it acquired Pick-n-Pull, a retail self-service business that allows individuals to come in, for a fee and with their own tools, to pick and pull parts which Schnitzer sells to them for a list price. Then once all the valuable parts have been harvested, or once it has been in inventory for a while, the car body is taken off the lot, crushed and sent either to one of Schnitzers auto shredders, if one is nearby, or to a third-party shredder.
It is with these acquisitions that Schnitzer, which had been focused upon sustainability before it became mainstream, can offer a full-circle end-of-life solution, Lundgren says. Its shredded scrap is sold to either Cascade Steel or other mills.
Lundgren says this fits nicely into Schnitzers business philosophy, which has always been about people, profits and the planet (including a desire to have a positive impact upon the communities where the company operates). The people piece involves being a creator of a wide range of both lower skilled and highly skilled job opportunities across many operational and functional areas. The profit part includes delivering increased value to all the companys stakeholders, including its customers, employees, investors and the communities in which it operates.
Recently Schnitzer has also made organizational changes to increase its operational and financial performance. In 2015 the company merged its Pick-n-Pull and metal recycling operations into a new division called Auto and Metals Recycling, creating a single operating platform that enables those units to operate more efficiently and focus upon providing more value-added processes at those operations. Similarly, in 2017 Schnitzer merged Cascade Steel and its Oregon metals recycling operations into a new division called Cascade Steel and Scrap to enhance the flexibility and nimbleness of that business and to allow it to more efficiently deliver product on a timely basis and meet the quality standards of the buyers of its steel long products.
Lundgren notes that Schnitzer is also dedicated to investing in new technologies to offer the quality of ferrous and non-ferrous scrap that meets the varying specifications of mills and smelters around the world. This includes investments in the latest non-ferrous metals extraction technologies. She notes that Schnitzer typically exports 60-70% of the scrap that it processes, although that varies depending upon domestic and/or global demand for its products in any given year.
For example, this could be impacted by the new metallic content quality standards announced by China. In fact, there has been some noise about whether China will import any scrap at all within the next year or so, noting that this is one reason for Schnitzer to remain very nimble.
While Schnitzer does not anticipate any further big organizational moves, it is committed to further growth, including through acquisitions, through greenfield and brownfield expansions and organic growth of existing operations. Lundgren says that even though much of that growth is expected to come from its metals scrap and auto salvage operations, there are also opportunities for it to grow its steel business, which is currently operating at a very high capacity utilization rate.