Editor's Focus

After more than two years of strong commodity pricing, the amount of money flowing into the coffers of basic materials companies has, in some cases, drastically increased.

On the metals side in particular the increase of cash flows (and profits for many) has been noticeable and has brought with it the question of how to best use this additional cash on hand.

Updating and upgrading equipment has been one priority, as manufacturers of scrap processing equipment can attest. Accompanying high prices has been steady demand for more scrap products, and thus the need for high-production processing equipment.

Along with increases in plant and equipment investment has come greater attention to merger and acquisition activity. The steel industry in particular has been in the headlines because of a series of high-profile (and high-stakes) acquisitions and proposed deals.

As spelled out in a recent feature in this magazine ("Marking Time," starting on page 100 of the March 2006 issue of Recycling Today, or online at www.RecyclingToday.com), the years 2002 through 2006 have been full of successful and proposed deals.

The steel industry consolidation has been noticed by ferrous scrap processors, many of whom wonder whether further industry consolidation on the scrap side will be necessary to negotiate capably with increasingly larger mill buyers.

The fragmented scrap industry is a long way from narrowing down into a half-dozen major players, but some of the new cash circulating through the industry is in fact being spent on attempts by larger companies to build bigger scrap empires.

The May 2006 issue of Recycling Today notes the growth of the Sims Group and its expanded presence in North America with the purchase of the former Hugo Neu Co.

Another international company with an increased presence in North America is the UK’s European Metal Recycling (EMR), which has purchased the Gulf Coast scrap recycler Southern Recycling LLC.

North America’s largest companies have also been active, with OmniSource Corp. having purchased an Indianapolis-based recycling company. Metal Management Inc. has purchased properties that were formerly operated by Morris Recycling in Mississippi as well as a former OmniSource plant in northern Indiana.

Veteran recyclers remain wary about when the high-priced music will stop and how much excess capacity might be in place when it does. But for now, there is no question that the industry is hearing music to spend by and is willing to plunk another quarter in the jukebox.