Ferrous

Export markets continue to grab the attention of ferrous scrap dealers. Demand from China in particular has been credited with providing strength to the ferrous markets, although mills at other overseas destinations are also part of the mix.

Dealers throughout North America are benefiting from the phenomenon, with the strengthening demand having been in place long enough now to lift prices virtually everywhere.

Both dealers and generators who played the speculation game during the downtrodden past couple of years may be glad they did, as they have hastened to process and ship out their stockpiles. "We built up inventories when the markets were bad," says one dealer. "As the price [increase] arrived, we made the move to boost production to process and ship out 60,000 tons of unprepared scrap," says one such dealer.

A rugged winter in the eastern U.S. has provided yet one more market factor to keep prices high, as some collection and processing activity has been hampered by snow and bitter cold in the North and ice storms in the South.

For those who both have the scrap and the ability to help exporters put together a shipment, 2003 is starting off with the same positive conditions that characterized the second half of 2002. The dealer who stockpiled ferrous scrap notes that the boosted prices paid by exporters in the second half of 2002 allowed his company to have its "second best year" in the history of the company in terms of profitability.

Even shippers who ordinarily favor working with domestic mills are finding it hard to resist the siren song of high-priced export shippers. "I want to support U.S. industry, or we as an industry are harmed in the long run; if [the price] is within a buck or two, it goes domestic," says one dealer. "But when export prices are so much higher, I’ve got to do what’s best for my business."

Europe and Asia operate more of the world’s larger electric arc furnace (EAF) steel mills, but North America fares well in the productivity it squeezes from its capacity.

That was one finding that Jerry Goodwald, a vice president with North Star Steel Co., Minneapolis, offered attendees of the Steel Scrap 101 Seminar in his look at steelmaking in the U.S. as it compares to efforts globally.

The Steel Scrap 101 Seminar was hosted in St. Louis in February by the Institute of Scrap Recycling Industries Inc. (ISRI) and the Steel Manufacturers Association (SMA).

Goodwald noted that 37 percent of Asia’s and 35 percent of Europe’s EAF mills could be considered "high productivity shops," if that is defined as a mill with 110-tons-per hour (or larger) furnaces and a tap-to-tap time of 60 minutes or less. Just 24 percent of North American mills (42 mills in total) could be said to fit in that category.

"If you look at that, you could say that North America is lagging a little bit," Goodwald remarked. But a look at some other numbers seems to indicate that while Asia and Europe may boast better equipment, North American mills are winning the efficiency battle.

The 42 North American high-productivity mills, on average, use less overall energy to produce a liquid ton of steel than the 60 European or 40 Asian high-productivity mills do. While Asian mills use the fewest kilowatt-hours of electricity, their use of additional energy sources ranks them third in overall energy efficiency.

The North American high-production mills are also pumping out the most steel, producing 134 liquid tons per hour, compared to an average of 120 liquid tons per hour for the Asian and European high-production mills.

Goodwald noted that a number of factors go into determining the profitability of an EAF mill, including labor, energy and transportation costs as well as the pricing one can fetch for finished products.

He cited as industry trends a lean or "flat" management structure; workforce compensation tied to productivity incentives; an efficient use of resources; and trying to established more flexible cost structures to cope with market cycles.

In terms of a steel industry wish list, Goodwald referred to the International Iron and Steel Institute effort to eliminate national subsidies for steelmakers; the shutting down of obsolete or non-competitive facilities; and the establishment of a trade arbitration system.

"Keep nonferrous scrap out of the ferrous loads" is probably the most important rule for shippers of ferrous scrap who want to avoid downgrades and rejections based on scrap chemistry.

While there are some general rules that apply to all mills and shipments, there are also a number of variables, Dick Jaffre, a vice president with TXI Chaparral Steel, Midlothian, Texas, told attendees of the Steel Scrap 101 Seminar in St. Louis.

Jaffre’s presentation to the assembled mill buyers and scrap suppliers, entitled "Effects of the Elements on Scrap Properties," provided a summary of how alloyed and attached materials found within scrap can affect steelmaking quality.

He noted that some residual elements may not be bad, and in some cases are desired by steelmakers. In other cases, though, steelmakers set low acceptable levels for the presence of residual metals such as copper, nickel, molybdenum, aluminum and vanadium. "It’s a very consumer-specific issue," he remarked.

For grades of steel with the strictest specifications, Jaffre said that iron alternatives such as HBI and DRI—often referred to as scrap substitutes—are preferred by melt shop managers. "Really, scrap is the substitute," said Jaffre. "You have to have a certain amount of virgin materials to ensure [proper chemistry]. It’s like saying teeth are denture substitutes," he quipped.

While mills have varying tolerances for these residual elements, the set of "bad guys" known as tramp elements are almost universally unwanted. The tramp elements are sulfur, phosphorous, tin, lead, zinc, antimony, cadmium and mercury. "They serve no purpose in the furnace charge," Jaffre said of the unwelcome elements.

He noted that sulfur and phosphorous can be found in pollution control equipment that enters the demolition scrap stream, while lead solder joints, lead pipe, lead-filled counterweights and lead acid batteries that make it into auto shredders are all sources of unwanted lead.

Mercury entering the shredder stream in the form of automotive light switches is well known, while zinc and tin can enter furnaces as coatings on steel scrap or as random items that make it into a ferrous scrap shipment.

Jaffre’s bottom line to scrap processors was, "Keep the nonferrous metal out of ferrous scrap. You’ll make more money, and we will too."

He called the issue his "pet peeve," adding that separating the materials is a primary function of scrap processors. "It is ridiculous how much nonferrous scrap shows up [at Chaparral’s mills]," he remarked. "We pull tin, lead, copper and zinc that you guys should recover and make money from; instead, we do, thank you very much."

The Steel Scrap 101 Seminar was hosted in St. Louis in mid-February by the Institute of Scrap Recycling Industries Inc. (ISRI) and the Steel Manufacturers Association (SMA).