Ferrous Department

KOREAN MILL POSTPONED

The monetary crises in Asia have led to the cancellation of plans for a large South Korean steel mill. 1997 year-end figures revealing an increase in Japanese steel output, however, may provide a signal that the Asian steel industry will still be competitive in 1998.

Hyundai Group, a South Korean conglomerate, announced in late January that it would not be building an integrated steel mill that had been on the drawing board for 1998. Rather, the company said in a statement that “we will do our best to improve our financial status” and that “to be competitive in the 21st century, a strong restructuring of management is necessary.”

Figures released by the Japan Iron and Steel Federation indicated a 5.8 percent rise in crude steel output in 1997 compared to 1996. December 1997 output, however, was down 2.4 percent compared to December of 1996. Demand overall for Japanese steel was greater in the first half of 1997 compared to the second half, according to the Federation.

North American and European steel makers have expressed concerns that the devaluation in Asian currencies may lead to Asia’s steel makers keeping production levels steady while taking advantage of the currency drop by exporting.

SCRAP OPERATIONS A SCHNITZER HIGHLIGHT

Schnitzer Steel Industries Inc., Portland, Ore., cited its Scrap Operations as a financial highlight of its most recently completed quarter. “Higher average selling prices and volumes sold contributed to Scrap Operations’ rise in revenues of $15.1 million to $66.2 million for the first quarter of fiscal 1998 compared with the same quarter last year,” a company news release noted. The bulk of the revenue increase was due to the finalization of the Proler International Corp. joint ventures, but the company also noted that the average selling price for ferrous scrap increased $11 per ton to $134 per ton during the quarter. Nine bulk overseas shipments during the quarter helped lift scrap operation income $3.1 million above the previous quarter’s total. The shipments were made before the series of Asian economic crises.

The company expanded its presence in the ferrous scrap market in the first quarter of 1998 with the announced purchase of the Schiavone-Bonomo Corp., Jersey City, N.J. Schnitzer is a partner in that purchase with the Hugo Neu Corp. The acquired Schiavone-Bonomo facilities would operate as part of the Hugo Neu Schnitzer East partnership.

MORE AUTOMOTIVE DECISIONS AFFECT FUTURE SCRAP SUPPLY

More decisions are being made in Detroit and in overseas automotive centers that will affect the future of the ferrous scrap supply, both its geography and its overall content. Among some recently-reported automotive decisions affecting scrap flow and supply:

• The Ford Rouge complex in Dear-born, Mich. will continue to be an industrial epicenter, with recent announcements by Ford emphasizing the company’s commitment to the Rouge location. The company has announced that it will produce a new engine at the Dearborn Engine and Fuel Tank Plant. “These investments will enable us to continue to provide outstanding products to Ford customers while helping ensure the future of Ford employees in the Rouge,” says president of Ford Automotive Operations Jacques Nasser. If the center remains an engine and assembly production powerhouse, it will also ensure its status as a steady producer and consumer of ferrous scrap.

Currently, the Rouge complex—which employs 7,000 people—produces four-cylinder engines, makes steel fuel tanks, assembles Ford Mustangs and houses several other operations for Ford.

• A different Ford announcement brought good news to the ferrous scrap infrastructure of Mexico. The company announced it will build a new engine plant in Chihuahua, Mexico, just south of the border with El Paso, Texas. Nearly $1 billion will be spent by Ford on the plant, which will be able to produce 400,000 engines annually. Along with the Rouge complex, the new plant is expected to remain viable after the auto maker undergoes a future consolidation of engine-making capacity.

• Will Mercedes-Benz build newly-designed minivans at its new Alabama facility? The answer to that question should come some time in early 1998, and if it is yes, it would most likely increase the plant’s consumption of steel (as well as its production of prompt scrap). If the new vehicle helps prolong America’s love affair with minivans and SUVs, that would also be good news for the steel and scrap industries.