Forward Momentum
Ferrous scrap dealers throughout the U.S. report better prices and heavier demand for their product.
Dealers in many regions of the country say they can move whatever material they can procure. While no one is calling the current situation a shortage, many processors are noting that they would be pleased to see more obsolete or industrial scrap coming into their yards.
Although prices have gone up, it is unclear if scale prices are high enough yet to draw out auto bodies and other obsolete scrap. Most scrap buyers are fairly certain that there is a fair amount of obsolete material that has been oxidizing in salvage yards and other places for the past two years, with potential buyers waiting for an attractive price to sell.
Wet April weather in parts of the U.S. is probably further delaying the movement of some of that material, one Great Lakes region scrap dealer speculates.
On the sell side, ferrous processors are encouraged by what their steel mill customers are telling them in terms of scrap demand and demand for finished steel.
A combination of improved economic conditions and the Section 201 actions announced by the Bush Administration are being credited with reviving the long-suffering ferrous segment.
Production figures gathered by the American Iron and Steel Institute reflect the increase in demand. In mid-April, steelmakers in the U.S. were using more than 90 percent of their capacity, compared to numbers in the 73 to 75 percent range back in January.
(For more on the state of the ferrous scrap market, see the Commodity Focus feature beginning on page 32.)
OVERCAPACITY TALKS CONTINUE
Representatives from more than 40 nations met in April to discuss conditions in the global steel industry, but no key agreements were reached.
Delegates to the Organization for Economic Cooperation and Development (OECD) met in Paris "to continue their work on improving the conditions in world steel," according to an OECD news release. At the conclusion of the meeting, the delegates agreed to meet again for further talks. "Progress that is being made in facilitating the ongoing and planned closure of inefficient capacity will be evaluated, as will work that has been undertaken on the ways that multilateral disciplines on market-distorting government interventions in steel, and related industry practices, could be strengthened," the organization has declared. Excess capacity is the issue that the board of directors of the International Iron & Steel Institute (IISI), Brussels, hopes will be addressed by the group. The board confirmed in a vote in April its support for the OECD negotiations and urged OECD delegates "to make further progress on the issues of assisting the closure of excess steelmaking capacity and removal of state aid which distorts the fair operation of the market for steel." The IISI is urging governments "to establish a new state aid code for assistance given to the steel industry whether by national, regional or local authorities. This code should prohibit the use of government finance to maintain existing steel plants or support investment in new capacity, but should allow the use of government finance to help cover the social and environmental costs associated with the closure of steel capacity." Most nations with steelmaking capacity are represented at the talks, including the U.S., China, Russia, Japan, Canada, South Korea, Brazil, Mexico and western European nations. At its February and April meetings, the OECD committee has agreed to "develop options for the strengthening of disciplines on government interventions and other market distortions in steel, feeding the results, as appropriate, into wider-ranging discussions at the World Trade Organization."
Steel Dynamics Inc. (SDI), Fort Wayne, Ind., is making steel at record production levels and has a full order book of sales for the current quarter, according to company officials.
The company has announced first quarter 2002 earnings of $4.4 million and is hinting at more positive financial results to come. "Our business experienced considerable improvement in the first quarter, hopefully beginning a rebound from the difficult environment we experienced in 2001," says Keith Busse, president and CEO of the electric arc furnace (EAF) steelmaker.
"Our March results were very strong as a result of higher production and shipment levels combined with improved product pricing and lower scrap costs," he comments. "We are currently producing at capacity at our Butler, Ind., facility. Pricing for shipments and orders continued to strengthen throughout the first quarter."
By comparison to the fourth quarter of 2001, SDI’s first quarter flat-roll mill shipments increased from 462,000 tons to 551,00 tons, up 19 percent, while hot-band production increased from 463,000 tons to 580,000 tons, up 25 percent.
"The market for our products has become more resilient over the past several months," Busse says. "Our order book for the second quarter has been full for some time now at significantly higher selling values than those achieved in the first quarter," Busse continues.
Busse also notes that construction of SDI’s $315 million structural steel and rail mill at Columbia City, Ind., has proceeded rapidly since the project started in May of 2001. The mill is expected to commence production of structural steel by the end of the second quarter, 2002.
Explore the May 2002 Issue
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