Heavy Lifting

For much of time since Recycling Today last published its 20 largest ferrous scrap processors list for North America, in March of 2006, recyclers enjoyed healthy scrap flows and a vibrant economy.

The boom market sputtered and then turned down sharply as summer turned to fall in 2008. But the two-and-a-half-year roll from March 2006 to September 2008 saw not just a lot of scrap circulating, but also cash and equity.

Subsequently, the chart includes many new company names. In some of those cases, the corporate names include combinations of companies that appeared as separate entities on the list in 2006.

(To view the Top 20 chart click on the following link -- Top 20 Chart. )

CHANGES AT THE TOP

North America’s three largest ferrous scrap processors have each undergone ownership changes of some sort since March of 2006.

Steelmakers have figured prominently in two of the ownership changes, while a merger of two of the world’s largest recycling companies created the other significant change.

In 2006, Metal Management Inc. ranked as the largest ferrous scrap processor in the United States, while Australia-based Sims Group ranked third because of its significant operations in several parts of the country.

In September of 2007, the two companies announced the purchase of Metal Management Inc. by Sims Group. The merger brought into the Sims fold the considerable processing capacity possessed by Metal Management in several major regional markets, including Chicago, Newark, Phoenix, Cleveland and Birmingham, Ala., as well as in several other markets.

Sims Group already had a major presence in California, Virginia and, with its purchase of Hugo Neu Co. earlier in the decade, in the New York and New Jersey region. Additionally the company operates scrap processing facilities in Australia and the United Kingdom.

Even though the Metal Management purchase was a major one for the company, it did not wait long before making additional moves, including establishing a joint venture with Anaheim, Calif.-based Adams Steel, creating an entity that operates as SA Recycling.

Sims was not the only company to have added capacity through acquisitions since 2006. Alter Scrap Recycling, part of St. Louis-based Alter Trading, has added to its portfolio with the addition of the Wisconsin properties formerly belonging to Samuels Recycling. Samuels Recycling was listed as the 20^th largest ferrous scrap recycler in the United States on the 2006 list.

The 18^th ranked company in 2006, Galamba Metals Group, was acquired by the David J. Joseph Co.

The No. 17 company on the 2006 rendition of the list, Carolinas Recycling Group, is now part of OmniSource Corp., and the No. 15 company, Southern Scrap Recycling, is now part of United Kingdom-based EMR (European Metals Recycling) Ltd.

The growth through acquisition by OmniSource Corp. and David J. Joseph Co. has come with a twist.

STEELY DETERMINATION

Two of North America’s three largest scrap processing companies on the 2009 list have undergone a change in ownership structure attributable to strategic decisions by two of America’s largest electric arc furnace (EAF) steelmakers.

The largest ferrous recycler on the 2006 Recycling Today chart, OmniSource Corp., is now owned by steelmaker Steel Dynamics Inc. (SDI), Fort Wayne, Ind. SDI thus became one of America’s largest scrap recyclers with its purchase of its long-time scrap supplier, which had also been based in Fort Wayne.

In the transaction, SDI acquired all the outstanding OmniSource stock for slightly more than $1 billion. The result is that OmniSource now operates as a wholly owned subsidiary of Steel Dynamics, continuing to focus on ferrous and nonferrous scrap processing, brokerage and industrial scrap management, according to the SDI news release announcing the deal. (SDI’s existing scrap operations in Virginia and Tennessee were consolidated into OmniSource, as was a planned scrap processing facility in Indianapolis.)

"This acquisition creates a significant new business platform for SDI and represents a quantum leap as it would regard strategic expansion into the steel scrap and recycled metals sector," remarked Keith Busse, SDI’s Chairman and CEO. "Aside from the fact that scrap is a critical resource for our steelmaking operations, and Omni has historically been one of our largest suppliers, this acquisition opens the door for further profitable growth in a sector of increasing relevance on a global scale," he added.

SDI was not the only American EAF steelmaker to pursue a stronger presence in the scrap industry. The processing and auto shredding capacity (and trading business) of David J. Joseph Co., Cincinnati, is now owned by steelmaker Nucor Corp., Charlotte, N.C.

The transaction, announced in February of 2008, involved Nucor acquiring the stock of Netherlands-based SHV North America Corp., which owned 100 percent of The David J. Joseph Co., for around $1.44 billion. David J. Joseph Co., which has maintained its headquarters in Cincinnati, became a wholly owned subsidiary of Nucor Corp.

"We are extremely excited to announce the acquisition of a company that has been our partner in growth for the last 38 years," remarked Nucor chairman, CEO and president Daniel DiMicco at the time. "With its considerable scale and excellent management team, DJJ offers Nucor a large platform for continued growth in this segment of the industry."

In its news release announcing the purchase, Nucor states, "The acquisition of DJJ will bring a variety of benefits to Nucor. In addition to DJJ’s scrap operations and expertise, its extensive brokerage operations provide Nucor with global sourcing of many key steelmaking raw materials."

With Nucor and SDI now joining Schnitzer Steel Industries and Commercial Metals Co. as steel and scrap companies, four of the largest seven ferrous scrap processors on this year’s list belong to parent companies that also melt scrap at EAF steelmaking facilities.

SMALLER WORLD

The purchase of David J. Joseph Co. by Nucor Corp. transfers a considerable amount of scrap processing capacity from a Dutch holding company to a U.S.-based corporation.

But companies based outside of the United States have by no means lost interest in American scrap processing assets. On this year’s list, the No. 1 spot belongs to Sims Metal Management, which is an operating subsidiary of Australia’s Sims Group.

And another growing presence on the list is United Kingdom-based EMR (European Metals Recycling) Ltd., which now owns facilities throughout the United States, including the former Southern Scrap Recycling plants in Louisiana and the former Camden Iron & Metal facilities in the Northeast.

United States-based companies also have been willing to look beyond America’s borders, with Alter Metal Recycling being one example of a company that has established overseas trading offices.

The boom market from 2003 to mid-2008 resulted in several major moves by recyclers and steelmakers alike.

Scrap recyclers will be watching and listening closely to see how and whether the market downturn will lead to an entirely new and different set of strategic moves.

The author is the editor in chief of Recycling Today and can be contacted via e-mail at btaylor@gie.net.