24 locations in the United States and Mexico. Full-service scrap processor and steel mill support services provider

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1 AMM Steel Scrap Conference September 11, 2014

2 24 locations in the United States and Mexico Full-service scrap processor and steel mill support services provider Transportation equipment dismantling and recycling nationwide Licensed ship recycler and environmental remediation contractor Demolition services provided nationwide Scrap management, consulting and purchasing services for industrial scrap generators on a local and national basis Used auto parts salvage yards shredder feeder yards Nonferrous heavy media plant to process shredder metallic residue Direct supplier to consumers of ferrous and nonferrous scrap commodities Trading & brokerage services throughout North America Fe Xchange Group

3 Handling, processing, shipping over 3 million tons of ferrous scrap annually Over 800 employees in North America SMS has been ranked for last 3 years on Inc list of fastest growing private companies in the United States. AMM Awards for Steel Excellence 2013 Scrap Exporter of the Year 2014 Large Scrap Company of the Year

4 What are the pricing dynamics and outlook for the major scrap regions? Pricing dynamics... major factors influencing market price of ferrous scrap: New steel demand, steel mill operating rates, raw materials inventories and steel prices Scrap supply flow of scrap, scrap yard inventory levels, grades available in region and at what price for each mill s desired scrap grade. Is region in a scrap surplus or deficit position for grades needed? Alternative iron supply, prices and timing of deliveries - Pig Iron, DRI, HBI Transportation cost and periodic logistic issues availability of equipment and weather-related issues Global economic situation and ferrous scrap export demand... Level of activity dependent on each importing country s demand, currency valuation and exchange rates (compared to exporting country s), and overseas bulk and/or container shipment freight costs

5 Outlook for the Midwest region one man s opinion! As the economy continues to improve, we can expect steel and foundry demand and new steel and casting prices to increase barring any real competitive import price pressure. Midwest region scrap prices have changed little each month for many months now, as the supply of scrap has been relatively in balance with demand in the region. However, I expect demand to increase more than supply in the near term, so I project most scrap prices to move upward to higher levels in the 4 th quarter and into early 2015 as a result of: Stronger mill demand and higher steel prices, with less steel imports Increasing and steady mill operating rates across all regions Some renewed scrap export activity on both coasts Increasing pig iron prices delivered NOLA due to global supply issues Expected scrap inventory build-ups at many mills and foundries in anticipation of another harsh winter with logistic issues.

6 How will new mill locations impact scrap demand regionally? Only a few new mills are planned, in the South and Southwest and still several years from completion. When these new mills are operating they will increase regional demand for some types of ferrous scrap, depending on melt practice. How much impact on pricing is yet to be determined too many unknowns (available scrap supply of grades desired, quantity of scrap substitutes consumed by them, export activity)

7 Is a surplus in busheling (prime scrap) still expected? Not really at least for the next few years Consider Nucor s recent announcement that their Louisiana HYL Technologies plant has been able to produce DRI containing 4% bonded Carbon. This DRI is higher in recovered Carbon than HBI and most pig iron melted, so I believe this product may be more of a pig iron substitute than a busheling replacement. However, how it is used at Nucor in their melt recipes will depend on price of pig iron delivered as compared to busheling. Few mills have the extensive systems installed and experience to handle and store or utilize DRI in their melt process, but all can use busheling. Should still be strong demand for prime scrap by the flat roll, SBQ and seamless OCTG pipe billet EAF producers. Especially when the spread between prime prices and shredded scrap narrows.

8 How will scrap logistics be impacted? Major issue with trucking, rail and barge movements of scrap to some areas, particularly in certain seasons. Need to find creative ways to transport large quantities of scrap efficiently and cost-effectively within the US and on a timely basis, such as usage of more private or leased railcars and possibly barges. What will happen to the domestic market as the US and global economic growth bifurcates? It s a matter of global supply and demand for scrap at any moment in time, as well as currency valuation. Stronger dollar and/or weaker global demand expect less scrap exports and more obsolete scrap flowing inland from the coast ports for domestic mills to buy which will impact US scrap prices generally. Weaker dollar... and/or stronger global demand expect more exports of scrap and higher prices for domestic mills to obtain their scrap.

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