The first annual scrap conference held by American Metal Market (AMM) took place in sunny and relaxing Scottsdale, Arizona on November 12-14, 2007. The two-day conference focused on many scrap-related issues, including the market trend, auto scrap supplies, alternate scrap supplies, and scrap transportation.
Mr. Keith Busse, Chairman and CEO of Steel Dynamics, Inc. (SDI), began the conference by comparing the current situation in steel production to the past. US domestic steel production has declined from its peak of approximately 150 million tons in 1973 to approximately 109 million tons in 2006. Since 1950, US steel production by electric arc furnace (EAF) mini mills has increased, while blast furnace production at integrated mills has decreased. Nowadays, around 33 percent of US flat rolled capacity is produced by EAF.
As for the scrap market in 2008, Mr. Busse said that SDI believes scrap prices will fluctuate, while the scrap industry as a whole will grow both domestically and across the world.
Another speaker, Dresdner Partners Investment Banking's Managing Director, Mr. Vincent J. Pappalardo, pointed out that scrap supplies are expected to get tighter while demand should remain strong, due to the increasing use of EAFs by steel producers. The decreasing scrap availability overseas in places such as Russia and Ukraine as well as ongoing consolidation and the increasing costs of scrap alternatives will also drive scrap prices up, Mr. Pappalardo predicted.
Mr. Steve Levetan, Senior Vice President of Pull-A-Part LLC, said that the auto scrap market would continue to be strong, while pre-shredding preparation will become more complicated, expensive and time consuming. Mr. Levetan also mentioned that qualifying suppliers and professional automotive dismantlers and recyclers will become more essential in the market.
The higher global demand, regional and global sales and distribution changes, and trading arbitrage will attract more scrap collection, according to Patrick McCormick, Managing Partner of World Steel Dynamics. He told the audience that the increasing global steel consumption and production along with the increasing global metallic requirement will lead to tight supplies. Moreover, the weakening US dollar will draw more international buyers, generating a positive scrap export market.
Alternative iron sources such as direct reduced iron (DRI), hot briquetted iron (HBI) and pig iron provide chemical benefits and pricing advantages for EAF producers, according to Mr. John Kopfle, Director of Corporate Development at Midrex Technologies Inc. He said that alternative iron demand and prices are increasing, as alternative iron is becoming more crucial for US flat product mini mills, and today, even some long products mills are also using it.
As for transportation fuel costs, Phillip R. Bedwell, Corporate Director of Rail and Barge Transportation of OmniSource Corp., said in his presentation that crude oil costs increased an average of 67 percent between 2006 and 2007, while diesel fuel per-mile costs prices increased an average of 115 percent between 2002 and 2006. It is expected that crude oil and diesel fuel prices will go up and remain in the high 90's while diesel prices will remain higher than 2007 levels. Mr. Bedwell also pointed out that the diesel fuel price increase will lower the mileage cost efficiency at the same time.
Overall, in 2008, the presenters at the event expressed their belief that the scrap market will continue to be strong due to the strength of global demand, tight scrap availability, and the weak US dollar. Demand and prices for scrap alternatives will increase, and fuel costs will stay high as well.