Befesa executive sees growth opportunities
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Befesa executive sees growth opportunities

CFO of the company that owns American Zinc Recycling says booming EAF market in the U.S. provides one source of good news.

May 17, 2022

Wolf Lehmann, chief financial officer (CFO) of Luxembourg-based Befesa S.A., says the electric arc furnace (EAF) dust recycling company enjoys steadily growing prospects in the United States and is considering opportunities for expansion in other parts of the world.

Lehmann tells Recycling Today the world’s growing attention to decarbonization will benefit the EAF production method of steelmaking. Additional EAF capacity coming online, combined with sound management, means Befesa can “grow this company to more than 300 million euros ($313 million) over the next years to come,” Lehmann says of Befesa’s potential annual earnings.

He says of the 2021 acquisition of American Zinc Recycling, “We’re very pleased with the transaction; tomorrow we would do it again.” He calls it “a dream acquisition” for Befesa “that makes a lot of sense.”

The CFO refers to Befesa as a “second-stage recycler” of the metals-yielding furnace dust at EAF mills and aluminum salt and pot-liner materials created as byproducts in that sector.

Because the materials it handles are regulated as hazardous, it charges service fees when acquiring them from mills and smelters. Yet zinc smelters “love the product” Befesa makes after it processes EAF dust, Lehmann says. “Basically, we’re always sold out” of the zinc produced, he adds.

While hazardous waste service charges ensure one source of stable revenue, Lehmann says zinc hedging practices he helped put in place at Befesa also ensure its earnings power is “locked-in” rather than being subject to base metals price volatility.

On the heels of what Lehmann calls “our best quarter in history,” the CFO says while overall economic conditions are uncertain, industry-specific trends are in Befesa’s favor.

EAF mills already account for 71 percent of U.S. production, Lehmann says. EAF steelmaking produces one-seventh of the CO2 compared with blast furnace/basic oxygen furnace methods, according to Lehmann, meaning EAF percentages are likely to keep rising in other parts of the world to head toward that same market share. “Europe is seeing EAF investments,” Lehmann says, and he predicts a steady shift to EAF methods in China.

Of direct pertinence to Befesa’s zinc harvesting, Lehmann sees no let-up in the use of zinc as a galvanizing coating on steel in automotive and construction applications.

Although trade tensions with China could create issues, Befesa is investing in two EAF dust recycling plants there. “We’re first mover” in China, he says of Befesa’s entry into that market. Although China currently is at a low 10 percent share for EAF production, any growth in that share combined with China’s overall volume of steelmaking means it’s likely “the largest EAF market in the world,” Lehmann says.

He also lists Turkey and South Korea as potential EAF dust recycling growth markets, as well as any nation where regulations begin requiring the enforced safe handling of such dust.

Currently, Befesa’s aluminum byproducts efforts are taking place only in Europe. While the company has no immediate plans to change that, Lehmann says, “The entire world is looking for circular economy, sustainability and decarbonization” solutions. That means Befesa has global opportunities in both the steel and aluminum industries, Lehmann says.