Grading on a Different Curve

There is no rule that says only rock singers and fashion trends can be "in" one day and "out" the next. Look at the transformations that are taking place in the ferrous scrap business.

Change is a constant in the business. Something as simple as the automobile wheel can drive that change. Years ago, wheels on cars were made of iron. Today they are mostly aluminum. A steel mill simply is not interested in buying aluminum scrap.

Technology also changes markets. Sometimes the entire profile of a region will change. A huge influx of shredder capacity in the Pacific Northwest has accomplished just such a swing. Part of the reason for the move to shredded material is another technology-driven change: the requirement for high-quality material.

On top of that, price fluctuations make a commodity hot one day and cold the next. (The stainless market is a good example of that sort of change.)

EAF Quality Demands

In St. Louis, Cap Grossman, president and CEO of Grossman Iron & Steel Co., notes a trend away from bundles as melting stock. That is matched by a trend to alternative materials like pig iron for use in electric furnaces. While new technology and a need for quality feedstock are the basis for the change, classic economics still rules.

"It always comes back to price and to supply and demand," Grossman says. He notes that mills have changed their buying strategies as the market has tumbled. "It depends on where different grades are priced," he adds. "As the price plummets, bushelings become more attractive in a market where their price was $20 a ton higher six months ago."

Indeed, mills are applying different formulas as prices change. One thing that is consistent in their demand, however, is a requirement for cleaner and cleaner scrap.

"We've seen a difference in makeup of our scrap only because the industry mix we serve has changed. As a business, we are reactive as opposed to being pro-active. The industry in our community dictates the types of scrap we will handle," says Joel Denbo, chief manager of operations at Tennessee Valley Recycling, Decatur, Ala. "Just because we'd like to handle 20,000 tons of bushelings a month doesn't mean it will be there unless someone makes it." Number-1 busheling is clean scrap less than 12-inches and generally includes stampings, sheet clippings, but no auto body or fender stock.

The recycler has to meet the specifications of the steel mill customer. Perhaps a scrap generator has been producing a product made of SAE 10/10 steel for years. Then it changes to SAE 80/24. "The melter doesn't care," Denbo points out. Or, the change can come from the mill side where they have made a switch in their melt.

"No matter where the change comes from, we have to make the adjustment in our pricing formula," Denbo says.

The electric furnace marketplace has showed a continued lack of interest in bushelings as a feedstock. This is true both for Number-1 and Number-2 grades. Grossman says this is true simply because it takes them so long to melt. "They used to be the commodity in vogue," he says. Now, it is primarily the integrated mills that have any interest in bushelings.

"Some of my grades are being replaced by shred," Grossman says. This is because some mills consider it a cleaner grade of scrap given their copper maximums. He finds his long-time customers-reassured by his reputation and knowledge of what they need- are not as likely to shy away as others might be.

"The percent of pig iron is another indication that the mills want cleaner scrap," he notes. This trend is influenced by the attractiveness of lower priced material that the mill can then "clean up" with pig.

"If busheling gets low enough, you might see a swing to pig as a dilution agent," Grossman points out.

Direct-reduced iron, pig iron, and iron carbide can be substituted for iron and steel scrap but are usually considered more expensive than scrap, notes Raymond E. Brown of the United States Geological Survey (USGS), Reston, Va.. Also, Brown says, availability of substitutes on a large scale is limited, and there are technical problems associated with the use of some substitute materials. However, these scrap alternatives have certain advantages, which include providing iron free of residual elements, such as copper, for use in producing higher quality steel and ferrous castings products.

Analysis by the U.S. Bureau of Mines of iron and steel scrap consumption by domestic steel mills shows two key trends emerging over the past 20 years. First, steel makers have increased their use of electric arc furnaces, which use close to 100% scrap as a charge material to produce raw steel. Second, steel producers have extended their use of continuous casting-a more efficient forming technology than ingot casting-which has increased steel mill processing yields but has left progressively less home scrap available to the mills.

On the recycling side of the market, there have been major changes, as well. Nowhere is that more pronounced than in the Pacific Northwest.

North by Northwest

Three huge new shredders have come on line in the Pacific Northwest recently. This capacity has been added to other existing shredders that are operating in markets from Portland, Ore.; Vancouver, Tacoma and Seattle, Wash; and up to Vancouver and Victoria, British Columbia, Canada.

"We don't have the heavy manufacturing in the area that we used to have," says Alan Sidell, executive vice president of Seattle Iron & Metals Corp., Seattle, Wash.

"Scrap grades are getting lighter. The grades are not what they used to be," Sidell says. Mills were de-emphasizing the value of mixed bales. Birmingham Steel is the major purchaser in the area. "To be competitive, we felt we had to have a shredder."

Seattle Iron & Metals added a 4,000 hp shredder from Texas Shredder, Inc. (TSI) San Antonio. Schnitzer Steel Industries added a behemoth 6,000 hp unit in Tacoma. Schnitzer is operating a 122/108 dual-discharge heavy shredder from TSI. The 122/108 replaced two existing shredders. It produces about 250-275 tons per hour of ferrous shred.

The Schnitzer system is backed by a Downstream Cleaning System. Both systems feature state-of-the-art components such as the Alstom 6,000 hp 450-rpm wound round electric shredder motor, a heavy duty disc rotor, and a Model 72 Z-box and a "smart" water injection system. The Schnitzer shredder is the largest capacity shredder in the Northwest today.

Seattle Iron's shredder also is a large-capacity unit. "It is big enough to do what we need to do," Sidell says. "Our company is 75 years old, so this was not a green fields installation," he adds. The new shredder allows them to take items that used to be baled or sheared and shred them. With the new, heavy-duty shredders, recyclers can do more than auto bodies and sheet metal.

The move to shredding was not simply based on survival. Producing a higher quality end product means better return from the market and a more comfortable place in the competitive game of selling ferrous scrap.

"In turn, this has created more competition for raw material," says Jay Sternoff, purchasing manager for Pacific Iron & Metal Co., Seattle. "It has flooded more shred onto the market." He agrees that the mills are using more shred.

Given the amount of shredded product available on the regional market, one might expect prices to nosedive. Spreads are certainly getting narrower, most agree.

Mills are working one shredder against the other. As a result, none are working at full capacity. Seattle Iron & Metals foresaw the possibility and is feeding nonferrous materials to keep the shredder busy.

However, shredding is not the only game left in town. "Cut grades are still in demand," Sternoff says. Even Material Flow

Like a charcoal suit and white dress shirt, some things never seem to go out of style. "Number one busheling is our number one product by tonnage," says Winford Moore, general manager at Metal Recyclers of Kentucky in Frankfort. The product flows through to Kentucky and Indiana area mills.

"Material is flowing at about the same rates," Moore continues. "Demand is even and the market remains strong for the industrial grades."

Metal Recyclers buys material and resells it to the end users, typically an integrated mill. They create number one bales and do not have a shredder.

On another stable note, Denbo notes that "obsolete scrap" is always going to be "obsolete scrap." (At Tennessee Valley Recycling something that has changed is the name - the company used to be Denbo Iron & Metal before five yards were consolidated.)

Scrap produced in the Construction & Demolition (C&D) business remains fairly constant. But with the growth in mini-mills, plate and structural does not hold the same status with buyers that it used to. This is because the copper content has gone up compared to what was available in years past.

"A change in what is available changes the way we bake the cake, if you will," Denbo says.

Other factors are important, too. The mix of imported and exported scrap and the value of the dollar versus other currencies have a major impact on the flow of various types and grades of ferrous scrap.

There is a trend to new steel production, both at home and abroad. To date, there has been a strong domestic economy. It is a mixed blessing, however. The strong economy means manufacturers are turning out high volumes of basic commodities like autos and refrigerators. With a steel recycling rate approaching 90%, there at times is an oversupply of material on the market. The obvious result is downward pressure on prices.

Given the situation in the Pacific Northwest, one might expect price turmoil. However, Sternoff says, "Things at the moment are reasonably flat."

From St. Louis, Grossman says, "I sense a trend that manufacturing will slow down, so scrap production may dwindle. That will be positive." But, he notes, that also means demand will probably drop, too. "It always comes back to supply and demand," he says. "But you have to realize that there are a half-dozen or a dozen more factors involved, too."

There is a famous saying: The more things change, the more they remain the same. Given current conditions in the ferrous market, that seems just as accurate as ever. Look for scrap to remain just as necessary as basic clothing, but the styles and fabrics of the market will continue to change with the season.

The author is an environmental writer and Recycling Today contributing editor based in Strongsville, Ohio.