Nucor Steel’s decision to withdraw from Management Science Associates’ RMDAS scrap pricing service has not in any way changed the structure of the company’s development of the program, according to two top executives with RMDAS. Nucor had its contract renewed twice before opting to allow its contract run out in February.
As reported last week in American Metal Market Nucor has decided to pull out of its participation in the program for the Raw Material Data Aggregation Service. However, MSA still notes that the service has 55 percent of the market reporting and "will not affect the validity of what we are doing at all."
Patrick Gallagher, VP, Metals and Advanced Manufacturing Division for MSA, notes that at the present time the company has 16 participants in the United States covering 54 melting shops, including both electric arc furnaces and integrated steel mills.
While the departure of Nucor, which was known by all the RMDAS participants months ago, Gallagher noted that many of its participants have renewed their agreements for one- to two-year terms.
The goal of the program is to establish a better format for average pricing in steel scrap transactions. With the departure of Nucor MSA has looked at the impact that it would have on the service. While a report in the American Metal Market states that the departure would have a $1 impact on pricing in the South, where Nucor is heavily represented, research by MSA has determined that after reviewing the date for the three months prior to Nucor’s departure, the difference in average price with and without Nucor for #2 shredded scrap had average differences of $.21, with monthly deviations in different directions.
Going further, MSA also determined that the difference in #1 heavy melting steel and prompt industrial composites in the South region were also in opposite directions so tended to balance each other, with the average difference being less than $1 if the two categories would be weighted equally.
MSA also said that it will continue to work to bring additional participants into the program. Several steel mills are considering participating in the program.
While the initial focus of the program has been capturing the domestic steel industry, Ralph Pinkert with MSA says that RMDAS also is having discussions with foundries, scrap suppliers and offshore buyers to further develop a stronger, more representative program in place.
"The goal," Pinkert notes, "is to get to a valid price. Our system is to establish an accurate aggregated weighted average spot market price for each commodity in a respective buy month." The system, he continues, helps to take out the uncertainty in the market, and makes the buyer more knowledgeable about the market.
By having steel scrap suppliers also participate in the service, MSA would have another check on the accuracy of data it is supplied by partners to such transactions. MSA would has checks built into its procedures, desired by participants to protect against possible "manipulation" or fraud committed by other participants, but MSA learns from participants new ways to try to protect the integrity of the data and is eager to help make RMDAS as sound as it can possibly be to benefit the entire steel industry.