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by Beth Stackpole, Contributing Editor   | Abstract: | RMDAS information service aims to give steel manufacturers much-needed intelligence on scrap pricing and volume. |
Master a recipe for a cake and you're not apt to alter the ingredients too much for fear of messing up your sumptuous treat. Not so when you're an electric arc furnace (EAF) mini-mill cooking up a viable formula to transform common scrap materials into steel. These manufacturers rely on a varied diet of old appliances, obsolete equipment and shredded automobile parts (in others words, common scrap) to concoct steel products that meet the varied demands of their customers. Modifying the makeup to reduce costs or produce a higher-quality product is an exercise that comes with the territory. "We know what the cake is going to look like, but we're always tinkering with the ingredients," says Rich Brady, manager of ferrous resources and logistics for Steel Dynamics Inc. (Ft. Wayne, IN), a $2.1 billion mini-mill steel producer. "We are always trying to determine what the scrap mix will be, trying to find one that will constitute the least amount of cost, but yet keep us within the parameters of the grade that our customers require." Until recently, most EAF mills went about the business of comparing and purchasing scrap without a whole lot of solid pricing data or market intelligence to back up their choices. With over 3,000 dealers in the country -- from multimillion dollar public companies to mom and pop shops -- hawking scrap materials, all at different grades and with varying consistencies, keeping a handle on pricing has been no easy feat. Given that scrap purchases typically account for about 60% of an EAF maker's cost of finished goods, and still a relatively sizeable 20% to 25% chunk of an integrated steel maker's investment, the lack of a reliable pricing index has created a significant void. [Click to continue] |