A calculated formula. (Ferrous).The dilemma occurs every few years. Just as the steel industry begins receiving more orders and is increasing its revenue, scrap prices head upward and cut into the profit margins of the steel companies. But just when do scrap prices affect steel mill profitability? James F. King of Spoutwell House, Corbridge, U.K., tried to find the answer to that question and presented his findings to attendees of the Ferrous ferrous (fĕr`əs), iron in the +2 valence state. Containing or having to do with iron. The difference between ferrous and ferric is the number of valence electrons they contain (ferrous contains two and ferric contains three), which Spotlight session at the Annual Convention of the Institute of Scrap Recycling Industries Inc. (ISRI ISRI Institute of Scrap Recycling Industries ISRI Institute for Software Research, International (Carnegie Mellon University) ISRI Information Science Research Institute ISRI Intelligent Systems Research Institute ) in April. King found that scrap prices tend to closely track finished steel prices, but acknowledged that there is a chicken-or-egg quandary as to where the cause and effect lies. Using hot-rolled coils as a benchmark, King determined that "the prices of steel scrap and hot-rolled coil follow each other," as well as finding that hot-rolled coil and other major steel products move together in price. With scrap prices almost always moving upward first, the two commodities follow each other in a range that in recent times is at a three-to-one price ratio. That is, if ferrous scrap is roughly $100 per ton, than hot-rolled coil will sell for $300. The next question that arises is at what point do high U.S. scrap prices begin making domestically made electric arc furnace An electric arc furnace (EAF) is a furnace that heats charged material by means of an electric arc. Arc furnaces range in size from small units of approximately one ton capacity (used in foundries for producing cast iron products) up to about 400 ton units used for secondary (EAF EAF - Effort Adjustment Factor ) steel non-competitive with imports. King concluded that scrap prices need only reach $88 per ton before overseas integrated mills (with their low labor and overhead costs overhead costs see fixed costs. ) can begin to sell steel at less than U.S.-based EAF mills. "Without import tariffs An import tariff or import duty is a schedule of duties imposed by a country on imported goods. It is paid at a border or port of entry to the relevant government to allow a good to pass into that government's territory. , a scrap price of under $90 per metric ton is needed for U.S. EAF steelmakers to compete with low-cost, low-overhead producers," stated King. Although EAF steelmakers can turn to alternative iron units to keep their prices down, even these commodities cannot consistently be found for $88 per ton. "At scrap prices above $100 per metric ton, existing capacity for merchant pig iron pig iron: see iron. pig iron Crude iron obtained directly from the blast furnace and cast in molds (see cast iron). The crude ingots, called pigs, are then remelted along with scrap and alloying elements and recast into molds to produce and HBI HBI Home Builders Institute HBI Hot Briquetted Iron (plant or facility) HBI Health and Biomedical Information HBI Hot Beef Injection (band) HBI Healthcare Building Ideas (magazine) (hot briquetted iron) in low-cost countries will take business from the U.S. scrap trade," King nonetheless concluded. No. 1 Heavy Melt Composite Pricing (per gross ton, monthly average) Apr02 $92.03 May $101.53 June $101.60 July $101.67 Aug $101.67 Sept $103.62 Oct $103.12 Nov $97.25 Dec $97.00 Jan03 $106.41 Feb $115.91 Mar $120.42 April $119.80 Note: Table made from bar graph. Source: American Metal Market |
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