Schnitzer sees more steel scrap export strength

NEW YORK Tue Mar 9, 2010 9:41pm EST

Tamara Lundgren, President and Chief Executive Officer of Schnitzer Steel, speaks at the Reuters Global Mining and Steel Summit in New York, March 9, 2010. REUTERS/Brendan McDermid (

Tamara Lundgren, President and Chief Executive Officer of Schnitzer Steel, speaks at the Reuters Global Mining and Steel Summit in New York, March 9, 2010.

Credit: Reuters/Brendan McDermid (

NEW YORK (Reuters) - Schnitzer Steel Industries Inc (SCHN.O) sees strong prices reflecting healthy demand for U.S. steel scrap, driven primarily by export market consumption, especially in Asian markets.

Chief Executive Tamara Lundgren told the Reuters Mining and Steel Summit on Tuesday that industry discussion of prices in the high $300s to the low $400s a ton were "generally correct" for U.S. steel scrap exports.

"When prices were in the mid-$300s, we were back to (strong) 2006 levels, and that was lower than where we are today. That reflects the strong demand which came back very quickly," the CEO said.

In late 2008, when demand for U.S. steel scrap tumbled, Lundgren said, "We couldn't sell anything."

But the rebound was also steep, with demand quickly returning to historically strong levels.

"And now they are very strong," the executive said, adding that the only constraint to returning to record levels is U.S. economic improvement.

Increased manufacturing rates would generate more scrap to feed export growth.

Many economists have pointed to an export-lead recovery in the United States, and 80 percent of revenues from Schnitzer's metal recycling business, its largest division, came from exports.

Because of lower U.S. manufacturing rates, meeting growing demand by extracting raw material scrap has become more expensive over the last 18 months.

"Primarily because of negative and slow U.S. GDP, people are taking down fewer buildings, throwing away fewer washing machines, manufacturing less. So the actual raw material is more expensive to pull out," she said.

In the export market, Schnitzer sells to all major steel companies around the world. Even blast furnaces can use up to 20 percent scrap metal and some can take 30 percent scrap.

At end of the first quarter, Lundgren said, the recycling company was on or near record pace for exports. Second-quarter exports are forecast to do the same.

In fiscal 2008/09, which ended August 31, Schnitzer reported 3.5 million tons of exported steel scrap.

For calendar 2009, its U.S. ferrous scrap exports grew by 4 percent and on a fiscal basis, the increase was 7 percent.

For the last 12 to 18 months China has been a large buyer of ferrous scrap. India, Turkey, Malaysia, Vietnam and Egypt are also among the 15 to 18 countries it sells into.

Though China's buying pace slowed during the lunar new year, Lundgren said that was only a seasonal factor.

"There was a run-up right before the new year, then a run down. We expect to see them back in the market. We see them in the market on a regular basis," the executive said.

Turkey's steel manufacturing has slowed from a year ago along with their consumption rate.

"They are buying, just not at the record rates they were in 2007 and 2008 when they were the No. 1 importer of U.S. ferrous scrap. But it is still strong," she said.

Back in the United States, the CEO said, there is still no sign of much-anticipated stimulus money for rebuilding infrastructure.

"There is certainly an expectation for the money. But it's a question of timing and there is no word on that. The need is dramatic. When you compare infrastructure building in Asia to the U.S., we are in danger of falling behind."

(Reporting by Carole Vaporean; Editing by Richard Chang)

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