* Dollar drop led to increased overseas interest in scrap.
* Scrap business crimped by less flow into yards
* Overseas scrap buyers were absent up to 45 days in Q2
By Carole Vaporean
NEW YORK, July 22 Nucor Corp.'s (NUE.N) steel
scrap processor has recently seen some improvement in its
business that it expects will last for the next 2 to 3 months,
helped by exports as the dollar declines, executives said on
"I don't see a run-away bull market. Just seems to be a
stabilization around this range and possible strengthening as
we look out the next 60 to 90 days," said Nucor Executive Vice
President Keith Grass and President and Chief Executive Officer
of The David J. Joseph Co scrap operation.
Nucor's mini-mill operations use scrap as a raw material to
produce steel, but David J. Joseph, bought by Nucor in early
2008, is also a top steel scrap processor and trader, based in
Nucor executives were talking to analysts on a conference
call after earlier reporting better-than-expected
second-quarter profit and sales nearly 70 percent greater than
the year ago quarter. But the Charlotte, North Carolina-based
steel maker warned that the economy is in a "new period of
During the second quarter, Grass said, David J. Joseph saw
a drop off in its scrap operations, that he now thinks has
leveled off or bottomed out.
"Certainly, we've seen the downward trend during the course
of Q2, and we probably feel as though things have stabilized or
to a degree bottomed," the executive said.
A key factor leading to the second quarter downtrend, was a
25 to 30 percent drop-off of scrap flows into all of its
"We're seeing a little bit less flow into the (scrap) yards
during the course of the past few weeks," Grass said, adding
David J. Joseph has recently seen an increase in inquiries
coming from customers in the export market with the dollar
weakening since early June.
"They had been absent for 30 to 45 days in a more
aggressive way. They have reentered to a degree. And from the
beginning of the (third) quarter to now, we've sort of seen a
reversal in the dollar. It started to move a bit lower."
Grass said scrap prices tend to move in opposite direction
to the dollar. When the U.S. currency moves lower, scrap prices
strengthen with increased demand from overseas buyers.
During the second quarter, Chief Operating Officer John
Ferriola said, the spread between Nucor's mill selling prices
and its iron unit usage cost increased by $36 per short ton to
$361 per short ton.
"While the cost of scrap and scrap substitutes increased by
$55 per ton, margins actually improved significantly as a
result of a $91 per ton increase in the average mill selling
prices (of steel)," the COO told analysts.
Dan DiMicco, Nucor Chairman, President and Chief Executive
Officer said, The David J. Joseph Company is expanding its
scrap processing platform through both acquisition and
greenfield opportunities, pointing out the company's planned
pig iron project received an environmental permit in May from
the state of Louisiana.
Ferriola added, however,Nucor had not yet made a decision
on pig iron, a scrap form of iron.
"I will emphasize that we do remain committed to increasing
our control over low cost supplies of high quality scrap
substitutes," the COO said.
(Reporting by Carole Vaporean, additional reporting by Steve
James;Editing by Sofina Mirza-Reid)