GreenYes Archives

[GreenYes Archives] - [Thread Index] - [Date Index]
[Date Prev] - [Date Next] - [Thread Prev] - [Thread Next]

[greenyes] Scrap Wars

May 17, 2005


Scrap Business Fights A Nemesis: Snooping


In this country, a lot of steel gets made with two key ingredients: scrap
and snooping. Now the industry wants to see if it can cut out the second
component by making metals prices more transparent.

One of the two main methods for making steel relies on recycling iron-based
scrap -- including washing machines, junked cars or even old bridges -- by
melting it into new steel. But there isn't a consistent and open system for
setting scrap prices, and that has led to headaches and even harassment:
Steel and scrap company executives have used helicopters and satellite
photography to keep tabs on rivals' scrap and steelyard inventories, while
pointing the finger at each other in trade publications. Some executives are
also experimenting with alternative materials, hoping to end their reliance
on scrap, although some of those plans have slowed.

"We've always questioned the accuracy and the timeliness of various types of
scrap [prices] in the scrap marketplace," says David Sutherland, chief
executive of Ipsco Inc., a Regina, Saskatchewan, steelmaker.

Now steel companies are signing onto a new project by Management Science
Associates Inc., a Pittsburgh-based data-collection and -analysis firm, that
aims to add price transparency to the scrap market.

MSA, which has tracked consumer trends for Coca-Cola Co., H.J. Heinz Co.,
MTV Networks and Levi Strauss & Co., has enlisted a dozen steel companies as
members in its Raw Material Data Aggregation Service, or RMDAS. MSA charges
member companies a fee to submit purchasing data and, in return, to see if
prices they paid were in line with aggregate average prices paid by other
steel companies in the program.

"Scrap is a free-floating commodity," says Ralph Pinkert, of MSA. "By
nature, it's created an adversarial relationship."

In the past year, as scrap-steel prices surged to a record high of about
$450 a ton, steel companies took to spying on scrap yards to see if supplies
were as tight as reported. At a current average scrap steel price of $210 a
ton, the 76 million tons of scrap recycled last year could fetch $16

"You're validating information constantly in this business," says Rich
Brady, scrap-metal buyer for Fort Wayne, Ind., steelmaker Steel Dynamics
Keith Busse, chief executive of Steel Dynamics, is one such validator. He
takes regular trips in a friend's helicopter or a company airplane to check
on inventory levels at the scrap yards that supply his company to gauge how
much scrap is available and whether prices are fair. "You can't help
yourself, when flying by a city, to go check on the scrap supply," he said
earlier this year. Mr. Busse has earned the nickname "The Red Baron" for
such trips.


Peter Anderson, President
4513 Vernon Blvd. Suite 15
Madison, WI 53705-4964
Ph: (608) 231-1100
Fax: (608) 233-0011
Cell: (608) 698-1314
eMail: anderson@no.address

This message, and all attachments thereto,
is covered by the Electronic Communications
Privacy Act, 18 U.S.C., Sections 2510-2521.
This message is CONFIDENTIAL. If you are
not the intended recipient of this message,
then any retention, dissemination, distribution
or copying of this communication is strictly
prohibited. Please notify me if you received
this message in error at anderson@no.address
and then delete it.

[GreenYes Archives] - [Date Index] - [Thread Index]
[Date Prev] - [Date Next] - [Thread Prev] - [Thread Next]