[greenyes] Scrap Wars

["Peter Anderson" <anderson@no.address>]

WALL STREET JOURNAL
May 17, 2005


COMMODITIES


Scrap Business Fights A Nemesis: Snooping

By PAUL GLADER

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 
billion.

"You're validating information constantly in this business," says Rich 
Brady, scrap-metal buyer for Fort Wayne, Ind., steelmaker Steel Dynamics 
Inc.
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.

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_________________________
Peter Anderson, President
RECYCLEWORLDS CONSULTING
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
web: www.recycleworlds.net

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