Dwindling Segregated Scrap Supplies a Risk for Casting Foundries

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Ferrous Metals

Nearly all steel producers and processors are having a tough time of it. But the general consensus is that demand is gradually improving and better markets, better capacity utilization, eventually better prices for producers will come; if not significantly this year then certainly by early next. But there is one sector that is being hit by a double whammy, one short term, one long, and that is the foundry casting industry. In an article published by AMM, Brian Shell explores the impact that reduced generation of top quality segregated auto scrap will have on the ductile iron casting manufacturers. At present, with demand down, the premium for top quality segregated scraps is only $30/ton, a far cry from the $300/ton premiums we saw at the height of the market last year. But with Chrysler and now GM in Chapter 11 and doubts about what kind of businesses will emerge in due course from that protection there are real fears that the long term trend of dwindling clean segregated scrap supplies will accelerate this year and premiums will rise when foundries can least afford them in a weak sales market.

Major steel mills like Nucor and Steel Dynamics have no problem taking a wide range of scrap sizes and grades. The chemistry of their finished products and the process controls they operate make them very flexible in their ability to take and economically use varying qualities, origins and grades. But the rise of high strength steels containing boron, titanium, manganese etc and the limited furnace sizes of ductile iron manufacturers means high strength steels and scrap that is over about 2′ sq are not suitable for them. The only alternative is a special grade of pig iron which though excellent from a chemical point of view is more expensive and has to be imported leaving consumers facing higher costs and more complex supply chains.

With weak sales markets and a growing scarcity of scrap supplies foundries are understandably concerned, but so too should consumers of their products. This situation represents a supply risk and consumers would do well to engage with their suppliers to understand the level of their exposure and ensure they have adequate supply options in place for when demand gradually rises.

–Stuart Burns

Comment (1)

  1. I have seem similar report in AMM. I posted this question on a couple of our LinkedIn groups to see what type of response we will get.
    http://www.linkedin.com/groups?gid=132794&trk=hb_side_g

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