EoW September 2010

Transat lant ic Cable

Let nothing be lost: spinning gold from scrap metal

Wresting value from scrap is a painstaking business that can also be strikingly profitable. The Seattle (Washington) Times for 13 th June reported on Schnitzer Steel (Portland, Oregon), founded more than a century ago as Alaska Junk. The company makes finished steel products from scrap and sells used auto parts; but the core of its business – accounting for 75% of income – is scrap. Schnitzer is expected by DA Davidson analyst Brent Thielman to post revenues approaching $2.4 billion in fiscal 2010, with a net profit of around $63 million. The company collects old autos, railcars, construction elements and other metal debris at facilities it maintains in four states. There the scrap is shredded, loaded into ships and sent to China, South Korea, Turkey and a number of other countries whose reviving steel mills must be fed. “We [the United States] are the biggest reservoir of junk metal in the world, by far,” Mr Thielman said. “That’s something I think these guys can leverage.” Leveraging is a concept that Schnitzer would appear to understand very well. The company’s Oregon minimill buys steel from the scrap division, melts it in a 108-ton capacity electric arc furnace, and turns it into rebar, wire rod and other products. Moreover, according to the Times , “At Schnitzer’s more than three dozen US and Canadian auto-parts yards, customers pay to scavenge usable parts from junked cars. What’s left goes to Schnitzer’s scrap division, if feasible, or is sold elsewhere.” Elsewhere in metals . . . Steel companies were prominent supporters of a failed ❈ ❈ Senate resolution aimed at blocking a broadened “tailpipe rule” that strengthens the hand of the US Environmental Protection Agency in the regulation of greenhouse gas emissions. As of January, EPA oversight of auto emissions would be expanded to include emissions from stationary sources, such as steel production facilities. Endangerment findings and subsequent regulations could impose more stringent EPA requirements on over 6 million stationary sources, including 200,000 manufacturing facilities. Thomas J Gibson, president and CEO of the American Iron and Steel Institute, on 11 th June expressed the AISI view on such EPA activism under the Clean Air Act: “This regulatory path will be economically detrimental to American manufacturing, and will not result in a reduction in greenhouse gas emission, as overseas competitors will continue to increase their emissions. Climate change is a global problem that can only be addressed effectively on a global basis.” On 17 ❈ ❈ th June the Dutch-German-British group Urenco inaugurated the second phase of its uranium enrichment plant in Eunice, New Mexico, in the US Southwest. According to the owners, the first new uranium enrichment plant in the country in decades will by 2014 have sufficient capacity to meet the needs of half the nuclear power reactors in the United States. The centrifuges utilised by the $3 billion plant are reported to consume only about 5% as much electricity, per unit of enrichment, as the gaseous diffusion technology employed by USEC Inc (Bethesda, Maryland). While USEC works on a new centrifuge-based enrichment technology, the US Energy Department in May extended a $2 billion loan guarantee to another prospective European rival –

22

EuroWire – September 2010 EuroWire – January 20 6