A Little Scrapping Among The Steelmakersby
Attention, conspiracy buffs! Some steel minimills are looking for dark reasons why the low-cost scrap they feed their furnaces isn't so cheap anymore. For a while now, lower production costs have let the minis knock steel's big boys around. But over the past year, scrap has soared 40% in price, to a historic high of $132 a ton, erasing the minis' edge.
Some minimill types are calling this a plot by its big rivals, which usually smelt steel from ore. Lately, though, the big guys are buying more scrap, despite the higher cost. Their purchases are up 11.2% over the past year, according to Kidder Peabody. Grouses Keith Busse, a former plant manager at minimill Nucor who is now starting his own outfit: "These guys are out there wantonly and indiscriminately bidding the market up."
The major producers deny any nefarious intent. Rising demand for steel has forced them to turn to scrap, they say. LTV Chairman David Hoag says higher scrap prices are "also a significant cost increase for us." But, says an Inland Steel vice-president, "maybe we're getting smart."
Partly as a result, there has been a role reversal: The large companies project black ink for the first time in three years. And the minis are on the down-swing. Oregon Steel Mills, for instance, has reported a disappointing breakeven third quarter.