Tampa Steel Conference: Omnisource, Strategic Resources on raw materials, trade and scrap

Strategic Resources is building a complex in Quebec, which will include a 4-million-ton/year DRI-quality iron ore pelletizer in Saguenay. It also plans to build a plant to produce DRI, then convert it to pig iron in an EAF. Both basic and nodular pig iron grades will be produced. In addition, ferroalloys will be produced, which will include ferro-vanadium and ferrotitanium.

The pellet plant is expected to be online in 2-3 years. The pig iron and ferroalloy projects are expected in about six years.

Cleary indicated tariffs and capitalization have been challenging aspects to completing the project. Another challenge is tempering of expectations of investors and others involved as economic and bureaucratic events often impede progress.

Omnisource, acquired by Steel Dynamics Inc. (SDI) in 2007, is the largest ferrous scrap processing company in the US. It processes 6.1 million tons per year and brokers an additional 5 million tons. The company operates 60 facilities in the US and 13 in Mexico, employing about 3,500 personnel in total.

Bell said his mission is to lower operating costs in all aspects of Omnisource’s business segments. He also said he seeks to increase adaptability to be able to navigate the threat of tariffs and to stabilize the flow of cross-border scrap. The company also wants to promote flexibility in scrap mixes which are necessitated by unforeseen disruptions in the ferrous markets.

Regarding pig iron, Bell said there was shortage created after the start of Russia’s invasion of Ukraine. Brazilian production has been able to satisfy US demand since then. The tariffs imposed on Brazilian pig iron imports has not materially impacted SDI as they have been able to adapt. He noted the steelmaker has switched to low-residual shredding technology, which has lessened dependence on pig iron and the change of scrap mixes to compensate.

Bell does not believe there will be future scrap shortages. The company will be able to adapt by using lower residual obsolescent scrap grades if prime grades became less accessible or rise in price. He added today prices for busheling and shredded are “neck and neck” to make his point. Both Cleary and Bell reject referring to scrap as “the next precious metal.”  

Cleary said in order to keep his project moving forward he needs to reduce the time frames and costs for construction, control system improvements and manage to be able to produce material which will be less than the Quebec lawful emission caps.

Both participants discussed the renewal of the US-Mexico-Canada trade agreement. Cleary does not believe it will survive to any appreciable extent. Bell hopes it can be renegotiated for all countries to benefit.