At The Steel Index’s Scrap Seminar in Chicago last week the theme of steelmakers backwards integrating into the once sleepy and primarily family-owned business of scrapyards was a frequent topic.

According to Rich Brady, Executive VP of the Ferrous Commercial Group at Omnisource, in the past there was a worry among EAF steel producers that foreign companies were going to enter the U.S. scrap market and begin exporting.

This perception drove many of them to protect their supply through acquisitions.

With roughly 30% of domestic scrap being exported, according to Joe Pickard, Chief Economist and Director of Commodities at ISRI, we can see why domestic steelmakers were concerned about scrap availability during times of strong domestic steel demand and production levels.

Exacerbating this is that there are 20 nations around the world that restrict scrap export.

Mr. Brady went on to say that producers are likely to continue to make acquisitions, though not at the same rate given the lofty valuations that many scrapyards are commanding today.

At the same time, the problems that many steelmakers face in finding stable prices for scrap were laid out by Republic Steel’s Director of Supply Chain Management, Michael B. Humphrey II, who outlined Republic’s difficulties in obtaining the high quality scrap they need to produce SBQ.

According to Mr. Humphrey, Republic is looking to acquire a scrapyard to help ensure a stable supply of scrap for its operations.