Can anyone give me hope that metal prices will ever fall. I work for a
company that manufactures a metal part for automobiles and the cost of
our raw material is causing us not to make any money. I am worried
about my job in a few years.
Not too long ago I took a tour of an automotive stamping plant. I asked
about how the cost of steel is affecting their business. They said it isn't
because they don't buy the steel, they only hit the OEMs' steel...
that's a forward thinking company there
also some people are saying that china will not be able to sustain their
currency the way they have and when they finally let go of it they will have
a several hundred percent increase in inflation, read it in one of the trade
might be interesting to see them compete in the world market with out a
There is no end in sight for metal price increases. Nobody knows for sure
the answer to this question.
One thing for sure, if your customer is not willing to allow you to pass on
the fair cost of metal increases this means if the company cannot absorb it
within the profit the company is, eventually the company will go out of
This means conservation of the metal is very important, design the parts
very efficiently to get the maximum yield, get the scrap rate down to the
minimum, if not zero, watch the suppliers closely so that when prices do
fall (there are fluctuations always but the overall trend is up) you are
getting the lowest possible price. Ask your suppliers if there are
alternate steels or other raw materials that will save you money.
Their is a net export of U.S. scrap steel to China and iron ore is not made
in America anymore. It comes from other countries, and China's appetite for
pig iron is so high that the U.S. and other countries have to pay more to
import the pig iron we need because of the competition.
We are in the beginning of a global economy. Nobody knows the long term
effect because we do not know whether the world will keep pumping capital
into China to build their economy. Once people slow down buying of their
exported products, and if they begin to use a lot of their manufacturing
capacity for internal goods, then the rest of the world will have to pay a
lot more for the manufactured products unless somebody invests in
manufacturing in their own country.
Eventually if demand raises, we would tap into the iron ore deposits in
North America. This will require either huge investments in new blast
furnaces which meet all the modern clean air act requirements and the iron
ore will have to be able to be turned into pig iron that is less costly than
what the U.S. could import, i.e. the production cost will have to be lower.
We have the natural resources it's just not now cost effective to do it
That sentence should have read "There is a net export of U.S. scrap steel to
China and pig iron is not made in America anymore." In the following
sentence of my post, which you copied, should clarify this.
It is true US iron ore is being mined, and then exported, to other
However if you can tell me the name of a pig iron producer in America I
would like to know it.
shows recent US iron ore production of about 50 million tons per year.
One word- SURCHARGES! I run a small gray & ductile iron foundry and without
surcharges we would be in dire straights right now. They are a fact of life
in most primary and secondary metal processing operations. However, I know
how the automotive industry acts about any deviations from standard cost.
Your company needs to take a very hard look at your contract with your
customer and get a plan together that takes into account the rising metal
prices that you have very little control over. You don't say where you are
on the food chain as a supplier ( Tier 1, Tier 2...), but I would have to
imagine that the big suppliers, i.e. Bendix, Delco and the like have some
method of indexing rising raw material costs to the part price.
Get your figures together on your standard cost and choose your metrics
wisely on the increasing costs of materials. It is very unlikely that we
will see any major reductions in raw material costs in the future. For
example, my scrap steel price went up $90/ton in July!!! I've never seen
that kind of movement in the market- my people in Chicago & Detroit say that
it wasn't demand driven (meaning China), it was supply side. Right now, from
what I hear, China isn't buying as aggressively as it was in Feb-April, but
they are expected to go back on a buying spree later in the year. The metals
market is a very cut-throat place to be right now, things are very volatile!
I believe you are basically correct in the fact that there are no domestic
pig iron producers at the present time. I do find a reference in Steel News
that Nucor may be trying to start up some type of pig production. I don't
have a subscription, so I can't access the article
Thanks that would be good to know and if there is a domestic producer of pig
iron out there it means I have not uncovered it. I think it's been 10,
perhaps 20 years, since there was domestic pig iron. I think the last
producers were Pickans-Mathers and Hanna Furnace, and possibly one or two of
the (then) major steel producers.
What is harder and more expensive to find is nodular or low Phos pig iron,
to make ductile iron; it would be interesting to see if someone produces
this. We have not used basic pig iron for about two years now by
reformulating our charge makeups, implementing a tight returns
classification system, and trying to conserve by increasing yield and
reducing what gets lost from use like metal being drug out with sand, or
Sometimes it has been amazing how hard it is to find even rail crop or other
dense charge material. I do think that the scrap dealers feel it is still a
seller's market. This was not a new thing since 2004 began, and the tariff
was lifted late in 2003 though it may seem that was the cause. It is supply
and demand at work.
"> Thanks that would be good to know and if there is a domestic producer of
Yes, the supply of nodular pig is VERY tight and very expensive. I'm buying
an RF-1 Sorel from South Africa at the bargain price (or so my supplier
tells me!) of $359/ton. I suppose that isn't too bad, I hear there is a lot
of nodular sold into the $400's.
There are several factors at work for the high costs, many of the Brazilian
furnaces have there entire production dedicated to Chinese buyers, so that
material never enters the market. There is also a major shortage of ocean
We are also working very hard at returns recovery and proper segregation. As
you have done, smart charge reformulation is a key factor in hot metal cost
Infeasible to take say, mild steel scrap, alloy it as necessary and add the
nodularizing components, say at a mini-mill?
Tim (BTW hi Mike)
"I've got more trophies than Wayne Gretsky and the Pope combined!"
- Homer Simpson
Using steel scrap and melting it in an EAF at a mini-mill to produce pig
iron would be very cost prohibitive, although it certainly can be done. To
make pig iron on a cost-effective basis, ya gotta have a blast furnace &
coking ovens. To the best of my knowledge, there hasn't been any new blast
furnaces or coking ovens built in the USA since the '70's. I think we have
been too de-industrialized to produce pig iron competively with the
Brazilians, Russians/Ukrainians or even the South Africans.
So what makes a mini-mill cost-effective? Steel is worth more than iron?
Ok. So what are you paying for? Or is the class of ductile iron you use
Personally, I don't see what's so hard about CI.. if you can melt steel, you
can add some charcoal and ferrosilicon, and maybe a hint of magnesium (or
whatever's used) to spheroidize it. I'm pretty sure people have melted
scrap steel in cupolas and had it come out a quality gray iron.
"I've got more trophies than Wayne Gretsky and the Pope combined!"
- Homer Simpson
Several things. Most mini mills are direct rolling mills. The
"traditional" mills produced their own pig iron from the iron ore and coke,
and either charged their steel melting furnaces with hot metal straight from
the blast furnace or pigged the excess iron because their blast furnaces
needed to run continuously, sometimes 24/7 for perhaps 3 years. When they
had a common grade like 1020 or 1045, etc. it was relatively inexpensive to
take the iron melt from the blast furnace, refine it in an open hearth, or
with BOF or whatever, and pour the entire huge melt into 20+ ton ingots or
refined steel. The ingots would be put in a soaking pit, then when the temp
was equalized the entire ingot was rolled to a common shape. There was
enough demand for the large batches of steel that one heat, once rolled to
final mill shapes, could be sold quickly. When they needed to produce
alloyed grades they used a similar technology and produced smaller heats but
still had to produce single ingots for the rolling mil sections of the mill.
By the 1970's there was enough recyling of steel going around at fairly low
prices that some new companies started up with lower capitalization. Their
idea was to make a mini-mill. They eliminated the blast furnace (economic
source of pig iron from iron ore) and started taking advantage of recycled
materials (cars, railroad rail, or whatever). They also eliminated a step:
Melt the steel, but don't cast into ingots. Instead tap the melt into a
chamber to form a continuous cast ingot that slowly extrudes directly into
the same or similar shape as a 20 ton cast steel ingot, except the length
was as long as they wanted (almost). The liquid steel after being released
from the steel melt and hardened went straight into the rolling section of
the mill. They could now take the steel from liquid to finished product in
a much shorter time. Also the batches were smaller. With this cost
efficient method they were most competitive on alloyed steels first because
they could make smaller batches than the traditional mills and they did not
have to inventory as much. Eventually more and more people built these mini
mills because they were more efficient (man hours per ton of steel produced)
required less money (capitalization) to build.
There was one problem. Nobody wanted to build blast furnaces to make the
pig iron from the iron ore because other countries were able to make pig
iron for less, even counting the cost of transporting the pig iron back to
the U.S. The thing is, though, the pig iron will always contain hogher
carbon and silicon that you want in a steel. So, if you buy pigs and refine
them into steel you have to remove the carbon and silicon. If you buy scrap
steel, the carbon and silicon is already close to where you want it so you
don't have to purchase oxygen to reduce the carbon. So most of the pig iron
being bought was done so by the big tradtional mills and the mini mills kept
buying the recycled steel (this is more or less the scenario). Gradually
though as the price of pig iron rises, and world currencies rise and fall
then if you are buying pig iron at a low rate from one country you can be
surprised by a turn of events where currency rates change.
There's a few other things going on too, for one iron foundries don't have a
way to remove carbon from their melt, like blowing oxygen into it, they have
to build the melt from pig iron and steels, and carbon raisers to aim for a
carbon. They build up to a carbon whereas the steel producers blow down to
a carbon (a little simplified but generally this is the case).
Depends on a lot more things. Generally:
Iron ore is at the bottom of value list. Don't have a clue on the price but
perhaps $50 / ton? Transportation is pretty easy and cheap, huge
freighters, long rail cars, etc.
Pig iron is next tier up (lots of variation here because there are lots of
grades of pig iron). Can range from $250 to $450 per ton and you have to
consider the transportation cost, etc. Usually shipped by ocean lines and
rail cars. If you only buy a little bit, then maybe it's shipped by dump
Plain carbon steels next, perhaps. Simple shape, common grade, purchased in
large quantities then maybe $400 to $600 per ton? Depends on the
productivity of mill, etc.
Mildly alloyed steel, unusual shapes like tubing, or formed shapes, or cold
rolled, etc. maybe $500 to $800 per ton?
High alloy or tool steel - could probably be a very wide range range of
prices, I don't have a good idea here but maybe $600 to $1500 or more per
ton. Often bought in small quantities.
Gray cast iron - depending on the complexity of the casting, and quality
requirments of the buyer, a gray iron casting could sell for $750 to $2400
per ton. The metal portion cost could be $425 to $650 of the price (in the
furnace) then you have to add the inoculants and alloy costs. The rest is
the capital equipment like core machinery, mold machinery, melting furnaces,
heat treat ovens, sand handling equipment, casting cleaning equipment,
blasting machinery, painting machinery, testing equipment and the labor to
do all it plus a small profit.
Ductile iron is similar to gray iron but generally the cost per pound is
more because foundries often use higher quality pig iron, higher quaity
levels of scrap, more expensive magnesium treatment alloys, and there is
usually an additional processing step (adding the magnesium) that requires
another piece of equipment. Add to this that ductile iron requires more
technical know-how (it was only discovered, or invented, by Millis about 60
years ago) and the gating and risering is more complex, to reduce cast
defects, and ductile iron castings cost more than gray iron. I know of some
companies, particularly in Europe, who have specifically prohibited
suppliers from making ductile iron in a cupola. I'm not saying it cannot be
done (I have done it) but it low on the list of preferred melting equipment.
Coreless induction furnaces are generally considered the best for
controlling ductile iron metal.
Okay, I went overboard on the answer above I think that answers SOME of what
you are paying for with an iron casting. There are also classes of ductile
or gray iron and these are divided generally into tensile strength classes.
Again, generally speaking, if you would image that either gray or ductile
iron can be produced in say five tensile levels, the lowest cost grade is
generally either the second lowest or lowest tensile level. That's because
the 3rd, 4th and 5th levels require either a heat treat, alloying, or a
controlled shakeout temperature to acheive the tensile strength. I haven;t
mentioned specific grades because there are so many of them.
Well this all depends on what the function of the part and the design
criticality. I would not get into my car and drive it down the street if I
knew the foundry followed the procedure you described. But, if I had a
backyard foundry and was making some ornamental iron, or perhaps making my
own iron pieces for a Gingery lathe, or perhaps a replacement part for an
old car, etc. I think (in general) you procedure would work. The the steel
could be dropped into the cupola along with additional coke to replace the
combustion, along with limestone, silicon and manganese briquets, etc. and
good quality gray iron could be tapped that might require only a minor
amount of alloy like copper and a ferrosilicon inoculant and a great quality
iron would result. But the coke also contains sulfur, from the coal, and
that base iron would not react well with the magnesium alloy because the
excess sulfur would want to combine with the magnesium and that would cause
quite a mess. At minimum you would have to make a desulfurizing step of the
iron out of the cupola before adding the magnesium plus any alloys and the
inoculant. When you tap a cupola you have to be sure everything's ready to
go because you don't have any time to mess with the iron, it cannot be put
back into the cupola.
And it's not cost-effective to refine to steel overseas?
Ok, makes sense...
Not sufficient to simply weigh out the proper amount of junk, toss a shovel
or briquette or whatever and stir?
From what little I've read, you simply add a minute amount (up to .05%, a
pound per ton) of magnesium and maybe some calcium and it'll solidify with
spherical rather than platelike carbon. Oversimplified of course, depending
on precise levels of everything as well as cooling rate and such.
So slag is more sticky, or is that just a side effect of the customer
demanding higher quality? Are gray iron castings more tolerant of slag or
does the average customer simply not care as much?
I've toured Mike's foundry and yep, he uses two Ajax induction furnaces. :)
He also melts a very specific scrap, as I recall.
Heh heh. Very informative though, thanks.
Yes, I've noticed this too.
There are also irons that have up to 40% nickel in them.. those must be
Eheh, yeah, but that's why the manufacturer does things a bit better than
Okay. So add some more control to it, weigh things out carefully, do
on-the-spot chemical testing (if possible), mechanical properties, etc. As
long as the instruments are certified, it should come out certifiably good
as anything, no?
- Just what kind of a mess? Can't say I've ever heard of magnesium sulfide,
in relation to iron or otherwise, for that matter.
True (hmm, putting iron back in the cupola... that's almost humerous, but
it's again got me thinkin'! :P ). If you do large melts, say in the one ton
range, it'll stay hot on its own for quite some time though. On said tour
of Mike's foundry (oh yeah, where's Errol to jump in with his pictures?),
they'd melt a load, pour into the ladle, stir and skim a bit with a nice
chunky steel bar, then slide the thing over to the molds and crank it into
them (mounted on an overhead crane system of course, with a geared wheel to
tip the ladle). It took a number of minutes to finish as I recall, and it
stayed liquid 'til the end.
"I've got more trophies than Wayne Gretsky and the Pope combined!"
- Homer Simpson
Last time I looked, pig iron and cast iron are the same stuff. In what sense
are they not the same stuff?
Pigs are ingots, cast as the output of big primary furnaces or cupolas.
They're plain, gray iron. Sometimes cast-iron products are poured from
cupolas directly, with no pigs being made in between. In fact, that's the
more efficient method.
In most cases, pigs actually are treated as the intermediate product in
making something else. In the old days, they were the feedstock for a
puddling furnace, which is where they made wrought iron. Today, ingots (if I
understand correctly, most iron ingots aren't in pig form today, but are
rectangular ingots) may be used for the feedstock for making ductile iron,
which is an alloy of cast iron and other metal(s).
In fact, I don't know if any real "pigs" are being made today. Maybe, maybe
not. But the old pigs were just cast iron, cast in a strange-looking ingot