Nucor Will Pay $1.44 Billion for Scrap Supplier

D.J. Joseph will enhance ferrous scrap sourcing, logistics


Nucor Corp. will pay $1.44 billion to buy the holding company that owns David J. Joseph Co., one of North America’s largest-volume traders of steel scrap. The move is the latest among various deals by steelmakers to secure long-term supplies of raw materials for steelmaking. The rising demand for steel in countries like China, India, and Russia has increased the cost and decreased the availability of metallics for steelmaking.

For example, U.S. Steel has outlined plans for a $300-million modernization and restart of an iron pellet operation, and a $1-billion program to modernize and expand its major cokemaking facility.

The problem for electric-furnace steelmakers, like Nucor, is that much of the new production capacity in those countries is also based on scrap supplies — though the collection and brokerage organizations in those places are insufficient to the local demand.

The move is surprising, because as recently as last October, in a conference call, Nucor executives dismissed the possibility of acquiring a scrap processing organization.

In a deal similar to Nucor’s, last fall its rival Steel Dynamics Inc. paid $1 billion to take over another leading metal scrap dealer, OmniSource Corp.

David J. Joseph will become a wholly owned subsidiary of Nucor Corp., and its headquarters will remain in Cincinnati. The company’s management, including president Keith Grass, will remain in place.

Steelmakers like Nucor and SDI rely on steel scrap for the majority of their raw materials. Last year, Nucor was North America’s largest buyer of steel scrap, having bought 22.8 million tons. That total is very close to the 20 million tons of ferrous scrap dealt by D.J. Joseph in 2007.

According to Nucor’s statement, the addition of DJJ to the steelmaker’s existing scrap-processing capabilities will allow the company to process approximately four million tons of ferrous scrap annually. DJJ maintains 12 shredding operations at 35 regional scrap yards.

DJJ also will enhance Nucor’s sourcing and logistics of ferrous scrap, with its 2,000+ railcars dedicated to scrap transport, the largest such fleet in North America.

This acquisition significantly broadens Nucor's overall raw-materials strategy, which includes DRI production in Trinidad, and the HIsmelt development project in Australia, which aims to produce ore fines into liquid iron. Last year, Nucor exited a joint development project that was to produce pig iron at a site in Brazil.

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