4 / Schnitzer Steel Industries, Inc. Form 10-K 2021 Our steel mill produces semi-finished goods (billets) and finished goods, consisting of rebar, coiled rebar, wire rod, merchant bar, and other specialty products, using recycled ferrous metal sourced internally from our recycling and joint venture operations and other raw materials. Semi-finished goods are predominantly used for the manufacturing of finished products. Rebar is produced in either straight length steel bars or coils and used to increase the strength of poured concrete. Coiled rebar is preferred by some manufacturers because it reduces the waste generated by cutting individual lengths to meet customer specifications and, therefore, improves yield. Wire rod is steel rod, delivered in coiled form, used by manufacturers to produce a variety of products such as chain link fencing, nails, wire, stucco netting, and pre-stressed concrete strand. Merchant bar consists of rounds and square steel bars used by manufacturers to produce a wide variety of products, including bolts, threaded bars, and dowel bars. Our steel mill is also an approved supplier of high-quality rebar to support nuclear power plant construction and has a license to produce certain patented high-strength specialty steels. Active Facilities Tabular presentation of our active facilities by geographic region is as follows: Auto Parts Stores Metals Recycling Facilities(1) Total Recycling Facilities Large-Scale Shredders(2) Deepwater Ports Steel Facilities(3) Northwest (WA, OR, MT) 7 8 15 2 2 1 Southwest and Hawaii (CA, NV, UT, HI) 22 7 29 2 2 1 Midwest and South (AR, IL, IN, OH, MO, KS, TX) 13 — 13 — — — Northeast (MA, ME, NH, RI) 2 9 11 1 2 — Southeast and Puerto Rico (GA, AL, TN, FL, VA, KY, MS, PR) 2 24 26 1 1 — Western Canada (BC, AB) 4 4 8 — — — Total 50 52 102 6 7 2 (1) Excludes joint venture facilities. Includes eight metals recycling facilities located in the Southeast which we acquired on October 1, 2021. See “Acquisition of Columbus Recycling” below in this Item 1 for further detail. (2) All large-scale shredding operations employ nonferrous extraction and separation equipment. (3) Includes one steel mill in Oregon and one distribution center in California. Pricing Domestic and foreign prices for recycled ferrous and nonferrous metal are generally based on prevailing market rates, which differ by region, and are subject to market cycles that are influenced by worldwide demand from steel and other metal producers, the availability of materials that can be processed into saleable recycled metal, and regulatory policies, among other factors. Sanctions, trade actions, and licensing and inspection requirements can also impact pricing for the affected products. Recycled ferrous and nonferrous metal sales contracts generally provide for shipment within 30 to 60 days after the price is agreed to which, in most cases, includes freight. We respond to changes in selling prices for processed metal by seeking to adjust purchase prices for unprocessed scrap metal in order to manage the impact on our operating income. The spread between selling prices and the cost of purchased scrap metal (metal spread) is subject to a number of factors, including differences in the market conditions between the domestic regions where scrap metal is acquired and the areas in the world to which the processed metals are sold, market volatility from the time the selling price is agreed upon with the customer until the time the scrap metal is purchased, and changes in transportation costs. We generally benefit from sustained periods of stable or rising recycled metal selling prices, which allow us to better maintain or increase both operating income and unprocessed scrap metal flow into our facilities. When recycled metal selling prices decline, either sharply or for a sustained period, our operating margins typically compress. The sales prices for auto parts from salvaged vehicles are deeply discounted from prevailing national new and refurbished sales prices offered at full-service auto dismantlers, retail auto parts stores, and car dealerships. Our stores provide a list price, available at each location and online. Prices for auto bodies sold to third parties and for major component parts, such as engines, transmissions, and alternators sold to wholesalers, are based on prevailing recycled metal market rates which differ by region and are subject to market cycles. Prices for catalytic converters sold to third-party processors are based on prevailing market rates for the extracted precious metals including platinum, palladium, and rhodium. By consolidating shipments of auto bodies and component parts, we are able to optimize prices by focusing on larger wholesale customers that pay a premium for volume and consistency of shipments.
RkJQdWJsaXNoZXIy NTIzOTM0