# Up from the Ashes: The Rise of the Steel Minimill in the United States

By Donald F. Barnett; Robert W. Crandall | Go to book overview

APPENDIX B
A Simulation Exercise: Scrap Availability for Electric Furnaces

The supply of scrap depends on a number of variables: steel-making yields from raw steel to finished product, the yield loss in steel fabricating, the return rate of obsolete scrap, and the mix of furnaces. This supply (S) may be represented as:

(1) S = [RiYiYfi + 1 - YiYfi](OH + BOF)
+ [RmYmYfm + 1 - YmYfm] ELEC
+ [RIYfI + (1 - YfI]I,

where Ri, Rm, and RI are the return rates for obsolete scrap from steel products supplied by integrated firms, minimill companies, and imports, respectively; Yfi, Yfm, and YfI are the yields in steel fabricating from integrated, minimill, and imported steel shipments; Yi and Ym are the steel-making yields in integrated and minimill steel works, respectively; OH, BOF, and ELEC are the total quantities of raw steel produced by open hearths, basic oxygen furnaces, and electric furnaces, respectively; and I is steel imports. (Scrap imports are ignored.)

Equation 1 abstracts from reality in two important respects. First, it is essentially a steady-state model in which the recovery rate for obsolete scrap is a constant fraction of current steel consumption. In fact, obsolete scrap is recovered from steel products made over a period of twenty years or more. If steel consumption is constant over time, however, obsolete scrap recovery may be written as a function of current steel consumption. Second, electric furnaces at integrated works are included in the minimill side of the supply equation. This assumes that the yields at minimills and integrated firms in products produced from electric furnaces are the same. While the assumption is dubious, it is not likely to make a major difference in any illustrative calculations.

The demand for scrap is likely to be a rather simple function of steel making at each type of furnace plus export demand. The share of scrap charged into basic oxygen furnaces, open hearths, electric furnaces, and blast furnaces may vary with relative prices, but for purposes of

-126-

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Up from the Ashes: The Rise of the Steel Minimill in the United States

• Title Page iii
• Board of Trustees v
• Foreword vii
• Contents ix
• I- Two Distinct Industries 1
• Summary 16
• II- The Competitive Position of Minimills 18
• Summary 35
• III- The Decline of the Integrated Sector 36
• Summary 55
• IV- Changing Technology and the Minimills 56
• Summary 70
• V- Future Scrap and Electricity Supplies 71
• Summary 94
• VI- Industrial Policy- The Lessons from Steel 96
• Appendix A- Tables 115
• Appendix B- A Simulation Exercise- Scrap Availability for Electric Furnaces 126
• Appendix C- A Model of the U.S. Iron and Steel Scrap Market 129
• Index 133
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