Monday, December 7, 2009

Rod Procurement Handling and Transportation

With the common use of continuos casters it has been possible to increase the billet size and hence the rod coil weights. Larger coil weights increases the efficiency at the wire mill because less handling is required.

In order to reduce cost and preserve the integrity of the rod coil most steel mills will today use Hydraulic Compactors and strap the rod coils before shipping.

Hydraulic Compactor

The cost of the wire rod is by far the largest variable cost factor ranging from as much as 90% in products like process wire, to between 85% and 80% for tire cord wire and spooled CO2 welding wire. Even in products with comparatively high degree of added value like fine woven galvanized steel mesh the Rod cost is significant.

Consequently the procurement process is extremely important for success and the terms and ways of delivery to the wire mill therefore varies greatly.

Local steel mills can offer to ship by truck allowing the wire mill to keep a low inventory.

Overseas suppliers that ship in by ocean vessel have to ship as much as 10000 tons per consignment but often warehouse and offer to inventory and ship in smaller quantities.

Wire mills that can commit to major quantities 10,000 - 40,000 tons at a time can use their purchasing power to the reduce price of Rod.

Prior to the introduction of scrap based so called mini mills the integrated steel producers ruled supreme and would maintain large wire drawing facilities themselves such as the Bethlehem Steel Sparrows points Baltimore Maryland plant, at one time the worlds largest wire facility under one roof.

In smaller markets protected from foreign competition companies like Stelco in Canada, Iscor in South Africa and BHP in Australia would set Rod prices and allocate supply and control markets.

This sheltered environment came to an end 20-25 years ago. Technologically through the introduction of the mini mill concept and economically through the lowering of tariffs under GATT (The General Agreement on Tariffs and Trade).

Some progressive Integrated producers spun off their wire mills as independent swim or sink entities, others used the "cut and chop" method to trim off the fat until there was just a few sacks of bone meal left to be disbursed by a receiver.

The first mini mill built in the late 1950th had capacities of no more than 50,000 to 100,000 tons of steel per year and would mainly produce low carbon grade steel for re-bar.

The mini mill of today have a capacity of 1 million tons or more and produces the most sophisticated grades such as stainless, highspeed tool steel as well as low/medium and high alloys.

Still because of the relatively small output capacity compared with the major fully integrated steel mills (that today range in size from a modest 2.5 million tons - to some colossal sized plants like the gigantic Bao Shan complex outside Shanghai with a combined crude steel output of 7.5 million tons in 1999) the main feature of the mini mill is its location in close proximity to the end user.

The mini-mills depend on an abundant and inexpensive source of steel scrap and low electric energy cost on the one hand but benefit from the investment saving of eliminating the need of blast furnaces and coke-ovens.

Today's mini-mills are built with continuos casters and uses multi-stand rolling mills that roll from billet to finish rod and are followed by a controlled cooling bed.

See pictures.

Price is not the only procurement criteria.

Without getting into the argument of whether the integrated producer is able to produce a superior wire rod because he can control the melt charge to a closer specification than a mini-mill producer, that depend on the amount of residual alloy elements in the scrap that feeds his electric arc furnace, I think it is safe to say that for most end uses, the mini-mill easily meets the requirements of the end users specification.

Mode of transportation form the steel mill to the wire mill can play a role in selecting your supplier.

Shipment by vessel or barge see picture versus rail or truck could have an impact on the ease by which the rod coil can be paid off when processed.

Proper rod storage prior to processing is another factor that requires attention.

See picture.
It is easy to see who is a winner


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