Schnitzer Steel Industries, Inc. (SCHN)

Cuchulainn1 (< 20) Submitted: 5/23/08 10:27 AM : Start Price: $79.95 SCHN Score: -42.64

I believe that we are seeing a perfect storm for steel recyclers in the making. High commodity prices and high energy prices means greater demand for those who can recycle steel since it requires only a fraction of the energy to produce.


More importantly, a lot of the new steel mills in Asia use electric arc furnaces. The advantage for the Asian steel mills is that the electric arc furnaces use a fraction of the energy (which is increasingly expensive) compared to smelting. This is important because all these new furnaces require scrap steel... a lot of scrap steel.


What this means is that the rise in recycled steel commodities is not SPECULATIVE. The demand is very real and is consumer driven. Those who sell recycled steel to buyers in the Asian market stand to make tremendous amounts of money. Like other steel companies, a weak dollar benefits the scrap companies.

Four companies that come to mind to play recycled steel are:

1. Large Cap: Nucor (NUE) 94% of caps all-stars think NUE will outperform.

2. Mid Cap: Sims Metal Management (SMS): With their recent merger SMS has passed Nucor as the worlds largest metal recycler in the world (16 million tons, 220 locations on 4 continents) 100% of caps all-stars think SMS will outperform.

3. Small Cap: Schnitzer Steell (SCHN): A Cramer favorite.

4. Micro Cap: Metalico (MEA) A perennial takeover target. 98% of caps all-stars think MEA will outperform.

3. Sims Metal Management (SMS) midcap. With the recent merger SMS has passed Nucor as the worlds largest recycler of metal in the world (16 million tons, 220 locations on 4 continents) 100% of caps all-stars think SMS will out perform.

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