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Old 08-09-2009, 04:02 AM   #12 (permalink)
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Originally Posted by blownb310 View Post
Interesting, I noticed that last summer. Why do you suppose the price of gas is related to scrap prices?
Virgin steel needs a lot of energy to make, mostly from coal, and coal prices tend to follow oil prices to a greater or lesser extent depending on how far the coal needs to be transported and how much diesel is used.

Specifically, each ton of virgin steel requires about 10000kWh of energy, mostly coal, and recycled steel requires about a quarter of that (2500kWh). For every mile the coal needed for a ton of virgin steel has to travel, it needs about 18kWh of diesel fuel. With large container ships at about 1000+ ton miles per gallon, for every mile a ton of scrap steel has to travel, it needs .042 kWh. So, even with a 6000+ mile trip from the west coast to China, a ton of scrap steel only needs about 240kWh of diesel.

Since virgin steel needs four times more energy than scrap steel, for every mile it needs about 13kWh more energy than scrap does, so even if the coal only has to travel about 15-20 miles to get to the virgin steel making facility, it needs more diesel, and therefore more money, than it takes to send one ton of scrap 6000 miles across the pacific. Granted, I'm glossing over a lot here, since the scrap steel needs to be transported to the American coast and from the Chinese coast inland, and every stage in the handling process incurs additional costs, and diesel prices are just one part of coal prices, but the coal still has to be really close to the steel mills for virgin to cost less than recycled steel because virgin steel is a lot more energy intensive.

edited for error

Last edited by roflwaffle; 08-09-2009 at 04:15 PM..
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