Brazilian steel giant Gerdau has acquired Tennessee-based Dale’s Recycling for $60 million. The deal, finalized on November 1, 2024, boosts Gerdau’s North American scrap processing capabilities. This acquisition will provide Gerdau with a more reliable and consistent supply of ferrous scrap for its Electric Arc Furnace (EAF) mill in Jackson, Tennessee. This move is crucial for ensuring Gerdau scrap supply remains steady.
Strategic Move to Counter Economic Challenges and Boost EAF Production
The acquisition aims to secure raw materials for Gerdau’s EAF operations, enhancing the Gerdau scrap supply chain. Dale’s Recycling operates five plants, including an auto shredding facility in Milan, Tennessee, which will directly supply Gerdau’s mill. With rising demand for steel, Gerdau is focusing on reliable scrap sources to mitigate market fluctuations.
Gerdau has faced challenges from factors such as the U.S. election and global economic conditions. Despite a 4.5% drop in shipments during Q3 2024, the company is optimistic. Gerdau plans to continue investing in scrap-based production despite global economic pressures.
Q3 2024 Performance and Market Outlook
In Q3 2024, Gerdau reported a 25.7% decline in adjusted EBITDA for North America, primarily due to weak steel prices and lower demand. Increased competition from imports further compounded these challenges. Still, Gerdau remains focused on stabilizing its operations. The recent acquisition is a key step in mitigating these pressures by securing a steady Gerdau scrap supply.
While Gerdau faced a tough third-quarter performance, it maintains a healthy order backlog and anticipates a better market outlook in the future. As scrap supply stabilizes, Gerdau is confident it can navigate shifting market dynamics and strengthen its position with a robust Gerdau scrap supply chain.
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