Question-and-Answer Session
Operator
Thank you, sir. (Operator’s instructions) And we’ll take our first question from Brett Levy with Jefferies and Company.
Brett Levy - Jefferies
Hey Greg, how are you?
Craig Shular
Morning Brett, how are you today?
Brett Levy - Jefferies
Not bad, not bad. You guys have sort got an internal estimate as to how much mini mill capacity is going to come off. I mean are you saying 5%, 10%? You know, as you guys kind of look forward, you are in an unique position globally to have a sense as to sort of how much capacity is likely to be rationalized at least temporarily. Any sense as to sort of where that would be?
Craig Shular
Yes, Brett very hard to ID it specifically to the electric arc furnace segment. So let’s speak about total steel and just looking around at the customer announcements, they’ve kind of varied from 5 to 10% on the low-end of the reduction too is high as 30%.
So there has been a lot of variation depending on the customer. There has been a lot of variation depending on the marketplace where they operate. But I would say total steel looks like it’s probably a good 15%, probably plus in announced reductions, globally.
Brett Levy - Jefferies
And it does look value is a little skewed towards the integrated. Is that a fair statement?
Craig Shular
Yes, no I think that’s very fair that it’s probably skewed towards BOF and will probably continue to be skewed that way. Obviously, EAF for steel production enjoys a number of advantages, better cost structure, I think a much smaller carbon footprint and obviously there are a lot variable BOF furnaces around the world, especially in China.
And I think China in particular saw a good advantage of shuttering some of those during the Olympics, when they really tried to address some of the air quality. And so, time will tell but I think one might imagine a scenario where a lot of those old, small BOF furnaces in China just never come back.
So, Brett I think it’s going to be skewed towards BOF; EAF just got the cost advantage. And as I look at the EAF cost advantage and what some of the analysts are saying that advantage may be widening to-date versus BOF.
Brett Levy - Jefferies
Oh yes, no scrap is at $146, I mean that has got to be a huge advantage for a mini mill player. I know that sort of when the music is stopped here, it looked everyone now is refusing deliveries of scrap and sending it back to the producers.
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