RECYCLING IS A KEY GLOBAL STRATEGY IN THE PRESERVATION AND PROTECTION OF NATURAL RESOURCES AND THE ENVIRONMENT THAT PROVIDES EFFICIENT AND EFFECTIVE RAW MATERIALS. WITH MORE THAN EIGHT DECADES EXPERIENCE IN RECYCLING, COMMERCIAL METALS COMPANY REMAINS A LEADER IN THE FIELD.
Secondary Metals Processing Division - Our string of four good years came to an end this year, mainly due to the Asian economic crisis. The underlying problem is the inherent weakness in Japan and its Asian neighbors. West Coast ferrous scrap that historically makes its way into the Asian markets is now regularly being sold to steel mills in the Southwest at distressed prices. Northeast ferrous scrap, which usually went to Europe, the Near East and India, is now being sold to the steel mills in the Southeast and Midwest. Mexico is feeling some of the effects from Asia as well and hasn't been buying the usual tonnage from the Texas scrap processors. Nonferrous scrap markets have been selling at prices equivalent to twelve year lows depending upon the commodity.
During this lackluster period, we have continued to upgrade and expand our plants through major projects that will strengthen our regional position. We installed a 4,000 H.P. automobile shredder in Jacksonville, Florida. In addition to shredding crushed auto bodies, this shredder will also upgrade light gauge feed material that was previously sold as a lower grade of ferrous scrap. During this period we also acquired three auto salvage operations in Florida. The plants are located in Gainesville, Ocala and Leesburg.
These three sites also supply crushed autos to the Jacksonville shredder while serving the auto repair market throughout central Florida. In Texas, we installed a large guillotine shear in Odessa. This one piece of equipment replaced two stationary shears of smaller dimensions and two shear-mounted cranes. In addition, our expansion included the acquisition of the assets of a company headquartered in Joplin, Missouri, with scrap processing locations in Miami, Oklahoma; Independence, Kansas; Pittsburg, Kansas as well as Joplin.
Given its growth, the Division has been restructured into five regions with regional managers responsible for specific territories. In the past each branch functioned as a profit center. Under the new concept, each region acts as one profit center. We believe the benefits from this structure will be numerous. We will now have the ability to utilize our processing equipment more efficiently. Each regional manager also has the autonomy to move products to the best processing point. The trucking fleet previously assigned to each plant, can now be utilized more effectively by each region. We also named a regional marketing manager in each territory. This will permit standardized scrap buying practices while serving our customers expeditiously. Each region also expects to benefit from our specialized functions, such as maintenance, safety, and environmental. Rather than duplicate these disciplines at each location, one manager for each function will have the ability to service multiple locations.
The domestic electric arc furnaces continue to operate at high levels, but have been affected by imported steel. This new fiscal year will start out strong for most mills, but continued weakness abroad might spread the impact being observed in the scrap sector to the mills. We are in a defensive mode, cutting back on expenses, lowering our buying prices and postponing acquisitions. We are also rationalizing equipment that is not fully utilized. With these defensive measures we are hopeful that we will return to profitability during the first half of next fiscal year.
