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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
 Posted - 03/08/2007 : 20:25:05
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Scrap becoming a precious metal
Recyclers pay pretty penny to fabricator shops
When metal recyclers from as far away as Georgia called to buy scrap material from his tool and die shop, Ron Loos figured that prices were probably headed upward.
"Some of the guys coming in were pushy. They wouldn't take 'no' for an answer," said Loos, owner of Quality Tool & Die Inc., in West Allis.
Loos was right about the higher prices and scarcity of some scrap materials. One recycler recently offered him $10.50 a pound for carbide steel, almost double the price paid not long ago.
"I was pretty floored by that," Loos said. "We used to have someone haul away our scrap for free. Now we get paid pretty good money for it."
Scrap metal is a key ingredient in the manufacturing of new metal products. A global clamor for scrap has resulted, at times, in high prices and extreme actions - such as the theft of a railroad locomotive for its metal content. 
The March "factory bundles index," a scrap steel price indicator from the American Metal Market, rose for the fourth consecutive month to $352 a ton, up $68 from February and up nearly 70% from last November.
"We believe the sharp jump in the index is due to a number of factors," Steel Market Intelligence, a trade bulletin, noted.
"First, demand for scrap has strengthened as domestic steelmakers have brought back some idled production; second, overseas demand continues to be at record levels due to robust construction markets, most notably in the Middle East; third, the supply of bundles was limited in the month due to lowered automobile production; fourth, winter weather has limited scrap flow. Finally, there's been a limited availability of high-quality scrap substitutes such as Brazilian pig iron."
For many metal stampers and metal fabrication shops, the scrap that's left over from their work has become increasingly valuable. Some companies have banded together to sell their scrap as a group, increasing their bargaining power.
"They don't look at it as a windfall. It's a core part of their bottom line," said Bill Gaskin, president of the Precision Metalforming Association, a Cleveland-based trade group with Wisconsin membership.
"If they lose the ability to benefit from scrap sales, it's just one more erosion of the bottom line," Gaskin added.
The basic story is that markets for scrap iron and steel are firm now, and non-ferrous metals, especially copper, are experiencing some price volatility.
The iron market tends to remain flatter longer, said Bob Garino, director of commodities for the Institute of Scrap Recycling Industries, in Washington, D.C.
Price nears cost of new
Some companies have been paid nearly as much for their scrap as they paid for the new material to make products from. RB Royal Industries, for example, has paid about $2.80 a pound for new brass and has sold the leftover scrap pieces for $2.66 per pound.
"There are about nine cents of fabrication costs that we can't retrieve, but it's a pretty efficient system," said John Valek, president and chief operating officer of the Fond du Lac company that makes hose and tube assemblies for a variety of uses.
"If we didn't recapture scrap, it would be a tremendous loss for the company. We treat our scrap with as much care as the virgin raw material," Valek added.
Raw material costs have soared for brass, copper and aluminum.
Two years ago, RB Royal Industries paid about $1 per pound for brass. A few months ago, they paid $3.11 per pound.
Several domestic steel mills have announced price increases starting this month and April. Even as metal fabricators receive more money for their scrap, they're also paying more for raw materials.
"We are always looking for ways to reduce scrap. It's a bad way to try and make money," said Mark Tyler, president of OEM Fabricators Inc., in Woodville.
Competition between metal recyclers has heated up with the value of scrap materials, even though recyclers say their profit margin remains the same regardless of prices.
"Everybody is competing furiously for the big industrial accounts," said Enrico Siewert, owner of Action Metals Co. in Milwaukee.
Prices peaked in November 2004, lost half of their value by June 2005, recovered again, only to spend almost all of 2006 slowly collapsing.
"Then in the middle of last December everything changed for the positive," said Marty Forman, president of Forman Metal Co., a Milwaukee recycler.
"We had a big pop upward for January, another one like it for February, and now March scrap is up again at even a larger advance," Forman said.
Where are prices headed?
"Nobody knows, but a lot of us think we have maybe one more month (of increases) and then we will see a gradual falling market again," Forman said.
The industrial revolution in developing nations has shaken metal markets to the core.
Top U.S. export to China
U.S. waste and scrap, for example, was the top domestic-goods export to China in 2006, valued at nearly $6 billion. It composed 11.5% of our exports to China, according to the U.S. Commerce Department.
Now, when China's economy gets the hiccups, the U.S. might get a heart attack, Forman said.
India, Pakistan, Turkey and Russia also are consuming large amounts of scrap metal to make new products.
"There's really no such thing as a domestic market anymore," Forman said. "It doesn't matter what the commodity is, whether it's trees for lumber and paper, Portland cement for concrete runways at new airports or scrap iron and steel.
All of these items are at the mercy of world supply and demand."
Quote:A global clamor for scrap has resulted, at times, in high prices and extreme actions -
such as the theft of a railroad locomotive for its metal content.
.........I wonder how much nickel and copper is in one of those things anyway. (What did the thief do, hide it under his coat and sneak off with it? )
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Scrap becoming a precious metal
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