NATION Prices for scrap metal skyrocket

With high scrap prices, people are making money by taking junk from curbs.
MILWAUKEE JOURNAL SENTINEL
MILWAUKEE -- At a scrap yard on Milwaukee's south side, a young man known as a "metal peddler" unloaded a faded green Oldsmobile filled with so much junk that its rusted bumper nearly dragged on the ground.
Out of the car's rear doors he tossed broken lamps, kitchen pots and pans, a bicycle frame and a wrought-iron aquarium stand.
The heavy lifting came from the car's trunk, which was crammed with old engine radiators, a lawn mower and chunks of industrial iron plates and pipe.
The peddler would not give his name but said he cruised alleys and abandoned factory sites looking for bounty that could bring him several hundred dollars a load at metal recycling centers.
Given current scrap metal prices, his timing couldn't be better. The average price of scrap iron, for example, has soared from about $70 a ton in January 2002 to about $160 at the end of 2003.
The price of nickel, used in making stainless steel, recently reached a 14-year high of nearly $7 per pound. Prices of copper, lead, aluminum and other scrap metals also have hit multiyear highs in recent weeks.
The price paid for wrecked cars has jumped from about $10 per ton, in early 2002, to $50 at Alliance Iron & amp; Metal in Milwaukee. Stainless steel scrap that sold for 10 cents a pound two years ago now sells for 30 cents.
Busy place
On a recent Monday, 288 metal peddlers unloaded their cars, trucks, shopping carts and bicycle baskets at Alliance -- setting a new daily record at the company, which shares its scrap yard with Mill Valley Recycling.
Much of the bounty was composed of ordinary household items plucked from street curbs before they would have been hauled off by municipal garbage trucks. Some of the items came from vacant lots and alleys where junk tends to accumulate.
"The alleys are cleaner than they've been in a long time," said Ron Kloeden Jr., Alliance Iron & amp; Metal president.
"Tragically, it's leading to a certain amount of theft too," he said. "If it isn't nailed down, it's getting stolen."
A worldwide shortage of scrap metal is behind some of the price increases. China has bought huge amounts of U.S. scrap, putting pressure on what domestic steel mills have to pay for the same material.
"China looms very large in this equation, especially in nickel," said Robert Garino, a metals market analyst with the Institute of Scrap Recycling Industries in Washington, D.C.
Steel mills in South Korea, Turkey, India and Italy have shown voracious appetites for North American scrap metal at the same time that business has picked up at U.S. mills.
U.S. manufacturing down
Shortages have been compounded by a shrinking U.S. manufacturing base that hasn't produced as many metal goods or as much scrap.
"There isn't as much new scrap being generated," Garino said. "So the high prices are a combination of some supply reductions coupled with some extraordinary new demand."
The loss of U.S. manufacturing companies, which once supplied the scrap metal industry with prime material, is disturbing on many fronts, said Marty Forman, president of Forman Metal Co., a Milwaukee scrap metal recycler.
"Good, high-paying jobs are going overseas right along with the scrap metal," he said. "I know full well that more of my industrial customers are going down."
Household castoffs
Among consumers, more people have found at least a small cash value in old appliances such as washing machines and stoves. They've scoured their homes and garages for old cast-iron bathtubs, kitchen sinks, brass lamps, doors, window frames, furnaces, motorcycles and aluminum fishing boats.
Copper products are valuable, including old rain gutters, pipe and wire, said Art Arnstein, president of United Recycling LLC in Milwaukee.
"There aren't a lot of these items headed to the landfill now," he said.
Scrap prices have surged for about six months, but the trend might not continue much longer as scrap supplies creep up and start to match demand.
"Those of us who have been around long enough to see the business cycles aren't fooled into a false sense of euphoria," Forman said. "These high prices are never sustainable."
Scrap steel prices soared in the early 1970s and then crashed within six months of peaking in 1974, said Charles Bradford, a steel industry analyst with Bradford Research Inc. in New York.
Predicts decline in spring
Bradford predicts a decline in scrap metal prices this spring. There were some unusual events that added to metal shortages in 2003, he said, including the freezing of rivers in Europe that slowed shipping.
Russia placed a 30 percent tax on scrap exports, so metal that normally would have come from Russia didn't make it into the global marketplace in 2003.
There were other things that compounded shortages at the same time as the demand for metal in countries such as China and Turkey increased dramatically.
"The amount of material that China is importing right now is so huge, it has driven up ocean freight rates all over the world," Bradford said.
Economists often use scrap metal prices as a tool to forecast changes in manufacturing. When prices come out of a slump, it can signal the rejuvenation of the general economy four or five months later.
"Prices move real quick when there is a slight increase in demand," Bradford said.