A boom year: metals prices have stayed aloft throughout 2004, benefitting demo contractors and other generators.

Steel mills, iron foundries and the scrap brokers who supply them have been, at times in 2004, paying between $200 and $300 per ton for scrap steel and iron.

Prices in that range are three or more times higher than what these same companies were paying during most of 1998 through 2002.

Among the beneficiaries of the recent price boom have been demolition contractors, job site clean-up companies and mixed C&D recyclers who pull metal from their mixed stream.

IRON IN THE FIRE

Steelmakers and other consumers of iron and steel scrap have been running their furnaces full-time in 2004, helping fuel demand and pricing for steel scrap.

With the market often reaching new peaks in 2004, a dizzying variety of factors are combining to make for a speculation-filled winter for those in the ferrous scrap market.

A market of historically high scrap prices has steelmakers scrambling to figure out how to best maintain their margins. Some steelmakers have responded to higher summer scrap prices by aggressively seeking lower-cost grades, trying to play the spot market in their favor.

Mill buyers in the northern United States and Canada are faced with the additional task of preparing to build stockpiles to get them through the winter, while mills in the southern United States may soon tap into storm clean-up debris resulting from the hurricane season.

The dictum that the economy will grow in an election year has appeared to hold true, with domestic mills joining overseas mills in running at healthy capacity rates.

The Chinese government has taken steps to slow down its economic growth and has also caused scrap exporters to maneuver through a new customs registration process, but Chinese mills are nonetheless producing significant amounts of steel.

An overriding concern for ferrous scrap recyclers and consumers is making sure there is enough scrap to go around. Earlier this summer, some recyclers were already noting that stockpiles of auto hulks had been whittled down to ground level.

Demolition scrap has been key to keeping the supply pipeline open, and at least one steelmaker took measures to tap into its own cut grades resource. In Cleveland, B&B Wrecking has been dismantling several buildings owned by ISG and has been keeping the resulting iron and steel scrap right on site. The company has been feeding the structural scrap directly to its nearby furnaces.

Although such a one-time act of cannibalism may not be a trend, there are observers who see it as symbolic of steel mill efforts to take steps to ensure they have access to scrap in a hyper-competitive market.

COPPER PAYOFF

Contractors and recyclers who take in copper wiring and piping and brass fixtures have been enjoying scale prices in 2004, and may continue to do so in 2005.

Strong demand from East and South Asia and a low ceiling on new supply sources should keep copper pricing above $1.00 per pound throughout much of next year. That was the opinion of analysts willing to make a forecast at the Copper Roundtable session of the Institute of Scrap Recycling Industries Inc. (ISRI) Commodity Forum, held in Chicago in late September.

Several speakers noted the historic connection between supply deficits and copper pricing, including analyst Thorn as Boustead of Refco LLC, New York. Predicting a supply deficit of more than 500,000 metric tons this year and another 250,000 metric tons next year, Boustead says this situation is causing consumers to work their way through inventories built up earlier this decade.

"Deficits don't always have to imply high prices," Boustead said, adding that, "These markets are forward looking," and that the demand side of the equation has to be examined.

The biggest factor on the demand side is China, where even a slowdown in economic growth will not change the fact that the country has become a major consumer of copper scrap and finished copper.

Oil prices that remain above $45 per barrel could ultimately slow down many of the world's economies, and in North America slower vehicle sales could affect copper consumption levels.

These are variables that could keep copper at the lower end of a $1.10 to $1.45 price range for copper that Boustead sees for the first quarter of 2005.

Bruce Blue of Freedom Metals, Louisville, Ky., said that the higher pricing is bringing more copper-based scrap into his nonferrous scrap processing facility. "The volumes have just skyrocketed," he commented. "There's nothing to it but the price. When the price goes high enough, everybody unloads. Copper is easy to purchase and easy to sell right now," he said, adding that number one copper is moving quickly to domestic consumers and that "exporters are calling again" for number two copper.

MOST METALS ARE WANTED

In addition to iron and copper being in demand, aluminum siding and sheet and any form of stainless scrap are also being welcomed by scrap dealers and brokers.

In North America, Hydro Aluminum NA is one of several aluminum makers competing for scrap. The company has been focusing research and technology efforts on ways to use forms of aluminum scrap, such as demolition scrap, in higher-end finished aluminum products it makes. "Our challenge as an industry is to dig deeper into the scrap supply and use it effectively," the company's Lynn Brown told attendees of the ISRI Commodity Forum.

When industrial production slumped in the United States in 2001 and 2002, aluminum scrap consumers began counting on auto shredder scrap and demolition scrap as two sources to replace the lack of plant stampings and trimmings.

Parks Dodd, an aluminum industry analyst with Aluminomics LLC, Atlanta, told Commodity Forum attendees that, globally, there was a supply deficit of aluminum in the second quarter of 2004, and that such a situation may continue through the second quarter of 2005.

This deficit could include a significant "scrap gap" during this period, with China experiencing such a gap through 2008, Dodd said. Laws of supply and demand should dictate a rise in aluminum scrap prices during this period, but Dodd also noted that previous gaps have been covered by the emergence of scrap from Eastern Europe or a ramp-up of primary aluminum production.

Demand from China and reviving U.S. and Japanese economies should keep the demand strong for stainless steel scrap, and thus keep scale prices at a healthy level.

John Vorberger, sales and marketing manager of special products with Eramet North America, Coraopolis, Pa., says tighter credit rules in China are slowing down that nation's metal production growth from the double-digit rates of 2002 and 2003, but added that the nation has now joined the family of the world's major consumers of nickel and nickel-bearing scrap.

The situation with stainless steel is similar to many other scrap metal markets. For now, it's a sellers market, and demolition contractors and C&D recyclers who have metal to sell will hopefully continue to benefit from market conditions that keep the scale prices at scrap yards a little higher than normal.

A DEMOLITION-T0-SCRAP LINK

When demolition contractors have an abundance of scrap metal to sell, it's always helpful to get top dollar. In some cases, the Investment Recovery Association, Kansas City, Mo., may be able to provide some helpful connections.

Barry Stein of Ansam Metals Corp., Baltimore, says his company has been an associate member of the organization for more than a decade and has found the relationship to be beneficial. "We get a good deal of our scrap from association members," says Stein, noting that Investment Recovery Association members can include manufacturing firms and utility providers who occasionally must shut down obsolete plants.

Ansam Metals specializes in dismantling large, complicated, obsolete equipment for its scrap value, but Stein says other scrap firms can also benefit from linking up with the association.

Ansam has been able to gain the trust of association members through its years of providing knowledge and sub-contractor assistance to member companies with a dismantling and sell-off project on their hands. "The companies don't necessarily have the best scrap knowledge, and they have many other concerns--such as environmental compliance and used equipment sales--at the same time they are trying to learn about scrap," says Stein. "We'll help them get a handle on the best ways to sell scrap material and how to get the best value for it."

Although Ansam enjoys being among the few scrap dealer companies involved with the Investment Recovery Association, Stein says there is "absolutely" room for other scrap companies to get involved. "They can benefit from contacting the Investment Recovery Association and its executive members and staying in touch to find out about any local scrap generating sources opportunities stemming from association member company activities," he notes.

In fact, Stein says his company would be pleased to work in cooperation with regional scrap companies that may also be plugged in to investment recovery projects in their operating areas. "We would rather work with a scrap dealer in other regions and have a processing partner," he notes, "It's not a secret."

Stein says the relationship can be a positive one from all sides. "The association has been a very good place for us to meet people and find sources of scrap from all over the country. For a local scrap company, it might be a way to get to know more people in their area who might have an organized method of selling material, and they can get involved in that process. And for the manufacturers and utility companies, scrap dealers can help them simplify the selling of scrap."

More information on the Investment Recovery Association can be found on the Web at www.invrecovery.org.

The author is editor of C&DR and can be contacted at [e-mail].