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Features - Scrap Metals Report

The global metal industry continues to welcome scrap metal generated by demolition contractors and C&D recyclers.

Brian Taylor January 15, 2013

Contractors in the United States may have a hard time believing it, but around the world more steel, copper and aluminum are being produced than ever before.

An impressive new collection of furnaces, smelters and refineries in Asia have been added to the more established metals production base of America and Europe to create a demand for finished metals—and scrap metal used to produce it—than ever before in history.

In the United States throughout most of 2012, the enduring challenge for scrap processors was finding enough metal to fill orders or requests from buyers.

Although prices paid by scrap dealers to contractors and mixed C&D recyclers in 2013 are likely to move up and down occasionally, as they did in 2012, forecasts are calling for global metals production rates that will result in a healthy scrap market.


New World Order

Judging by steel production rates in the United States and globally, the ferrous scrap market remained one where furnaces were melting enough scrap to keep demand healthy (and prices in the $350-to-$400-per-ton range).

On the demand side of the ferrous scrap equation, steel output has been on a largely upward trajectory since the U.S. economy reached its low point in late 2008 and early 2009.

At the end of 2008 and in early 2009, steelmakers and the scrap processors who serve them both experienced historic drop-offs in business, according to figures maintained by the American Iron and Steel Institute (AISI), Washington, D.C.

AISI figures show that mills in the United States in one week in mid-February 2008 produced 2.1 million tons of steel, for a capability utilization rate of 91.6 percent. Twelve months later, in the week ending Feb. 14, 2009, production was slashed in half, with slightly more than 1 million tons of steel being made. That represented a capability utilization (mill capacity) rate of 45.4 percent.

Throughout the rest of 2009 and into 2010, the weekly output and capacity rate figures climbed back up. By April 2012, output was up to just shy of 2 million tons, and the capacity rate was just shy of 80 percent.

The summer and fall of 2012 saw the introduction of some negative influences, with pre-election uncertainty cited by many analysts and pundits as the reason for a manufacturing slump that affected steel output.

In the week ending Nov. 10, 2012, domestic raw steel production was 1.74 million net tons at a capability utilization rate of 70.7 percent. This was down from the 1.81 million tons produced in the week ending Nov. 10, 2011, when the capability utilization was 73.0 percent.

Also in mid-November, the AISI reported that for the month of September 2012, U.S. steel mills shipped 7.23 million net tons of steel, which was a 13.7 percent decrease from the 8.37 million net tons they had shipped in August 2012. The figure also marked a 9 percent decrease from the 7.95 million net tons shipped in September 2011.

Export markets have continued to soak up their share of scrap in 2012. Turkey, the single largest export destination, produced more than 30 million metric tons of steel in the first 10 months of 2012, according to the WorldSteel Association, Brussels. This was up from 28.1 million metric tons in the same period in 2011, and just 23.8 million metric tons were produced through October of 2010.

Those markets could be strained further if the steel industry in China follows the wishes of some of the country’s central planners for a more “circular economy.” Professor Wang Yangzu of China’s Ministry of Environmental Protection, speaking at the Electronics Recycling Asia conference in Guangzhou, China, in November 2012, said Chinese leaders were concerned that the country’s steelmakers use scrap as only 14 percent of their steelmaking feedstock, while steelmakers in European and North American nations use from 58 percent to 83 percent scrap.

China’s 14 percent rate amounted to 80 million tons of ferrous scrap melted in 2011, according to Wang, who added that China “plans to reach 200 million tons [melted] in the future.”

While some of the demand signs are encouraging, scrap processors reported throughout the year that lackluster construction and demolition work levels continued to hinder scrap flows. Many processors also decried the continued introduction of more shredder capacity in the U.S., saying it hampered their profit margins at a time when scrap generation from sources such as demolition contractors was low.

The competitive shredder market in many parts of the country has resulted in plants running at just 20 percent to 50 percent of the number of hours they may have operated in 2007 or early 2008, according to some sources.


Copper Not Seeing Red
While supply and demand factors caused several $50-per-month price swings in the ferrous scrap market, nonferrous traders continued to ride the roller coaster caused by several metals (but copper in particular) being investment products on the commodities market.

On the London Metal Exchange (LME), copper traded for as much as $8,655 per metric ton ($3.97 per pound) in February of 2012 before falling to its 2012 low of $7,251 per metric ton ($3.32 per pound) in June.

Fundamentally, copper-bearing scrap remains in demand, particularly in China, where annual copper production figures continue to climb.

At the 2012 CMRA (China Nonferrous Metals Industry Association Recycling Metal Branch) Recycling Metal International Forum in Beijing in November, Hank Qiu, a senior consultant with the China branch of the New York-based International Copper Association (ICA), said 22.1 million metric tons of copper were consumed globally in 2011, with nearly 30 percent of that (9.75 million metric tons) consumed in China.

For the past 15 years, both state-owned enterprises and entrepreneurs have been furiously adding copper production capacity—much of it secondary copper production—to keep pace with that consumption.

As China embarks upon its 12th five-year plan for its economy in 2013, more metals production is forecast, with sustainability initiatives such as the “circular economy” and “scientific development” favoring the ongoing use of scrap materials.

Industry analysts and reporters in the financial press, however, are beginning to wonder whether some Chinese building and infrastructure projects are beginning to outpace the actual growth in China’s middle class and urban migration.


Still on the Lookout
Construction and demolition contractors and their worksites remained all too frequent targets for thieves in 2012.

The Institute of Scrap Recycling Industries Inc. (ISRI) continues to cooperate with law enforcement authorities to try to break the cycle of metals theft.

As part of its effort, ISRI operates the Scrap Theft Alert website, www.scraptheftalert.com, which it describes as “a tool for law enforcement that allows you to alert the scrap industry of significant thefts of materials in the United States and Canada. Upon validation and review, alerts [posted] are broadcast by email to all subscribed users within a 100-mile radius of where the incident occurred.”

Those wishing to report a theft can register with the site and file their own reports as well as additional reports in the future (if necessary).

At the 2012 C&D Recycling Forum, held in Long Beach, Calif., in September 2012, demolition contractor Rich Lorenz of Central Environmental Services, Orlando, Fla., provided his views on the metals theft problem.

Lorenz warned attendees that any scrap metal left unprotected might be targeted by thieves. “What we have is an epidemic,” Lorenz said of the commonplace occurrence of scrap metal theft in the past several years. “If you have these metals on your site and they’re visible—that’s an opportunity for thieves.”

Lorenz told attendees that in just the three years from 2009 to 2011, there had been some 31,000 property insurance claims filed in the United States pertaining to metals theft.

His advice to attendees: “Don’t be cheap. We’ve spent $15,000 on [security] cameras, we’ve got more lighting and we’ve got dogs in our yard.” Lorenz also noted that municipalities and contractors in Central Florida no longer mark structures to be demolished with a bright orange spray-painted letter “D.” Remarked Lorenz, “It was like saying to thieves, ‘Come on in—it’s free.’”

As 2012 turned to 2013, continued high metals prices have brought with them good news for contractors when they reach the scrap yard scales—as long as they can fend off the thieves.

 

The author is editorial director of Construction & Demolition Recycling and can be contacted at btaylor@gie.net.


Paper and Plastic

Read about the difficult stretches and other trends experienced by the paper and plastic scrap business in 2012 in an online exclusive sidebar at www.CDRecycler.com/cdr0113-paper-plastic-scrap-2012.aspx.

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