KELLY KEARSLEY; The News Tribune
Published: October 7th, 2007 01:00 AM

World market raises value of copper, aluminum, more

Joseph Simon & Sons’ 12-acre yard on the Tacoma Tideflats is filled with mountains of what some may call junk.

There are bales of crushed aluminum cans and cardboard boxes loaded with used bullet casings. There are mounds of wheels and extension cords, boxes of old faucets, stacks of aluminum siding.

But in the booming scrap metal business, even the smallest bit of metal – from aluminum shavings to copper sprinkles – has value.

Global demand for metal has kept the prices of scrap aluminum, copper, nickel, steel and other metals increasing for the past five years.

The recycling of discarded metal items is now a $65 billion industry with players including billion-dollar corporations down to one-man, junk-peddling operations. Exports of scrap metal total billions of dollars each year, providing the raw materials that fuel manufacturing in foreign countries.

“It’s no longer the ‘junk’ business,” said Marc Simon, Joseph Simon & Sons senior account manager.

A GLOBAL BUSINESS

Joseph Simon started his scrap metal recycling company in the 1920s, near where the Tacoma Dome bus station is now. He had one truck, and most of the people he bought and sold metal from were in the Puget Sound area.

“He never knew about China or international markets,” said Phil Simon, Joseph’s son and the company’s president. “He would have thought we were out of our minds.”

Things have changed.

International sales are a large part of the scrap metal industry. Joseph Simon & Sons has been exporting for decades, and overseas sales account for 90 percent of the company’s estimated $200 million revenue. Schnizter Steel and Calbag Metals, two other large scrap recyclers, also export metal out of Tacoma.

On a recent afternoon, Simon & Sons workers loaded a shipping container full of electrical cords. The product was headed overseas, likely to China, where manufacturers will strip the plastic casings and reuse the copper inside.

Marc Simon gets to work at 5:30 a.m. to check prices on the world markets and see if the company received offers overnight. His father and his uncle arrive shortly after, so they can make calls to customers in places such as China, India and Japan.

The United States exported $15.7 billion worth of scrap metal last year. Washington state accounted for more than $200 million, according to the state Community, Trade and Economic Development Department.

The country’s export of scrap metal has surged in recent years, right along with metal prices, said John Mothersole, a nonferrous metals analyst with Global Insight, an economic forecasting firm.

The price of scrap metal is derived from the price of the base metals, such as copper and aluminum, which have been on an upward run since about 2003.

Most of the demand is coming from China.

“It reflects the strength of investment spending there, particularly in basic infrastructure: the metals used to build the ports and roads needed to put out the goods we then buy,” Mothersole said.

According to figures from the Institute of Scrap Recycling Industries, the price of copper averaged about 81 cents per pound in 2003, compared to $3.45 per pound last month. Aluminum was at 65 cents per pound in 2003, and now the price is closer to $1.13 per pound. Iron and steel were selling at $120.56 per gross ton then, compared to $256.50 per ton last month. The consistently strong market is a new frontier for those in the scrap industry, whose veterans are used to volatile cycles with fast rises in prices and corresponding steep drops.

ABOVE GROUND MINING

Large scrap metal recyclers get their material from a few places: smaller recyclers, industrial manufacturers and junk peddlers.

In one section of the Joseph Simon & Sons facility, there are dryer-sized boxes of curlicue aluminium scrap – leftovers from a local aerospace contractor. Large chunks of titanium molds – also remnants of an aerospace manufacturer – sit on a pallet in another part of the yard.

And there are sources like Bobby White.

The Lakewood man calls himself a traditional recycler. He’s been visiting Joseph Simon & Sons almost daily since 1968. He mines the world of used metal goods, picking up junk from people’s homes and the occasional thrift store and selling them to the scrap yards.

On a recent, misty Tuesday afternoon, White and his partner unloaded their wares from his truck: old lamp parts, metal tables, crutches, even a toy-sized, metal shopping cart.

“I just pick up stuff for free if people want to get rid of it,” White said. “I do aluminum, copper – everything but refrigerators.”

White said the past few years have been good for business.

The high prices have paid off for legitimate junk peddlers but have contributed to an increase in copper and metal theft. In the South Sound, thieves have stolen wiring from local parks, sports fields and construction sites, and even pilfered a copper gong from a Federal Way yoga studio. The rash of crime led 20 states, including Washington, to pass laws this year aimed at cracking down on shady scrap-metal sales, according to stateline.org.

Bona fide recyclers are doing their part, the Simons said. The Tacoma company checks the IDs of people who sell them metal and sends checks to people who earn more than $30 from their scrap. Tacoma scrap recyclers have said they won’t take items that seem suspicious or stolen.

Buying and selling scrap metal is as fast-paced as trading shares on the stock market.

Inside the Simon & Sons office, computer monitors at staff desks track changing metal prices on the London Metal Exchange and COMEX.

Outside, whirring conveyor belts move and cut wire into bits. Welders dismantle large chunks of metal machinery. Forklifts haul bales of metal roofing and bricks of crushed aluminum cans.

Peddlers such as White bring in small truckloads of goods, while semis line up to pick up outgoing containers.

The company moves 36,000 tons of nonferrous scrap metal, including aluminum and copper, each year and about 48,000 tons of scrap steel and iron. In addition, Simon & Sons also brokers 30,000 tons of metal material annually, buying and selling the goods but never bringing them to Tacoma.

A NEW WORLD, A SOLID FUTURE

The metals market is now at a turning point, and the dramatic growth in prices is likely to slow, said analyst Mothersole.

Usually a collapse in demand puts an end to price runs, he said. This time that doesn’t seem to be the case.

Instead, he’s forecasting more of a price correction in some metals, including copper, and slower growth – but growth nonetheless – overall.

Even if some prices dip, he noted, the increases of the past couple years have created a higher plateau for the market.

In Tacoma, scrap recyclers say the overseas sales have stabilized their industry.

The companies have their eyes on emerging markets – and their finger on the pulse of the world’s economy.

In one conversation, the Simon brothers talked of growing demand in Vietnam and Malaysia, their Indian customer that imports metals from Tacoma for castings only to send them to Seattle to be distributed, and the Iranian president’s speech at Columbia University.

For now, Phil Simon has his eye on the weakening dollar, something that bodes well for his industry, as overseas customers can pay more for scrap metal, but not so much for Americans, who rely heavily on imported goods.

“The outlook for scrap is very good,” he said. “The long-term is good because we are in a global economy and people can afford to buy scrap.”

http://www.thenewstribune.com/business/story/173275.html

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