With steel demand increasing, metal businesses are paying more for scraps

David Galloway dumps a hot water heater from the bed of his truck at PSC Metals on Central Street in North Knoxville. Nationally, some
scrap metal operations are reporting that scrap is getting scarce because people are keeping old appliances longer.

Photo by J. Miles Cary

David Galloway dumps a hot water heater from the bed of his truck at PSC Metals on Central Street in North Knoxville. Nationally, some scrap metal operations are reporting that scrap is getting scarce because people are keeping old appliances longer.

n 2009: 5,313,558 tons

n 2008: 8,319,854 tons

n Annual production capacity: 12 million tons from 18 mills

Source: Gerdau Ameristeel

n 5 million metric tons of shredded steel scrap

n 3.3 million metric tons of No. 1 heavy melting steel

n 1.8 million metric tons of alloyed nonstainless steel

n 1.1 million metric tons of cast iron

n For cars: 102 percent

n For appliances: 90 percent

n For cans: 63 percent

n For plates and beams: 98 percent

n For rebar and other construction

materials: 63 percent


Since the U.S. recession hit in 2007, Luke Bryant has noticed something different about the refrigerators, washing machines, stoves and other appliances brought to PSC Metals Inc. for scrap.

They appear to be in really bad shape. You would expect something sold for scrap to be well worn, but Bryant, who is assistant general manager for PSC, said it seems that people are hanging onto old appliances until the bitter end rather than buying a new product sooner.

"We are seeing stuff that is about beyond repair and people are having to get rid of it," he said.

Nationally, there is a trend of people keeping appliances, cars and other possessions and repairing rather than replacing them. A Wall Street Journal report last month detailed how the trend is prompting a shortage of iron and steel scrap that has driven prices for those commodities up 70 percent in a year.

The effects in Knoxville seem to be uneven.

Fetching a premium

Bryant said his business actually has increased over the year as people seem to be bringing in more scrap for extra bucks during the recession. But for other companies such as Tennessee Metals LLC, scrap metal is getting harder to come by as people seem to be holding onto old appliances longer.

"On our ferrous metal side, we were doing over 200 tickets (customer transactions) a day in 2007, and we are under 100 tickets a day now," said David Davis, one of Tennessee Metals' owners.

By contrast, Bryant said the PSC Metals operation on Central Street has been getting about 275 pickup truck loads of scrap per day compared with about 125 loads a day in 2008. However, the scrap yield is not as high as it would seem because of appliances made with more plastic and less metal in them.

But one thing in common for both businesses is that metal prices have risen. For their customers, this is a good thing.

Bryant said PSC typically is paying customers 10 to 15 cents more per pound for nonferrous scrap such as aluminum and copper. Ferrous metal prices have risen even higher. On items like scrapped cars and appliances, PSC has gone from paying $1.50 to $2 per each 100 pounds before the recession to $5.50 to $6 per 100 pounds in 2009 and $8.50 to $9.50 per 100 pounds currently.

Davis declined to discuss prices but said Tennessee Metals is paying customers about 30 percent more on average. The company has locations at 305 W. Quincy Ave. in North Knoxville and 2630 Pickel Lane in Forks of the River Industrial Park in East Knox County. PSC has North Knoxville locations at 822 Richards Street and 2826 N. Central Street and in South Knoxville at 1202 Maryville Pike.

Davis said the driving force is increasing demand from steel mills as they begin to step up production to meet the demands of a recovering economy.

A March 25 article on Steelworks, the online publication of the American Iron and Steel Institute, reported that American steel companies were seeing a modest increase in business as the economy improves. James Wainscott, CEO and president of AK Steel and AISI chairman, was reported to have told U.S. legislators during a congressional caucus that the country's steel industry, which was operating at 40 percent capacity a year ago, is averaging 67 percent capacity now.

"At any other time in history, operating at 67 percent of capacity would not be cause for celebration," Wainscott was quoted saying. "But, in 2010, it is a positive sign that The Great Recession has begun to loosen its grip ever so slightly."

The American Iron and Steel Institute reported that in December, U.S. steel mills shipped 5.4 million tons of steel - an 11.3 percent increase from November and a 30.8 percent increase from the 4.6 million tons shipped in December 2008. The Institute reported that January shipments totaled 6.6 million tons - a 9 percent increase over the December figures.

With steel demand increasing, steel companies are paying higher prices for scrap and scrap companies are paying more for the scrap sold to them by the public. In Knoxville, the prime customer for both PSC Metals and Tennessee Metals is Gerdau Ameristeel, an international steelmaker that operates a mill in North Knoxville's Lonsdale community.

Phillip Bell, corporate spokesman for Brazil-based Gerdau Ameristeel, said the company does not discuss pricing or availability of its scrap sources, but noted that the Lonsdale operation receives raw materials from local sources and from across North America. Bryant and Davis say their companies essentially pass along the price increases or decreases from the mill to their scrap customers.

Travis Hembree, left, helps his brother, Marvin Hembree, unload scrap metal from their
family’s automotive repair business in Clinton.

Photo by J. Miles Cary // Buy this photo

Travis Hembree, left, helps his brother, Marvin Hembree, unload scrap metal from their family’s automotive repair business in Clinton.

Demand and supply

A number of factors are affecting the availability and price of scrap metal in Knoxville, Davis said. Besides people reacting to the recession, all the companies that have slowed production or shut down this year mean less scrap from industrial sources.

As the economy slowed, steel mills decreased production, started relying on stores of scrap they had on hand and reduced buying from scrap dealers, Davis said. The price of scrap plummeted and scrap dealers eventually allowed their stocks to dwindle.

"As the recession ends and steel mills start shifting their operating rates back to high, because the price for scrap metal has been depressed for so long, scrap dealers don't have the supplies on hand to meet demand and this forces them to scramble to buy scrap," he said.

Eventually, the higher prices will bring more scrap back in and prices will stabilize, Davis said. It's a process that is volatile even in normal times, he said. Just the standard ebb and flow of the automobile industry can throw conditions off.

"Steel mills will run like gangbusters for six months, then the car people will take two weeks off to retool. That doesn't sound like a big deal, but for those two weeks they are not using thousands of tons of steel," Davis said.

n In 2007, the U.S. ferrous scrap industry was valued at $21.6 billion.

n If the ferrous scrap recycled in the U.S. were put into rail cars, the train would stretch 11,349 miles - nearly halfway around the world.

n On average, the U.S. processes enough ferrous scrap daily to build five Eiffel Towers every day of the year.

n In 2007, the U.S. scrap industry recycled more than 81.6 million metric tons of ferrous metal.

n Steel produced by predominantly scrapfed electric arc furnaces account for about 59 percent of the total raw steel produced in the U.S. - nearly 58 million metric tons.

n The U.S. is the largest exporter of ferrous scrap in the world. In 2007, 15.6 million metric tons of ferrous scrap - valued at more than $5 billion - were exported to 133 countries.

n Recycling steel requires 60% less energy than producing steel from iron ore.

n The use of scrap versus iron ore reduces mining wastes by 97 percent, air pollution efficient by 86 percent, and water pollution by 76 percent.

n More than 17 million cars were recycled in 2006 through more than 200 shredders to supply an estimated 14 million tons of shredded scrap.

Business writer Ed Marcum may be reached at 865-342-6267.

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Comments » 3

cjensen writes:

Oh, my, gawd, Obama is bringing the economy back from the dead, and now he's going to be blamed for higher steel prices, higher gas prices, higher grocery prices.

I predict the piss-n-moan crowd will be at it soon enough, but in the mean time, I hope the Administration continues to cause these type problems.

BPaone (Inactive) writes:

A series on recycling for extra cash would probably be appreciated by a number of people. Information on how to recycle electronics (like old computers and peripherals) seems to be the most in demand.

Any commenters out there have any recycling tips?

schwamee writes:


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