PST: Slow economy drives post-production aluminum, steel prices down
At least the scrap metal coming out of the presses at Jagemann Stamping still has some worth."It looks like we've dodged the bullet of our scrap not having any value," said Tom Moore, senior buyer for the west-side manufacturer of automotive and consumer industry parts made of aluminum, steel, brass and copper.
Just months after reaching record prices, the recycling market has taken a dramatic drop at the same time as the global economic slowdown.
Steel scrap to be recycled is down to about a nickel a pound from 30 cents, aluminum is less than half the 95 cents a pound price in July, and empty plastic bottles have fallen in worth from 25 cents to 2 cents a pound.
"We have steel mills around the world shut down … there is an imbalance in demand and supply," said Tom Knippel, industrial marketing manager for Sadoff & Rudoy Industries.
Based in Fond du Lac and doing business in Manitowoc under the name Alfred Muchin, on 26th Street, it collects scrap metal from Jagemann Stamping and several other Lakeshore-area manufacturers.
The companies collate different metal alloys into giant lugger boxes for hauling away and Sadoff & Rudoy's resale.
"As people saw no opportunities in housing or the stock market, hedge funds poured money into commodities with prices escalating to their highest points last summer," Knippel explained.
"But the bubble has burst, and world demand for everything is down … we have steel mills around the world not in operation," Knippel said. "However, there is still some demand for products. The value won't go down to zero."
"Commodity markets are cyclical, driven by supply and demand, and, in a capitalist society, 70 percent of our growth is driven by consumers," he said. "If they believe things are bad, they will be bad."
Knippel contends that after the impact of recent years' excesses of borrowing and speculation are brought under control, commodity values will rebound.
Moore hopes so. "We treat our scrap just like our product — we make money on it," he said, noting Jagemann Stamping's efforts at upgrading "scrap identification."
The company's 50 presses have about a 40 percent scrap rate, from the tons bought as coil metal and manufacturing stock to the weight of the finished products.
Moore and company president-owner Tom Jagemann explained engineers are constantly seeking ways to minimize scrap, including precise stamping reducing the margins around the millions of parts it produces.
"By the nature of our products, about 60 to 70 percent is recycled back," said Erin Haban, manufacturing manager at LDI Industries in Manitowoc.
It uses screw machines to make hydraulic and lubrication equipment parts out of aluminum and brass "bar stock."
Some manufacturers, including LDI, are stockpiling scrap metal, waiting for prices to rise. But not Jagemann Stamping, which buys some 5 million pounds of steel per year and doesn't have the space and facilities to properly store scrap.
Contracts Protect From Swings
"I've seen prices lower … the big difference in this price drop was how fast it occurred and it is all commodities," said Jeff Beyer, public works director for Manitowoc County.
Beyer has been involved with recycling since 1978, and it is his department that operates the Manitowoc County Recycling Facility on Basswood Road.
It focuses on scrap generated by residents, not manufacturers, but the MCRF also has been hit by falling commodity prices.
"They dump it and we take it," Beyer said of the recyclables — glass, plastic, paper, steel, tin — brought to the MCRF by Pozorski Hauling & Recycling, Larry's Hauling, Waste Management, and Veolia Environmental Services.
City of Manitowoc ordinances require haulers to provide homeowners with free containers, and to pick up recyclables along with their trash.
"The only commodity where we're really taking a beating is plastics because we have contracts with floors (minimum paybacks) on other products," Beyer said of price protections he has negotiated.
He said anticipated 2008 recycling revenue for the MCRF was $600,000. Beyer forecast the year-end total would be about $20,000 less.
The MCRF sells paper to Fox River and Green Bay mills through a broker, with plastics going directly to Cleantech, out of Chicago, with pickup at MCRF's dock.
While Wisconsin statutes require households to recycle, Beyer said Manitowoc homeowners do a good job at not throwing away items that can have a remanufactured second life.
"We've never had to beef up the public response for recycling," Beyer said.
