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2/29/2004

Precious metal

By Pam Mellskog
The Daily Times-Call

ERIE — After three years of soft scrap metal prices, Speedway Auto Wrecking management might have retired Dommer, the Doberman pinscher stalking the junk yard’s cyclone fencing, without incident.

Today, that black dog had better show teeth.

Scrap metal prices have jumped this winter from the barely break-even rate of $25 per ton to between $75 to $100 per ton, according to Speedway manager Bill Renoad.

Meanwhile, refined steel prices have shot up from $100 per ton to nearly $300 per ton in some spots, according to Bob Johns, a spokesman for Charlotte, N.C.- based Nucor Corp., a leading scrap steel company.

Such historic nationwide steel and steel raw material shortages may make princes of some and paupers of others — despite the tariffs President Bush slapped on steel imports in 2002 to push consolidation and efficiency.

However, shortly after he lifted the tariffs in December, prices skyrocketed, according to Mike Bertolin, a shop foreman at Madden Steel Inc. in Longmont.

“We can’t control it,” he said. “Whatever the price of steel is, we have to adjust our prices as much.”

Substituting another material for steel does not work, given Madden’s focus on making heavy equipment parts such as booms and bucket teeth, he said. Other local companies enjoy a little more wiggle room facing the price crisis.

According to Darin Kirkman, a materials manager at Air Comm Corp. in Boulder, steel makes up about 10 percent of the helicopter air conditioner units they build and between 20 and 30 percent of the heating units offered.

To cope with the new costs, the company took a radical tack.

“We’re taking (the units) back to engineering for a redesign,” Kirkman said.

While the steel spike stems from a complex global web of supply and demand issues, Washington, D.C.-based American Iron and Steel Institute spokeswoman Nancy Gravatt identified three key reasons.

“Some people say every developing nation wants to have a steel industry, a baseball team and a beer factory, and China — which was once a very agrarian nation — is going though its own Industrial Revolution now,” she said.

To build everything from bridges to automobiles, Gravatt continued, both China and South Korea have put tremendous pressure on the global steel market for raw materials and have ramped up production to a fever pitch.

“They now produce more steel than the U.S. and Japan combined,” said Johns, a nearly 40-year steel industry veteran. “Welcome to globalization. Sometimes you get what you don’t want.”

And because China’s steel industry operates with heavy government subsidies, he added, the surge has forced typical supply and demand factors to go haywire.

“Go out and try to buy an American-made barbecue today,” he said.

Big steel has also suffered, according to Gravatt, from the same energy hikes that have had home owners looking twice at the bill, international shipping costs and Russia and Ukraine’s recent policy to keep scrap metal to feed their own steel mill furnaces.

In response, several major trade organizations representing dozens of American companies formed the Emergency Steel Scrap Coalition in Washington, D.C., in early February.

“It’s overwhelming when steel prices triple or quadruple in some cases,” said Tim Brightbill, coalition legal counsel.

That is especially true, he continued, for companies who bid jobs involving steel months or even years ago not expecting prices to soar.

To find solutions, Brightbill continued, the coalition plans on conducting a 30-day economic study and then approaching the Department of Commerce and Congress for some short-term relief.

Meanwhile, scrap metal dealers continue benefiting from steel scarcities, according to Dale Ekart, at EcoCycle in Boulder.

“The scrap metal industry has languished for a few years,” he said. “But this spike, has its pros and cons.”

Fattening up the bottom line is a boon, he said. But dramatic spikes often draw speculators.

“Spikes create an illusion,” he said. “When that happened in the recycled paper industry a few years back, people were stealing cardboard off curbs.”

For now, though, players such as Renoad will keep “Beware of Dog” signs up and doors open.

“(Cheap scrap metal prices) have been going on for so long, I can’t even remember how long it’s been,” he said. “But now it’s going up and up and up.”

Suddenly, washing machines and refrigerators — once almost more trouble than they were worth to breakdown — look better than ever.

“ If it’s metal, we’ll take it,” he said.

Pam Mellskog can be reached at 303-776-2244, Ext. 224, or by e-mail at pmellskog@times-call.com.