Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

China's Need for Metal Keeps U.S. Scrap Dealers Scrounging
The New York Times ^ | March 13, 2004 | ANDREW POLLACK and KEITH BRADSHER

Posted on 03/13/2004 3:10:02 AM PST by sarcasm

LOS ANGELES, March 12 — At a time when toys, televisions and other products made in China are flooding into the United States, helping push the trade deficit to record levels, there is at least one American product for which China has a nearly insatiable demand — industrial junk.

Sales of scrap metal to China have surged, with effects that are ricocheting across the American economy. Prices are soaring not just for scrap, but for metals in general. After years of surpluses that forced many steel makers into bankruptcy, supplies are so tight that contractors told a Congressional hearing in Washington this week that they sometimes cannot obtain supplies at any price.

China last year became the first country ever to import more than $1 billion of American scrap, according to the newspaper American Metal Market. Indeed, it would not be an exaggeration to say that China's transformation into an industrial powerhouse is being fueled by America's waste, and that of other countries, as well. Much of the material being used to build China's skyscrapers, factories and telecommunications systems — along with many of the products it exports — is derived from scrap, which is usually cheaper than new metal made from ore.

"China is very hungry," said David Pan, a Chinese-born scrap metal buyer, as a truck carrying steel reinforcing bars from a dismantled building in San Diego prepared to dump its cargo with a deafening clatter on the floor of his warehouse in Maywood, an industrial town just south of here. "They need a lot of material."

A decade ago, Mr. Pan was working in a Los Angeles restaurant when relatives back in China asked him to start buying scrap. Now, as China booms, so does Mr. Pan's business, called Universal Scrap Metals. He ships about 500 containers a month to China filled with battered pipes, fine metal shavings, doorknobs, jumbles of wire, crumpled cars and all other manner of flotsam. He is even negotiating to buy the remains of a steel factory in Utah; he would ship it, as scrap, to his native country.

American scrap dealers, an industry of 1,200 or so mainly mom-and-pop operations, are sharing in the boom times.

"They're scrounging every yard in the country, like a vacuum cleaner," Ely Keenberg, president of Ekco Metals, a Los Angeles scrap dealer, said of purchasers from China. At one point during an interview, Mr. Keenberg's receptionist interrupted to show him the business card of a man from Hong Kong who had just made a cold call looking for scrap. "If we allowed it, we'd have one in here every five minutes," said Mr. Keenberg, who sells 90 percent of his scrap to Chinese buyers.

American companies that depend on scrap are, in the meantime, scrounging.

"We're having greater and greater difficulty in securing scrap," said M. Brian O'Shaughnessy, chief executive and principal owner of Revere Copper Products in Rome, N.Y., a company founded by Paul Revere that turns copper scrap into sheets and strips. "It's causing the price of scrap to go through the ceiling."

Both copper and steel industry trade groups are drawing up petitions that would ask the government to temporarily limit scrap exports — an authority that Washington has used only once, in the mid-1970s.

The price of scrap steel has soared to more than $300 a ton, compared with about $156 a ton at the end of 2003 and $77 at the beginning of 2001, according to the Emergency Steel Scrap Coalition, a group backed by steel users and minimills, which use scrap to make about half of the nation's steel. Many minimills have imposed surcharges to pass the higher costs onto customers like automobile and construction companies, with some of them resisting.

"Scrap is the overwhelming factor determining steel prices at this point," said Christopher Plummer, managing director of Metal Strategies, a consulting firm in West Chester, Pa.

Rising exports are clearly one factor behind the high prices, but the extent to which they can be blamed is debated. Over all, exports of steel scrap have almost doubled since 2000 to 11.9 million tons last year, close to a record. China was the largest importer, accounting for 3.5 million tons, or about 30 percent, of the exports.

But scrap dealers argue that exports are still small compared with domestic consumption of about 70 million tons a year, and so could not account for the huge price increases. Moreover, they note, there have been several occasions in the last two decades when total scrap exports reached or even exceeded last year's levels.

"What is happening now is not unique," said Robin Wiener, president of the Institute of Scrap Recycling Industries, the dealers' trade group. Attempts to restrict scrap exports, she said, are "just clearly a smoke screen attempt to control the price of scrap" and would be a "distortion of free trade."

Some experts add that in any event, China's building boom has the look of a bubble and cannot last indefinitely. Indeed, China's State Development and Reform Commission just announced that after fixed investment in steel mills rose 90 percent last year, it would stop approving virtually all applications to build mills. Still, with many mills approaching completion, one Chinese trade group forecasts that imports of scrap will nearly double by 2005 over last year's levels.

David L. Edelstein, copper commodities specialist at the United States Geological Survey, noted that while copper prices — about $1.30 a pound — are high, they have been as high before. One reason for price increases, he said, was that some copper producers were holding back output, after an oversupply a couple of years ago.

But copper scrap exports to China, including Hong Kong, have quintupled since 1998, and China now accounts for 70 percent of the total. China's purchases of American copper scrap last year were equal to about 40 percent of American consumption.

Scrap dealers argue that in some cases, the scrap going to China would be of no use to Americans because it would cost too much to sort into its various parts. But with China's cheap labor, that effort is affordable.

"We send everything to China," said Danny C. Yiu, vice president of Ekco Metals, the company owned by Mr. Keenberg. "They will use chisels, hammers, hand tools to break this apart and sort it out."

He pointed around Ekco's yards at various heaps of old automobile radiators, pots and pans, air-conditioner condensers, even parts of jet engines. There were also old soda cans squashed into giant cubes weighing 1,000 pounds each, stacked six or seven high.

At a loading dock, small Bobcat construction vehicles were loading two of the 25 or so 20-ton shipping containers that leave here each day for the ports of Los Angeles and Long Beach. After a Bobcat shoved a load deep into the container, the driver backed up, then accelerated forward, crashing into the pile with a loud bang to compress it.

The scrap world has its own vernacular to facilitate trading. Copper wire is known as "barley," yellow brass is "honey" and No. 1 copper tubing is "candy." And there is a food chain, where one company's scrap turns into another company's raw material.

The people above Ekco Metals in the food chain say they are not getting enough to eat. A few miles from Ekco is California Metal-X, which buys copper scrap and melts it in huge furnaces to make bronze and brass ingots. It then sells those ingots to foundries that make everything from bronze statues to brass valves.

"Last year was a year from hell," said Tim Strelitz, who founded and runs the company with his wife, Karen. The company last year cut its work force from 70 to 38 people, the first layoffs since its founding in 1979.

One problem, Mr. Strelitz said, was that it was difficult to compete with Chinese buyers, who have grown in sophistication since the days when Mr. Pan and others first came shopping. "They are not owners of restaurants trying to buy for a cousin anymore," he said. "They are buying for a dollar what I can only offer 80 cents for."

Yet another reason for Mr. Strelitz's problems is that his customers are ailing — and in some cases going out of business — in part because they face stiff competition from Chinese manufacturers of valves, faucets and other brass products.

"I've lost millions of dollars per year to China already," said Leigh Omer, foundry manager at Fresno Valves and Castings in Selma, Calif., a customer of Mr. Strelitz.

To Mr. Strelitz, Mr. Omer and others dependent on copper scrap, this seems like the ultimate indignity — that Chinese companies drive up scrap prices, yet are able to sell products made from that scrap for less than American manufacturers can. Indeed, American copper companies contend that China is subsidizing importers of copper scrap and exporters of finished products, in part through tax rebates.

Joe Mayer, president and general counsel of the Copper and Brass Fabricators Council, said the group may file a trade complaint about this. "The faucets from China are coming into the United States at less than the metal value that we would have to pay," Mr. Mayer said.

Meng Jianbin, director of international cooperation at the Metallurgical Council of China for the Promotion of International Trade, a Chinese trade group, denied that his government subsidizes the scrap industry. While some incentives are provided for scrapyards to set up operations in particular industrial zones, they are not especially generous, he said.

Mr. Pan, the Chinese scrap merchant, said that Americans should be a little more appreciative of the benefits of China's scrap purchases. After all, he argued, they keep some junk that could never be used in the United States from ending up in American landfills.

"We do something good for America," he said. "We do something good for China."


TOPICS: Business/Economy; News/Current Events
KEYWORDS: china; exports; manufacturing; scrap; scrapmetal; steel; trade

1 posted on 03/13/2004 3:10:03 AM PST by sarcasm
[ Post Reply | Private Reply | View Replies]

To: A. Pole; harpseal
Export profile of a third-world nation?
2 posted on 03/13/2004 3:14:11 AM PST by sarcasm (Tancredo 2004)
[ Post Reply | Private Reply | To 1 | View Replies]

To: sarcasm
"Americans should be a little more appreciative of the benefits of China's scrap purchases."

They take our scrap and give us crap!

3 posted on 03/13/2004 3:31:56 AM PST by endthematrix (To enter my lane you must use your turn signal!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: endthematrix
I really don't mind them having the dirty industries like steel recycling.
4 posted on 03/13/2004 3:41:49 AM PST by Lokibob (All typos and spelling errors are mine and copyrighted!!!!)
[ Post Reply | Private Reply | To 3 | View Replies]

To: sarcasm

China got the best of this mess...and we get this in return?

5 posted on 03/13/2004 3:43:40 AM PST by endthematrix (To enter my lane you must use your turn signal!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: sarcasm
There was another time the scrap metal industry was booming: Sales to Japan in the 1920's and 30's.
6 posted on 03/13/2004 3:50:12 AM PST by Gordian Blade
[ Post Reply | Private Reply | To 1 | View Replies]

To: Lokibob
What does it do for the US market for scrap? Drives prices up, I believe. This isn't garbage, but a valuable commodity for a producer who needs cheap supply.
7 posted on 03/13/2004 3:50:24 AM PST by endthematrix (To enter my lane you must use your turn signal!)
[ Post Reply | Private Reply | To 4 | View Replies]

To: Gordian Blade
I thought of that, too.
8 posted on 03/13/2004 3:54:11 AM PST by Smokin' Joe (As the oldest generation dies, the memory of liberty fades into obscurity, replaced by an impostor)
[ Post Reply | Private Reply | To 6 | View Replies]

To: sarcasm
I know several junk car salvage yards owners a couple a years ago they could not get rid of their cars. I just talked to one the other day and he is buying anything he can get his hands on and crushing it.

This is good hundreds of cars that were just laying around rusting away now are being used.

9 posted on 03/13/2004 4:14:58 AM PST by riverrunner
[ Post Reply | Private Reply | To 1 | View Replies]

To: sarcasm
"What is happening now is not unique," said Robin Wiener, president of the Institute of Scrap Recycling Industries, the dealers' trade group. Attempts to restrict scrap exports, she said, are "just clearly a smoke screen attempt to control the price of scrap" and would be a "distortion of free trade."

Free trade shall not be denied! Anyway these metals will return in the form of finished products.

10 posted on 03/13/2004 4:31:15 AM PST by A. Pole (<SARCASM> The genocide of Albanians was stopped in its tracks before it began.</S>)
[ Post Reply | Private Reply | To 1 | View Replies]

To: A. Pole
Anyway these metals will return in the form of finished products.

As car stereos, or JDAMs?

11 posted on 03/13/2004 4:38:36 AM PST by RogueIsland
[ Post Reply | Private Reply | To 10 | View Replies]

To: A. Pole
Anyway these metals will return in the form of finished products.


12 posted on 03/13/2004 4:40:24 AM PST by sarcasm (Tancredo 2004)
[ Post Reply | Private Reply | To 10 | View Replies]

To: A. Pole
"We do something good for America," he said. "We do something good for China."

Here is the good it has done my business:

Stainless Steel, Copper, and tin , my raw materials, are all up 40%. I have certain constraints as to how much I can raise my sales prices, so I now have the joy of working for Yuan instead of dollars.

But metal prices go up, and they can go down as well, so I'll just hang in there for a while.

13 posted on 03/13/2004 4:55:22 AM PST by Gorzaloon (Contents may have settled during shipping, but this tagline contains the stated product weight.)
[ Post Reply | Private Reply | To 10 | View Replies]

To: sarcasm
Jeez ! I'm old enough to remember the fuss raised when it was "discovered" the scrap metal we had been shipping to Japan in huge quantities was coming back to haunt us-in the form of weapons,ships,airplanes,etc.

Even a dumb dog,sprayed once by a skunk,will detour around the next one it meets.
14 posted on 03/13/2004 5:24:30 AM PST by genefromjersey (So little time - so many FLAMES to light !!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: sarcasm
Steel price increases a looming problem

April 2, 2004

Why is it that a potentially big story that could have a devastating effect on the economy is being mostly overlooked by both political parties -- and the media? Since early January, steel prices have been escalating to record levels.

We are a small family metal-fabricating business, with approximately 25 employees, that buys a fair amount of steel. We are now seeing prices at double in some cases, and we are seeing shortages. Widespread unemployment is just around the corner when present supplies of some steel items are exhausted. I see it happening right now!

This is not something that is going to miraculously disappear overnight. The Evansville area will most certainly be adversely affected.

It appears that China is buying most of the United States' scrap for its own steel needs, and we now have a real shortage that may become a crisis. This is just a part of the overall picture that you would find with a little bit of research.

With limited capacity and plant closures and coke shortages, compounded with other economic conditions, the steel industry is on its way to causing double-digit inflation. Everything made out of metal will have to go up in price.

It's simple. Maybe too simple. China will be dropping even more cheap products over here, and a lot of companies like ours and larger will no longer be.

Keith Smith,
Creative Craftsmen Inc.,
Evansville, Ind.
http://www.suntimes.com/output/letters/cst-edt-vox02a.html

15 posted on 04/04/2004 1:13:37 AM PST by endthematrix (To enter my lane you must use your turn signal!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: sarcasm
I bet Kerry, the Democrats and all the whiney idiots around here at FR start complaining about us "outsourcing" our metals.
16 posted on 04/04/2004 1:14:32 AM PST by Fledermaus ( Frm ^;;^ says, "Fallujah would make a lovely glass table top!")
[ Post Reply | Private Reply | To 1 | View Replies]

To: sarcasm
Red China needs scrap?

Okayyyyyyy

Send them one half our nuke arsenal, via air.

17 posted on 04/04/2004 1:41:38 AM PST by Thumper1960 (Total victory with total subjugation.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: sarcasm
Let's see now. China is grabbing ever more of the global industrial base, and more especially the US industrial base. China is expanding its military capability - rapidly. And China is starting to rattle the sabre more. There are parallels between the Japanese buying lots of scrap metal before WWII and China buying same today.

Nope, nothing to see here. China is our friend. No problems. Nope, nope, nope. Move along... (/bitter sarcasm)

18 posted on 04/04/2004 1:54:36 AM PST by neutrino (Oderint dum metuant: Let them hate us, so long as they fear us.)
[ Post Reply | Private Reply | To 12 | View Replies]

To: neutrino; Fledermaus; sarcasm; Gorzaloon
(South Korean) Government to Restrict Exports of Scrap Iron, Steel Bars
March 4, 2004
Government Information Agency

The Ministry of Commerce, Industry and Energy decided to temporarily suspend exports of scrap iron and steel bars Wednesday (March 3) to ease a worsening domestic shortage of raw materials.

The ministry together with other government ministries will also clamp down on speculative stockpiling of scrap iron and other raw materials.

According to the ministry, the international prices of non-ferrous metals such as aluminum, electrolytic copper and nickel and major metal materials have been on the rise steadily and the trend is expected to continue for the time being.

Lee Hee-beom, Minister of Commerce, Industry and Energy, said, ¡°In terms of non-ferrous metals, it is unlikely to experience a supply shortage in spite of price rises, but with regard to scrap iron and steel bars, we expect that the raw material supply shortage will continue for some time.¡±

The ministry has activated a task force to monitor daily changes in raw material prices and to swiftly draw up effective countermeasures to absorb any shock.

As for steel bars, local steel makers agreed to divert a total of 67,000 metric tons from export to domestic supply to stabilize the local market.

http://search.korea.net:9000/search97cgi/s97_cgi.exe?action=View&VdkVgwKey=7240&DocOffset=&DocsFound=736&QueryZip=steel&Collection=gpArea&SortField=v_date&SortOrder=desc&SearchUrl=&viewtemplate=search_view.hts

19 posted on 04/04/2004 10:24:03 PM PDT by endthematrix (To enter my lane you must use your turn signal!)
[ Post Reply | Private Reply | To 18 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson