January 2006

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Scrap metal processors expect another demanding year
by Brian R. Hook E-mail the author

The company was formed in 1999 with the merger of B. Abrams & Sons Inc. of Harrisburg, Pennsylvania and L. Lavetan & Sons Inc. of York, Pennsylvania, both family-owned businesses with a long history of processing. In 2000, CSR acquired Wagaman Iron & Metal facility in Gettysburg. The company now operates in five locations in Central Pennsylvania.

Verman said global demand is impacting the market. “There are situations when global markets come into the equation to help stir up the market and take scrap away from domestic markets, mainly because their prices are higher and more attractive.”

Verman said there is not much of an advantage for his company to ship steel scrap oversees. But he said there continues to be global interest in the non-ferrous grades.

“The thought is that many people have shelled out their scrap during the past year to take advantage of good markets and now with great markets there just isn’t enough copper around. Translation: People do not have much inventory,” Verman said.

“With regard to steel, as long as industry is making finished products and the economy is allowing the public to buy new products there is no short term problem.”

Brian Shine, president of Manitoba Corp. in Lancaster, New York, also expects prices to decline. He said Manitoba saw an increase in throughput for 2005, but he expects lower volumes in 2006. “I believe this was attributable to improved market prices which brought out more scrap along with improved efficiencies in our plant operation,” he said.

Manitoba is a non-ferrous metal processor that specializes in processing and packaging copper scrap. It is a family-run business now in its third and fourth generation. It operates a recycling plant at its headquarters outside of Buffalo and also has a plant in St. Louis and facilities in Rochester, New York, and Toronto. It operates chopping lines, wire burning incinerators, an aluminum sweat furnace, a small arms ammunition popping oven, as well as additional equipment to prepare and process non-ferrous metals.

“Demand for several years has been working towards just-in-time inventory control. With the very high copper markets this is more evident than ever,” Shine said.

“Supply is very challenging. Most of our suppliers are very low on inventory at this time. We are performing for all of our customers but the model would be strained if consumers start to aggressively require material.” Shine said he also expects further margin compression due to higher operation costs and competition for raw material.

“China is still a major factor. We keep hearing about their slow down in purchases. However we have not seen a slow down in activity,” Shine said.

The Institute of Scrap Recycling Industries Inc., a trade group in Washington D.C. which represent more than 1,200 companies that process, broker, and consume scrap commodities, estimates that the American scrap recycling industry directly employs over 30,000 people. It estimates the value of scrap materials produced tops $30 billion.

Across the country in the Pacific Northwest it is much of the same story among family-owned metal processors. Lois Young, marketing supervisor at Skagit River Steel & Recycling Inc. in Burlington Washington, said that future markets are hard to predict.

“I am not in the projection business, especially since we are a small company. However, I have been in marketing for a while and like all good marketers, we know prices will go up or down. Rarely do we ever guess prices are stagnant,” Young said.

“There are so many factors that go into marketing these days that projection is very difficult. There seems to be a relatively strong demand for most products. Asia is still a formidable player…and other world markets seem to be opening up as well.”

Skagit River Steel & Recycling was founded in 1958 under the name Skagit River Junk. Young said the company has evolved into a community oriented recycling and steel company and is still family owned. It is comprised of a retail steel division where it is able to custom cut and order new steel products. The company also has a full line recycling division that handles both ferrous and non-ferrous scrap metals.

“We feel fortunate to be in a location that has easy access to ports in Seattle, Tacoma and British Columbia as well as proximity to steel and paper mills,” Young said.

“Some of the pitfalls of our location are very limited manufacturing, rural and agricultural areas and lots of competition for a limited supply” of scrap materials.

Young said the company processed roughly 22,000 tons in 2003 and 25,000 tons in 2004. Through November 2005, it processed about 26,000 tons. “In the current economical climate, we are exploring ways to enhance our business with updated equipment and tools that will continue to prosperously grow our company,” Young said


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