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Downturn trashes scrap business

By LARRY RULISON, Business writer
First published in print: Wednesday, November 5, 2008

SCHENECTADY — The global economic downturn has hit scrap metal yards in the Capital Region especially hard.
     
Here on Edison Avenue in Schenectady, T.A. Predel Co. has had to cut hours and staff as the price for metals such as copper has plummeted. Other commodities also have lost half or more of their value since July.

"It's dropped faster than we can get it out of here," said owner Mary Predel. "We've lowered prices every single day in the month of October."

The worst part of it, local scrap metal dealers say, is that this summer they were experiencing some of the strongest demand and highest prices ever for scrap metal in decades, making the impact of the downturn even more severe.

Business isn't much better at R.K. Freedman & Son Inc., a scrap yard in Green Island that also has operations at the Port of Coeymans.

Company president Tony Dawson says that copper was fetching $4 a pound back in July, and now it gets between $1.80 and $1.90 on the open market.

"The demand is not there," said Dawson. "We've done a bunch of layoffs."

The reasons for the drop in scrap metal prices is global in nature. Dawson says that mills in Turkey have been setting the price for scrap metal from the northeastern United States, and demand was red hot until about July, when the credit crisis started drying up capital and with it, the scrap metal market.

Now, a ton of metal shipped overseas that would have brought $750 only a few months ago pays less than $200.

"When it's good it's good; when it's terrible, it's terrible," Dawson said.

As a result, scrap yards are paying a lot less for scrap that the public brings them, and therefore fewer people are driving through their gates. Dawson said that this summer, hundreds of vehicles would clog the streets around the yard waiting to get in each day. Now, fewer than 60 people a day bring in scrap.

Mary Predel has had the same problem. This summer as many as 300 people would bring scrap each day. Now its 100 or fewer. She's had to let five of her 15 employees go.

"It's the first time we've had to lay off in many years," she said.

Scrap metal is a huge industry in the United States. According to the Institute of Scrap Recycling Industries Inc., a Washington, D.C. trade group, the U.S. scrap industry was a $71 billion business in 2007 with 50,000 employees. More than 150 million metric tons of scrap metals are recycled in the U.S. annually, from iron and steel to paper, aluminum, copper, lead, zinc, plastic and tires. All told, scrap yards in the United States exported $21.7 billion worth of materials last year, according to the institute.

"We're having just a huge, huge precipitous drop," said institute spokesman Bruce Savage. "It (the price of scrap) has just dropped off the face of the earth. Credit is hard to get, so people are putting a lot of things on hold."

So when will the market rebound? It's difficult to say. On Tuesday, Predel was at her scrap yard, doing accounting in her office. She said she believes prices won't rebound until 2010, and then only if the economy and market sectors such as exports, housing and motor vehicles improve by then.

"They're all in the dumps, and so are we," Predel said,

Larry Rulison can be reached at 454-5504 or by e-mail at lrulison@timesunion.com.