Like a discarded antique discovered in your grandfathers attic, scrap steel in old buildings and industrial sites has become so valuable that some contractors say they have been able to bid at or below the cost of their services and still make a profit.
Some contractors have reaped windfalls, or tried to, by bidding at normal levels. In a few instances alert owners have approached contractors and offered to split the scrap steel proceeds while taking advantage of the opportunity to clean up and clear properties. But such arrangements remain rare, contractors say, and complicating factors such as asbestos and the type and condition of the steel can wipe out any profits.
Nevertheless, the economics of steel are dramatically different than what they were just 24 months ago, when the run-up in scrap prices kicked in. For demolition contractors working on industrial projects where steel may be present, "its a unique time," says Jesse Specter, vice president of Perth Amboy-based American Wrecking Corp. of New Jersey. His company sells recovered metals to scrap yards. "We track the price daily and its important to our whole approach."
The demand for scrap is stimulated by electric arc furnaces in mini mills, the least expensive method of making steel. With a weak dollar and burgeoning demand from China and Korea, scrap steel exports have roughly doubled from 2000 to about 12 million tons in 2004, according to U.S. government statistics.
Obsolete scrap, the type that comes from tearing up boilers, is a good example of what has happened to prices. At $106 dollars per ton in January 2003, it barely covered hauling costs. Last March, scrap dealers or mills were paying $250. Recently the price stabilized at $240.
That kind of dramatic change has altered the strategy for some bidders. In Coatesville, Pa., late last month, the towns redevelopment authority sought bids for demolition of an old steel plant. Six companies submitted bids as high as $624,000, according to published reports. The low bidder, Philadelphia-based Gracie Corp., offered to pay Coatesville $1,001. Disbelieving town officials had to be reassured that no mistake had been made. Gracie Corp. and town officials could not be reached for comment.
Those kinds projects still are the exception, not the rule, contractors say. Eugene, Ore.-based Staton Companies was able to do a few jobs "at revenue" when it was able to lock in good prices for the scrap with smelters, says Ron Richey, general manager. "We sell mostly at unprepared rates, longer pieces and a mix of conduit and iron."
A recent leveling of scrap prices has cooled interest. Clean scrap prepared for smelting in his area topped out at $160 a ton and has fallen to $130, says Richey.
Only a handful of projects have had enough clean steel without other complications to offset costs of performing the work, says Paul Conway, vice president of Demco Industrial, Houston. Most of Demcos projects still depend on specifications. "The steel price spike didnt send us out looking for steel," he says.