There’s not much gold in a pile of scrap metal these days.
Wichita’s scrap dealers are feeling stressed as falling prices for recycled steel, copper and other metals have squashed their margins.
It has meant slower operations, fewer hours and workers, and it may help spur some consolidation of the scrap yards. It also promises to slow metal thefts as the prices fall.
The price of scrap iron overall fell about 20 to 25 percent over the course of 2014 because of slower economic growth overseas and the strengthening dollar. Both tended to cut into exports, even as domestic demand for scrap remained flat, according to industry publication Scrap Price Bulletin. Further declines are expected in 2015.
Harlan Hartstein, owner of Wichita Iron and Metal, 922 Merton, said that copper was $4 a pound in mid-2013. Now it’s $2.19 per pound.
They buy from the general public and local industry and sell to wholesalers and steel mills. As prices have fallen, their few pennies of margin have gotten fewer and fewer.
“At Thanksgiving they sent us out a nice turkey and a note that said ‘guess what?’” Hartstein said.
A scrap yard is a pretty impressive place for the sheer amount of material that it handles.
Allmetal Recycling, the former Kamen Inc., 800 E. 21st St., has mountains of scrapped appliances, car engines, pipes, tanks and assorted pieces of steel. A material handler armed with a grapple picked up clawfuls of assorted scrap and dumped it into a shearing machine. Several train cars were packed with the chopped up results.
Elsewhere in the yard, workers with torches cut up the pieces of steel decking too heavy to be chopped by machine, while others shoveled aluminum cans or filled boxes full of thick copper wiring. Other scrap yards have large machines that can shred a whole car.
Allmetal, owned by the Cornejo family, is a relatively recent player in the local industry.
Operations manager Clint Cornejo said they have spent a lot of time and money to present a cleaner, more professional appearance and manner. They spent a considerable amount of money converting the former meatpacking plant building into modern offices.
“We want to change the image of the industry,” Clint Cornejo said. “People think of it as dirty, with lots of trash around, more of a junk yard. We want to be thought of as a recycling center.”
The Cornejo family sold its extensive paving, construction and aggregates business to Summit Materials of Washington, D.C., in 2010. But Summitt didn’t want Caster Iron, which the Cornejos had bought in 2009 during a plunge in metal prices, renaming it Allmetal Recycling.
Brothers Ron and Marty Cornejo decided it was a way to build something for their sons. They bought Kamen in 2012 and made that the basis of their operation, and then bought American Can in 2014. They bought Auto Castings Recovery in Newton in December.
Clint Cornejo, son of Marty Cornejo, and Kolby Cornejo, son of Ron Cornejo, are majority owners and day-to-day operators of Allmetal Recycling. This week, Kolby Cornejo was in McPherson supervising the removal of steel piping and tanks from a major building project at the NCRA Refinery.
With scrap metal prices and profit margins way down, Marty Cornejo said the industry is ripe for consolidation. This downturn may supercharge that, whether it be a local operator buying up competitors or an out-of-town company buying a large share of the Wichita market.
He said Allmetal is looking at a few more acquisitions, but the plan isn’t to dominate the local scrap industry or build a juicy takeover target.
“That is not our intent,” he said. “This is really for our sons’ future more than ours.”
One piece of good news for the community is that tumbling scrap prices mean fewer metal thefts, say scrap yard owners.
“It’s not a cure,” Hartstein said. “$4 (a pound for copper) will produce maximum thefts, and $2 will be minimum thefts. One thing about thieves is they are pretty lazy, they’ll go where they can make the most. I would say it won’t stop, but it does slow it down.”
Scrap yards in Sedgwick County are required to record the ID, car description and license plate of anyone bringing in scrap.
The information is sent daily to the police department. A few categories of scrap must be kept 48 to 72 hours before it can be recycled. Sellers of any copper items, or all metal worth together more than $50, are paid by check to generate a paper trail.
He said his company got caught in a high-profile theft recently when a seller brought in several feet of an aluminum hand-railing stolen from a project at Bishop Carroll High School in December.
The aluminum was put in the bin for recycling, but the police investigating the theft spotted the transaction and came by the yard a few days later. They already had his name, Cornejo said.
“Most of those guys, they just get a slap on the wrist,” he said.
He said his company is asking local legislators to introduce legislation in Topeka this session to spread local metal theft prevention rules statewide.
Craig McCollar, assistant manager at Glickman Metal Recycling, 410 E. 25th St. North, said the local rules have cut down on the number of metal thieves in Sedgwick County. But he said that doesn’t keep thieves from going out of the county to sell.
He supports spreading such rules statewide.
“We are losing ones we don’t want anyway,” he said, “but if the state enacted restrictions it would keep that down all over.”