- Associated Press - Tuesday, December 6, 2016

HOUSTON (AP) - If some supernatural being were to drag an enormous magnet over Houston, yanking out all the bits made of metal and sorting them into neat little piles, the result might look a bit like Brandi Harleaux’s scrapyard a few miles south of the Galleria.

Gutters. Window frames. Insulated wires. Boat motors, crushed guard rails and toll booths. All of Harris County’s discarded highway signs. Truck wheels, air conditioning coils, copper plumbing and lots of tin cans, ready to be crushed and loaded in containers. All of this stuff is worth money - but so little, in recent years, that small recyclers like Harleaux have barely made a profit.

“It’s been a tough market,” said Harleaux, who strides through it all in a t-shirt and high heels. “We’re a pennies business. You have to move volume.”

The Houston Chronicle (https://bit.ly/2gM5LkU ) reports even though the South Post Oak Recycling Center (yes, SPORC) is a mom-and-pop operation - founded by Harleaux’s father in the 1990s to buy scrap from local contractors - it’s at the mercy of global commodity prices.

A sustained drop in the values of steel, nickel, copper and tin has made it difficult to pay people enough to take the trouble to bring their discards for recycling, rather than toss them in the trash, and that’s helped cut the number of licensed scrapyards in Houston from 122 licensed in 2014 to 101 this year.

The election of Donald Trump, however, has fueled hopes of a revival in commodities, including oil. Prices spiked after his election amid hopes that after many years of a Democratic president failing to get a massive infrastructure plan through a Republican Congress, a Republican president might finally succeed. Trump has promised to spend $1 trillion on roads, bridges, highways and other projects - which need steel, aluminum and, of course, fuel to get built.

Tom Baker, president of the Recycling Council of Texas, says his members are encouraged by the prospect of a sizeable public works program that would boost demand for commodities and provide a respite from relentlessly low prices.

“Everybody thinks it might happen this time,” Baker said. “I would say right now is that there’s more optimism than pessimism, and that’s changed in a short period of time.”

Recycling is a cyclical business, but this last cycle has been more of a roller coaster than most.

Industrial metals climbed to unprecedented prices in the past 10 years, with some seeing their highest spikes before the financial crisis, fueled by a building boom in emerging markets like Brazil and India. Steel scrap reached $477 per ton in early 2011, according to S&P; Global Platts’ Steel Index, and since scrap is the main component in U.S. steel production, recycling became much more profitable. Scrapyards opened left and right, many financing expensive equipment - like aluminum crushers, balers, and industrial-sized scales that can weigh trucks full of metal - on borrowed cash.

But that bubble popped and just kept deflating after about 2014, as emerging markets stumbled and China put its steel industry in overdrive to hit artificial growth targets. That oversupply depressed prices, which reached a low of $166 per ton in late 2015. The strong dollar had slowed down U.S. manufacturers, which are some of the biggest consumers of scrap metals, and they could no longer buy as much as they used to.

U.S. exports of metals and other scrap material plunged by more than a third in mid-2015 from their peak in 2011.

“2015 was the worst year our industry saw in a generation,” says Joe Pickard, a staff economist at the Institute for Scrap Recycling Industries, a trade association with about 1,300 members. “Some companies had to close their doors, other companies are not operating anywhere near maximum capacity.”

The scrap industry, which according to ISRI accounted for $45 billion in direct spending in 2015 and 149,000 direct employees, went through a wave of consolidation. The largest player, an Australian industrial materials company called Sims Metal Management, divested dozens of scrapyards in the United States, while its stock fell to historical lows.

The pain was especially acute in Texas, which was facing a double whammy from the oil bust, since the state’s manufacturing base is heavily tied into production of drilling equipment. Recyclers that had over-extended themselves during the boom years collapsed or were bought by competitors. Nearly one in five of licensed recycling businesses in Texas vanished; the numbers fell from 964 at the beginning of 2015 to 791 at the end of October.

Meanwhile, the industry was facing a big increase in both state and local regulations designed to fight metals theft, which had become a problem when commodities prices were sky high. Now, even the smallest scrapyard must have sophisticated systems to verify that the people they’re buying scrap from haven’t made off with someone else’s gutters or plumbing. In Houston, the state has shut down some yards for failing to comply.

Read Langford, president of Houston-based recycler Spectrum Metals, says they’ve gone from about 450 employees to 315 and are now just treading water, waiting for signs of a recovery. The wait has been longer than usual.

“This is one of the worst times we’ve had, not just because of the drop in prices, but the length of time is a key component,” Langford said. “There are times when the iron market carries the aluminum market, or the copper market is good and it carries the nickel market. Across the board, we’re on real historical lows.”

Finally, however, there are signs of a recovery. The price of steel has ticked up in the second half of the year, as Chinese steel production tapered off, and the oil market began to rebound, bolstering local manufacturing, and thus the local scrap industry. Also, as the price of coking coal - a key steelmaking input - has risen, more mills are increasing their use of scrap metal to compensate. The real jolt came after Trump’s election, with copper prices jumping 20 percent in a week.

That’s been welcome news for Joe Schneider, the owner of Holmes Road Recycling near NRG Park, who sees Trump’s promised corporate tax breaks and publicly-funded infrastructure projects juicing business activity and demand for metals and other commodities.

“They’re going to be spending half a trillion dollars on infrastructure,” Schneider said. “They’re going to need steel, aluminum, copper, and they’re going to have money to invest in inventory.”

All of those are still hypotheticals at the moment, though. Houston’s recyclers won’t be hiring more people, bringing back overtime hours, and buying more equipment until the recovery starts to look like it will last.

“I don’t think we’re going to get a form of stability that people are comfortable with,” says Brandi Harleaux. “I think there’s a lot of people hoping for things that we don’t even know.”

___

Information from: Houston Chronicle, https://www.houstonchronicle.com

Copyright © 2018 The Washington Times, LLC.

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