Having entered the copper industry in the early 1950’s, I have seen very extensive and significant changes in the way that business is done.  I have been personally involved in almost every aspect of the scrap recycling business including scrap sortation, packaging, shipping, buying, selling, hedging, tolling, import, export, finance, education, management  and trade association activity.  I have also been involved in forecasting (read “guess work!”)

            I have divided the areas of change into seven categories, each of which will be addressed separately.  Although some of these categories overlap, there are enough individual elements in each to merit separation.

Scrap Processing

            The single most significant copper scrap processing change has been the adaptation, development & improvement of machinery to remove insulation from copper wire and cable to upgrade its quality and value.  This is the realm of the “wire choppers” who have operated since the mid 1960’s.

            For decades prior, open-field burning was the easiest method to remove rubber, PE and PVC insulations.  The product of burning was a somewhat ashy #2 copper wire.  Burning heavy gauge power line wire insulated with tar-impregnated cotton produced burnt #1 copper.  Although first introduced on a large scale beginning in the mid 60’s, the original wire chopping process was actually developed during WWII to recover, not the copper, but the rubber insulation for recycling.  During the war copper was about 12¢/lb. while rubber was very difficult to obtain and the value exceeded copper severalfold.

            There was some limited effort in the 70’s to recover copper wire and clean steel scrap from motor and armatures through a cryogenic process.  It was expensive, generally uneconomic and died a natural death whenever the copper prices declined.

            Auto shredding (the original Proler Process) also introduced a new copper product through hand-sorting the tubing and wire from the non-ferrous shredder fraction.  In the last 10-15 years they have become very sophisticated with the addition of electronic systems that separate all of the shredder fractions and clean up the steel shreds at the same time.  “Zorba” is a new ISRI category, consisting of metal product with 85-95% clean mixed metallic content.  This has found a ready market both domestically and for export – mainly to China. 

            Some further commentary on the copper wire chopping business is needed due to the great influence it has had on the recycling of insulated wire and cable.  Riding on the tide of growing local and national awareness and concern with air pollution in the 1950’s & 60’s wire chopping gave the metals industry a new copper raw material in addition to providing for the recycling of insulated wire scrap without adding subsequent pollution.  Problems in disposing of waste plastic diminished these results to some degree but the big picture remained very positive.  “Copper nuggets,” originally a registered trade mark of Diversified Metals Corp., an early leader in this field, came into common acceptance in the domestic and foreign metals markets starting in the mid 1960’s and continues to this day, creating a landmark change in the copper scrap industry.

Communications

            While only indirectly related, the change in domestic and international trade of copper scrap caused by the communications revolution has been noteworthy.  The export of copper scrap to world-wide destinations has been with us for decades.  One of my first jobs with a small trading firm was the decoding and encoding of overseas cable messages.  The use of five-letter code groups kept down the cost of overseas cables as they were charged as one word.  This is the origin of Birch, Cliff, Berry, Candy, Honey, Label, Grape, and Ebony, etc. as they are named and described in the ISRI specifications.  Buyer and seller knew exactly what was being traded although only one five-letter code was utilized.  Similar code use made whole sentences readily exchanged by overseas cable at low costs.

            Through the 1950’s and 60’s the use of telex became widespread, followed in subsequent years with fax, e-mail, cell phone, the internet, laptop computers plus a host of handheld devices.  I have no idea what lies ahead but I’m sure some new modes of communication will develop.  However, Birch and Cliff, Berry and Candy will be with us always.

The Merchant/Broker and Terminal Markets

            Before WWII and in the years following, copper scrap grades were almost exclusively bought directly from the dealer & broker trade by the purchasing departments of tube mills, refineries, brass mills etc.  There was usually well known to every wholesale scrap dealer, a person to call when he wanted to sell brass or copper scrap.  In addition, the scrap buyers traveled widely and visited and knew personally the dealers whom they solicited.

            As for overseas sales, only the very largest dealers had direct sales contacts abroad.  There were only a few on the West Coast, the East Coast and the Gulf.  Most of the export business was handled by a half dozen large firms in New York City.  Names such as Phillip Bros., Brandeis Goldschmidt, Amalgamated Metal, Commercial Metal Co and C. Tennant Sons made up most of the roster.

            In the 60’s and 70’s names such as Diversified Metals, Gerald Metals, OmniSource, Harold Sacks Co. and a growing list of others, large and small, were added, particularly in the domestic market as the merchant trading segments expanded.

            During this period, although direct mill buying was still active, the tenor of the brass and copper scrap market changed to a significant degree.  A larger amount of the brass, tube mill and refinery scrap began to flow through the hands of the new generation of merchants who supplied dealer scrap to consumers and to large mill converters.  The mills, for a processing fee, accepted the merchant scrap and delivered brass and copper semis to the converter, thus keeping their plants busy and avoiding the high finance cost of inventory.  By 1980 with a 20% prime rate, this became an important factor.  “Conversion deals” became a byword in the industry, implying higher prices for dealers who supplied the merchants and brokers.

            This important change that became widespread, was based on the fact that merchants provided scrap suppliers with more flexibility and options than could be obtained by selling directly to the scrap consumers.  Practically all consumers bought for 30-day delivery on net 30 or net 45 terms, a practice which is still widely followed today.

            The merchant, hedging on the terminal markets, provided scrap buyers with fixed prices or pricing options for significant scrap tonnages up to 1 to 2 years ahead.

            In turn, the merchant provided the dealer with pricing options on Comex, advance payments on delivery and the ability to sell ahead as far as the dealer wanted.  In periods of fluctuating copper prices this option could be a bonanza or a bust for the dealer.  Whatever the results, it introduced a new element of change in the copper scrap business and continues extensively today.

            As a footnote, you may observe that merchant and broker are not synonymous terms.  Brokers buy and sell, receive a fee from both or either party but usually do not have a financial interest in the transaction.  Merchants buy and sell for their own account assuming all of the inherent risks of delivery, markets and payments.

International Trade and Transportation

Although it may seem that the omnipresent export sea container has been with us always, such is not the case.  As recently as the mid 70’s, exports of brass and copper scrap were made by break bulk shipments using burlap-wrapped bales, “headed-in” 55 gallon steel drums, old oil tanks cut out at one end, palletized bundles etc.

            The shipper delivered to the dock side or FAS.  Ocean freight was charged by the cubic weight and volume with the evidence of shipment consisting of a clean dock receipt.  This was used by the carrier to produce an on-board ocean bill of lading suitably dated and addressed as to the consignee and destination port. 

The procedure described limited the export business mainly to seaports or nearby points of origin.  To make an export shipment from the interior was more expensive but was often done if the FAS price was attractive enough.

            For decades the carriers gradually expanded the availability and destination ports for 20- and 40-foot sea containers.  Today, even small dealers can load up to 40,000 lbs. at any USA location and participate in the premium export market in any part of the world.  Such business is usually handled by merchants and brokers, both domestic and foreign.  It is not unusual for a Far Eastern buyer to visit a dealer’s yard, inspect a quantity of scrap and pay for it on the spot!  It is obvious that the change from break-bulk shipment to sea container has broadened the market, and is truly a revolutionary change.

Agglomerations

            In the late 80’s we all witnessed and possibly invested in the phenomenon of a nation-wide rush to combine large and small yard dealers into giant, highly leveraged, stock market-listed combinations.  Territorial aggrandizement became the dominant theme and while directed mainly toward the scrap iron business, its effect was felt in copper and brass scrap as well. 

            From 5 to 10 individual scrap suppliers solicited by consumers and merchants, there evolved one central office that was delegated with the market responsibility for the entire organization which consisted of multiple yards.

            A buoyant stock market and domestic demand initially supported these enterprises.  However, we subsequently witnessed the collapse and liquidation of several, often with the original sellers buying back their facilities at prices well below the original sale.  Other major players coping with bad times and a restrictive stock market, also turned down and went bankrupt.

            In the past 10 years another frenzy of agglomeration seized the iron and steel scrap business carrying along with it the copper scrap activity in the many yards acquired.  This time, although there have been ups and downs, the large firms that are in the game were well financed and not dependent on the vagaries of the stock market. 

            Although the pace of expansion has recently slowed down due to a depressed economy, we read periodically of scrap yards being acquired.  These developments represent another very significant change in the copper scrap market.

Pollution Control

            The generally free and easy times of copper scrap processing in years gone by have changed to a much more restrictive environment in recent years.  EPA, OSHA and other government agencies both local and national are pushing the trade in the direction of clean air, water and safer working conditions.  While the intent is quite reasonable – who doesn’t want a clean and safer environment – it all comes as a cost to the dealer. There is no necessity to elaborate on this matter, as we are all familiar with the subject.  Suffice it to say it represents a significant change in the copper scrap industry.

U.S. Copper Producers and the Decline of the Custom Smelter

            This is a subject of historical interest to me as I was present as a participant from day one as the U.S. producer evolved from a strictly domestic mining and refining company to a consumer of scrap who welcomed it as long as the scrap cost fit their parameters.  Of course, some domestic producers had for decades combined mine production with scrap usage in their dual roll as custom smelters and miners.

            The broadening conception that copper scrap was truly, “the mine above the ground” probably began with the great copper strike in 1967, a nine-month shut down constituting the longest industrial strike in history.

            We could spend hours discussing this subject but for our purposes the change in the copper scrap industry that relates to the producers and the decline and fall of the custom smelter goes something like this:

            One of my early jobs at Diversified Metals was to visit and assess every U.S. copper producer, smelter and refinery as to its potential to consume #2 copper and #2 copper choppings (Cobra).  As a result, several new delivery points for scrap were developed and toll or exchange business was concluded.  We expanded our dealer purchases to cover this new demand.  Other merchants also participated.

            In the 1980’s, U.S. producer interest in dealer’s #2 copper ebbed and flowed with some sizable tonnage going to White Pine, MI briefly in the late eighties.  Even the old Quincy Mining Company in Michigan had a short season in the sun.  Both locations provided Midwest dealers with new premium outlets, for as long as it lasted..

            Also, in this period new producer interest in #2 scrap was developed at some West and Southwest smelters and refineries.  All this business was supported by Comex prices in the 80-90¢ range.  However a decline to the low 60-70¢ brought this activity to a halt particularly when faced with exceptionally strong buying from the Far East.  This producer interest gave rise to new #2 markets particularly for Midwest dealers and should be viewed in the context of the decline and fall of the USA custom smelter, our next topic. 

            This very significant change in the copper scrap industry must be viewed against the historical background going back to the early 1900’s. Although my outline may be subject to correction, at that time 2 or 3 smelting corporations in the New York and New Jersey area made up the custom smelting industry using #2 scrap as a basic feed stock.  Not one of these smelting facilities is presently in existence.