Low scrap metal prices hurting even U.S. garbage scavengers

[July 06, 2016]  By Brendan O'Brien
 
 MILWAUKEE (Reuters) - Erica spends four hours daily walking miles of Milwaukee streets and alleys, digging through garbage and stuffing her red plastic grocery cart with aluminum cans and other small metal items to sell to support her three children.

The 34-year-old scavenger has had to work longer and harder over the past year, underlining how a drastic decline in scrap metal and commodity prices has hurt even the poor who collect discarded metal to sell to scrap yards.

Two years ago, Erica, who declined to give her last name, would have earned about $30 for a cart full of scrap. Now she makes about $15 due to the plummeting prices.

"It is tougher to feed my family," Erica, who wanders the streets while her children attend school. "I have to panhandle and do other things to make ends meet now, or make more trips."

Prices have fallen mainly because of a downturn in global demand from manufacturers, especially in China, pressure on supplies, and the increased use of substitutes, said Joe Pickard, chief economist and director of commodities at the Institute of Scrap Recycling Industries.

"We get really walloped when all of those things are combined," he said.

An index kept by the trade organization showed a downward trend in ferrous scrap metal commodity prices for several years until a plunge in 2015 made it probably the industry's worst year in decades, if not a generation, Pickard said.

For example, the price for industry benchmark No. 1 heavy melt scrap metal was about $500 a ton in 2008 before sliding to about $330 at the beginning of 2015. It then fell to about $170 by the end of the year, Pickard said.

'ABSOLUTELY HOMELESS'

The fall in base metal and steel prices over the past two years has been the biggest and longest rout since the 2008 global financial crisis, as China's slowing economic growth has fueled concerns about waning demand for industrial metals.

"When prices fall to a certain point, it just doesn't make any economic sense for the peddlers to collect the scrap," Pickard said. "A lot of those peddlers have had to look toward other ways to make money."

A scrapper heads toward a mountain of metal at a scrap yard in Milwaukee, Wisconsin, U.S. June 30, 2016. REUTERS/Brendan O'Brien

In the Detroit area, lower prices have financially crippled scrappers, said Chad Audi, president of Detroit Rescue Mission Ministries.

"Many are no longer in business and some have become absolutely homeless because they can no longer afford even the one-room apartments they used to rent," he said.

The downturn in prices has forced many scrappers, some of whom steal metal from abandoned Detroit buildings, to rely more on the mission's job training program to find more substantive ways to make a living, Audi said.

Milwaukee scrapper Darrel McVane was averse to asking for help until recently. The 47-year-old was self-sufficient for years, thanks to scrapping. But now, with his income cut in half, he relies on his brother to help pay his rent and on handouts he would prefer to avoid.

"Now I have to go to a soup kitchen every Wednesday to eat," he said as he pushed a cart on the city's North Side.

(Additional reporting by Josephine Mason in New York; Editing by Ben Klayman and Richard Chang)

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