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Where did the church roof go?

Submitted by on Thursday, 15 May 2008No Comment
Where did the church roof go?

Folklore has it that economic conditions can be accurately assessed by the rate at which lead (US$2,800 per ton) is pilfered off church roofs. Given recent global boom times it is no surprise that worldwide, more incidents of holy roof theft are being reported.

Until examples like these appear it is often overlooked that most metals are quite capable of being efficiently recycled. All that is required to kick-start the process is suitable motivation. This usually appears in the form of a blanket increase in metal prices; which is precisely what is happening at the moment.

So, because recycling moves in concert with the markets – a fact to which numerous wet churchgoers can attest – it has recently become big business. Predictably it is not driven by an altruistic mining industry, but rather by the fundamentals – enormous amounts of ready cash can be made from flogging scrap metal.

And therein lies the rub. Ready cash has the pernicious ability to tempt perfectly well intentioned members of the noble order of scrap metal dealers away from the straight and narrow. The growing nocturnal disappearance of manhole covers (around $20 each) from city streets across the world bears out this unfortunate truth. As does the misappropriation of beer kegs ($50), something which is occurring with increasing frequency in the US. In South Africa, where telephone line theft is endemic, the province of the Western Cape is now reported to be a net exporter of copper (US$8,600/t). No mean feat for an area without any copper mines.

Just as high prices reflect the increase in ‘recycling’ development; it is axiomatic that the growth in the recycling of various metals (fraudulent and legit) will be indicative of increasing metal prices. A decrease in shady scrap metal activity and an increase in crime in an allied industry – such as cheque fraud – will signal a declining market for metals quicker than the usual indicators will. So market commentators would be well advised to keep an eye on the press for reports of ‘metal theft’, to feed into their research and to bolster their price predictions.

Recently there have been numerous well publicised cases of metal theft. A valuable Henry Moore bronze sculpture disappeared from the garden of a stately home in the UK, after some enterprising recyclers decided to put it back into the system. Paradoxically the substantial size of the work was an attraction rather than a deterrent. Art lifts the spirits but in this case, it seems, dark spirits lifted the art.

A few years back, metal prices spiked and a similar incident occurred in Johannesburg. A rather less expensive but perhaps more accessible statue of bronze Springbok pronking (leaping) was, with the aid of a hacksaw, purloined from a public park. Fortunately, the foundry that cast the piece had literally not broken the mould. So the leaping Springbok were recast with bronze the foundry sourced from local scrap metal dealers, which in all probability was the original metal. Now that would be proper recycling.

Last year there were reports from the US of whole lines of parked cars having their exhaust systems plundered. The recyclers were obviously after the platinum ($2,030/oz), palladium ($450/oz), and rhodium ($8,000/oz), in the auto catalysts. The stainless steel casings which they surgically removed were simply a nice bonus. A sign of how the value of stainless steel has risen is that burglars used to take everything except the kitchen sink – now they first take the sink.

Granted, the volume recycled by miscreants is likely to be a drop in the ocean compared with that processed by legitimate recyclers. But, it is probably a more sensitive indicator of metal values, because of a single, fundamental human failing. Villains by their very nature are lazy and on the lookout for a quick and easy buck. They will not exert themselves beyond what is absolutely necessary and should their illicit labours show signs of becoming unrewarding they will, excuse the pun, scrap their recycling efforts and move onto greener pastures.

Interestingly though, in real terms (adjusted for inflation) metal prices are, in most cases, not even close to where they once were. Take gold. The price peaked in 1980 at $850/oz, which in real terms today would be around $2,500/oz. But it currently hovers at $920/oz. So why is that?

Technological advances in metal exploration and extraction are not (yet) being completely counteracted by falling grades, a lack of big mineral discoveries, and cost increases. So there still isn’t as much of a shortage as would be required to drive prices into the stratosphere. But the above list of debilitating circumstances is catching up.

So, it is still unclear whether – as many commentators are predicting –current metal prices have actually passed their peak. Regular updates from the experts of their metal price forecasts are routine. But last year, the convoluted explanations as to why they had gotten their price estimates wrong 98% of the time (which they almost all had) almost eclipsed the actual forecasts for interest value.

But maybe prices are not at their peak given the recent example of the emerging industry of “road furniture mining.” An entire metal bus shelter was nicked in Scunthorpe. There is also the recent report of someone discovering that recyclers had stolen the ornate Victorian cast iron porch outside his house. Frustratingly for him, on reporting the loss, the police persisted in asking him for his ‘Porsche’s’ registration number.

It probably makes sense to look towards the recyclers, rather than the analysts, for a reliable indication of market trends. After all they couldn’t do worse than the professionals. Note that it has been some time since anyone has tried to sell (or buy) the Brooklyn Bridge or the Eiffel Tower. This could mean iron and steel prices still have some way to go. (Apparently a few years back, the Eiffel tower was indeed purchased in a fictitious deal. Afterwards the disappointed buyer said he thought he was dealing with a genuine government official as the very first demand was for a “commission”).

So, as soon as reports surface of someone buying the Lloyds building for scrap, or rumours of the Millennium Bridge being recycled circulate, you can be pretty certain metal prices will finally have peaked and it will be downhill from there.

Dr Tim Williams is a Mining Analyst based in London. David Gemmell is a Project Manager, Freelance Writer and Author living in Johannesburg.

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