OT: scrap value crashes

Trains Magazine General Discussion
1

Will this mean that old locos are less likely be scrapped? Or that vandals are less likely to steel copper from static display pieces?

http://www.nytimes.com/2008/12/08/business/08recycle.html?_r=1

The economic downturn has decimated the market for recycled materials like cardboard, plastic, newspaper and metals. Across the country, this junk is accumulating by the ton in the yards and warehouses of recycling contractors, which are unable to find buyers or are unwilling to sell at rock-bottom prices.

One reason prices slid so rapidly this time is that demand from China, the biggest export market for recyclables from the United States, quickly dried up as the global economy slowed. China’s influence is so great that in recent years recyclables have been worth much less in areas of the United States that lack easy access to ports that can ship there.

2

The price of rail fell down that same well from in excess of $800/Ton to just less than $300/ton. The pressure to scrap certail out of service rail lines is backing off as the lagging valuation price drops.

The pressure in Asia to industrialize and build railroads has not completely gone away though.

3

Further on MC’s response - You betcha ! Here’s a little tale to support it:

Back in June (2008), SEPTA (the SouthEastern Pennsylvania Transportation Authority) expressly decided to take advantage of these extraordinarily high scrap market prices. SEPTA advertised for and took bids on the removal and sale of approx. 7.7 route-miles of double track = approx. 15.4 track miles (81,312 Track-Feet or 162,624 Lineal Feet of rail). It was the former Reading Railroad’s Bethlehem Branch, from MP 45.4 - Hilltop, PA (around Shelly, just south of Coopersburg) to MP 53.1 - Hellertown, PA, and I believe it was mostly 130-lb. AREA section, both the T-rail and H-F (“Head-Free”) sections, for an estimated quantity of 3,146 gross tons (evidently without any deductions for head or curve wear, or other losses, or additions for the joint bars and Other Track Materials). Further, in anticipation of the soon-to-be-cleared Right-of-Way, several of the local municipalities south of Allentown entered into an agreement with SEPTA to lease the R-O-W for creation of a new rail-trail.

The apparent successful (high) bidder was Vossloh Track at $997.25 per gross ton = $3,137,348.50 total; the 2nd highest was Unitrac Railroad at $863.09 ($2,715,281.14); and the 3rd highest was A & K Railroad Materials at $768.86 ($2,418,833.56). The complete Bid Tabulation as posted by SEPTA can still be found (as of today) at:

http://www.septa.org/business/bidtab/Internet%20Bethlehem%20RR%20Line%20Tabulation.pdf

If we “guesstimate” that the removal cost was in the range of, say, $4.00* per Track-Foot, then the total cost for removal would have been 81,312 T-F x $4.00 = $325,248, which the contractor would have to

4

[quote user=“Paul_D_North_Jr”]

Further on MC’s response - You betcha ! Here’s a little tale to support it:

Back in June (2008), SEPTA (the SouthEastern Pennsylvania Transportation Authority) expressly decided to take advantage of these extraordinarily high scrap market prices. SEPTA advertised for and took bids on the removal and sale of approx. 7.7 route-miles of double track = approx. 15.4 track miles (81,312 Track-Feet or 162,624 Lineal Feet of rail). It was the former Reading Railroad’s Bethlehem Branch, from MP 45.4 - Hilltop, PA (around Shelly, just south of Coopersburg) to MP 53.1 - Hellertown, PA, and I believe it was mostly 130-lb. AREA section, both the T-rail and H-F (“Head-Free”) sections, for an estimated quantity of 3,146 gross tons (evidently without any deductions for head or curve wear, or other losses, or additions for the joint bars and Other Track Materials). Further, in anticipation of the soon-to-be-cleared Right-of-Way, several of the local municipalities south of Allentown entered into an agreement with SEPTA to lease the R-O-W for creation of a new rail-trail.

The apparent successful (high) bidder was Vossloh Track at $997.25 per gross ton = $3,137,348.50 total; the 2nd highest was Unitrac Railroad at $863.09 ($2,715,281.14); and the 3rd highest was A & K Railroad Materials at $768.86 ($2,418,833.56). The complete Bid Tabulation as posted by SEPTA can still be found (as of today) at:

http://www.septa.org/business/bidtab/Internet%20Bethlehem%20RR%20Line%20Tabulation.pdf

If we “guesstimate” that the removal cost was in the range of, say, $4.00* per Track-Foot, then the total cost for removal would have been 81,312 T-F x $4.00 = $325,248, which the contractor would have to pay in addition to the purchase price to SEPTA. Dividing that cost by the estimated 3,146 gross tons is another $

5

This may help us out a bit. We have the go-ahead to install a passing siding, and even some funding that hasn’t disappeared yet. A local industry pulled up their siding and currently has the rail stacked up in their materials yard.

The major hang-up right now is mostly procedural - they aren’t quite sure how they want to/can give it to us. A drop in scrap value, however, helps reduce the possible return from selling it as scrap, which makes turning it over to us just the much more attractive.

We can hope.

6

Wait a while (If you can) for that lower rate to trickle down and you can negotiate.

(in the meantime head up to the peanut gallery with Chad’s popcorn, watch the beancounters get into a knifefight over who eats the raw material cost for material already purchased…[:D])

7

May I suggest that a little investigation, research and inquiries here may help your cause considerably ? Specifically:

  • What nominal weight (lbs./ yd.) and “section” is the rail ?

  • What condition is it in with regard to head wear, curve/ side wear, corrosion along the edges of the base, etc. ?

  • How much (LF) is there, with regard to a full flat-bed truck load(s) of 22 - 24 tons ?

Once you have that info, then have someone affiliated with your railroad make some discreet inquiries of the local scrap dealers to gauge the current market, so as to evaluate your potential donor’s other options, and what the potential benefit / payments to them from the sale of the rails as scrap would be. You may find that the rail is or isn’t in much demand for “relay” rail on the commercial market, particularly not if it less than 100 lbs. / yd., an odd-ball section, badly worn, or corroded, or substantially less than a full truckload. Further, only certain sections and metallurgies are preferred for “reroll” in reinforcing bars, fence posts, bed frames, and whatever else they do with it. If it’s not suitable for either relay or reroll, then it’s probably destined for scrap as “crops”, which have to be cut (torch) or broken (hydraulic shear) into short pieces less than 2 ft. or 18 in. long - an added cost that subtracts from th

8

AFAIK, the donation is a done deal, if they can work out the details. The more-or-less local company was taken over by an international firm. In the “old days” we’d probably already would have had the rail stacked up at our facility. Now “corporate” gets a little more involved, which just muddies the waters.

I think we have transportation already worked out, for that matter - it’s only a short distance IIRC. I think the switch is still in place, so we’ve got to get the owning RR to pull that. We’re building a runaround, so we’ll need another, but, as I said, the funding looks good for that.

The scrap angle hasn’t really been brought up, but if it is, the lower value now might make giving us the rail look more lucrative than selling it outright.

9

I know that the daily train to the scrap dealer here is a lot shorter.

dd

10

It’s not just scrap prices that have fallen, but new metal too. Several copper mines in Arizona are laying off workers because the price of and demand for copper has dropped so drastically they are cutting back on production.

11

Paul:

If I were in Tree’s outfit, I would hope that the turnout’s rail section is bigger than what they are running on and still is a section that is rolled today (so you can get spare parts out of the planing mill for the frog, stock rails and switch points down the road.)

Then again, if the switch is in Brand X’s main track, fat chance that it belongs to the industry. Division of ownership is most likely at the clearance point. But, if they give to you, take it and be sure to gather up all the special OTM and trackwork that goes with the switch.

Mud

12

I haven’t looked at our current station track, but I’m certain it’s relay as well. IIRC, the fellow who is trying to mastermind this said it was compatible rail.

I believe it ran off an old DL&W branch, now Susquehanna. Don’t quote me on that.

13

“The pressure in Asia to industrialize and build railroads has not completely gone away though.”

I was wondering if all of Asia will have a complete railroad system to haul heavy freight and long distance passenger trains.

Andrew

14

Perhaps thieves won’t steal the wires for streetlights as often now.

15

Quite true. Or at least, if they are still stealing stuff, they aren’t trying to sell it. The number of people coming to the scrap yard where I work has fallen to almost zero (from 30-50 per day when prices were so high).

There is some scrap metal that is so not in demand, that we are charging customers to pick up their scrap, and of course they are not getting paid for it (a few months ago it was selling for $200-300/ton). These are companies that just need the stuff out of their building because they have no means of storing scrap in hopes of the value rising.

16

Rio Tinto, the mining company who bought ES44DCis for service in Australia, is laying off 14,000.

http://www.telegraph.co.uk/finance/newsbysector/industry/mining/3699312/Rio-Tinto-announces-14000-job-cuts-as-metal-boom-deflates.html

Rio Tinto announces 14,000 job cuts as metal boom deflates

By Bonnie Malkin in Sydney
Last Updated: 12:26PM GMT 10 Dec 2008

Rio Tinto, one of the world’s biggest mining companies, has announced plans to cut 14,000 jobs and scale back its spending plans by $5bn as the global slowdown eats away at demand for the world’s metals.

17

It is affecting the scrapping of engines. NRE was on a scrapping tirade but when the prices crashed, NRE halted scrapping engines. CN also seems to have stopped scrapping engines at Woodcrest for now.

18

Now might be a good time to save some diesels from being scrapped[:P]