Scrap metal prices have fallen with a heavy thud since September, hammering Billings recycling businesses that have had to cut hours and lay off workers.
"It's like a morgue down here. There's nothing going on," said Don Cameron, assistant manager for Pacific Recycling.
"I've just never seen anything like it, and I've been in business since 1978," said Jim Gallup, president of Golden Steel & Recycling. "I've never seen it go so fast, so hard."
Since September, scrap iron prices have fallen from $130 and $140 a ton to $40 a ton. Clean scrap aluminum has dropped from 55 cents to 15 cents a pound. One of the few bright spots is nonferrous metals, such as copper, which has fallen only 90 cents a pound, to about $1.30.
"There's always been a fluctuation in these markets," Cameron said. "The thing that makes this one, the effect more pronounced, is it's such a big hit so quickly.
"In all honesty, things were overpriced. And then it all came crashing down around us."
Cameron said Pacific was lucky to not be overstocked with scrap metal when the downturn hit. Each month, the business would typically ship four and sometimes five rail cars, each containing about 120,000 to 140,000 pounds of material, to be melted down at steel mills. But for six weeks after the September crash, mills weren't accepting any more scrap metal. What's more, steel mills that were operating at 88 percent capacity back then are now down to 45 percent.
To add to the misery, mill purchase orders for scrap made in July and August by overseas clients such as China weren't honored, Cameron said. The buyers simply walked away.
As the steel mills' stock has depleted, Pacific has started to ship again - four cars last month, 10 this month.
"But how long that lasts is anybody's guess," Cameron said.
Golden Steel is shipping only 3 percent of what it did months ago, at the height of the market.
Since the downturn, Pacific has closed its doors on Saturdays and laid off five people. Just across the street, Golden had to lay off six workers.
"The market will come back when demand increases," Cameron said. "But it's going to take some time. My feeling is it's going to take longer than the spring. I'm hoping that by summer things will pick up and we'll have a full crew again."
The market's not down just for for scrap iron. Fiber products such as cardboard, newspaper and plastics have also taken a hit. Recyclers aren't offering any money for fiber products brought in.
Chip Horn, of Allied Waste Recycling, is philosophical about the prices. They've been up, and down, before.
"It's crashed pretty hard, but these things happen, you've got to roll with the business," he said.
But he agreed that this tumult is unusual in its severity.
"When it first started going two months ago, it went pretty fast," Horn said. "It was pretty hard to stay ahead of the curve."
Recyclers who stockpiled metals in hopes that prices would climb even higher have been hit hardest. According to the Wall Street Journal, scrap dealers in Houston, Denver and Cincinnati had to close their doors after they bought high and the market collapsed.
"We're projecting our business to be off 70 percent for 2009," said Gallup at Golden Steel. "We've seen these cycles. We were prepared for it. We figured that because the prices were so fast and furious, that it would come, but not at the speed and severity that it did."
Now the recyclers are faced with a conundrum - how long to hang on to metals in hopes that prices will rebound so they'll not be forced to take a huge loss.
"We can only hang on to it for so long before we run out of room or money," Gallup said. "Hopefully, as things take effect that the federal government is doing, that will help. I'm more optimistic than some people. I think 2009 will start to show some strength."
Horn said scrap dealers, like farmers and ranchers, are at the mercy of the commodities markets.
"The only difference between us guys and the farmers is that we don't get subsidized by the farm bill," Horn said.
Contact Brett French at email@example.com or at 657-1387.