Fighting Scrap Theft

"Metal theft has become a widespread and serious concern," Steve Hirsch, associate counsel and director of state and local programs for the Institute of Scrap Recycling Industries Inc. (ISRI), Washington, says. "ISRI and its members want to address this issue and be part of the solution because, aside from being concerned members of the community, much of the scrap that’s stolen is stolen from our members," he adds.

In the last year, media outlets ranging from local newspapers to the Wall Street Journal have reported on incidences of metal theft. Given the size and extent of the problem, it was inevitable that municipal officials and scrap yard operators would look for ways to combat it, especially as metal prices continue to increase.

In an attempt to address the issue of metal theft, some municipalities have enacted ordinances. While well-meaning, those ordinances have presented significant problems for recyclers. At the same time, ISRI and a number of pro-active recyclers, such as Randy Katz of City Scrap & Salvage, Akron, Ohio, and Ben Eisbart, executive vice president of OmniSource Corp., Fort Wayne, Ind., have developed effective procedures that can help to minimize a scrap dealer’s exposure to stolen scrap.

To help readers size up the overall situation and beef up their own anti-theft efforts, a look at the genesis and limitations of legislation regarding scrap theft and how recyclers can help themselves, not just through their own efforts but also cooperatively with legislators and the police, can be helpful.

Josh Carter of Integrity Metals in Connerville, Ind., says, "Our goal is to buy metal. We’re not the police. But we can certainly help the police track things."

LEAPING BEFORE LOOKING. Hirsch suggests that the first municipal ordinances probably originated as a response to complaints filed with the police. He imagines that city council members probably said to themselves, "Hey, we have these pawnbroker laws on the books, why don’t we just apply them to the scrap dealers also?"

With variations, the ensuing ordinances typically have mandated the following key provisions:

Hirsch, however, notes that there are significant distinctions between pawnbrokers and metal recyclers, which is why ISRI and the scrap recycling industry in general view such "tag and hold" provisions as especially onerous. "If someone goes to a pawnbroker, they may offer a gold watch with a serial number or a diamond ring with unique identifiers so that (a) money could be lent on it and (b) the owner later has an opportunity to get it back out of pawn," Hirsch says. "Recording that information and keeping it in a drawer for 30 days is not much of a problem because, oftentimes, they might be keeping [the item] for 60 or 90 days anyway as loan security.

"That’s very different from what our members do. Our members might be receiving not two or three watches a day, but 300 or 400 truckloads of material a day," Hirsch says.

"Secondly, it’s fairly rare that scrap items would bear unique identifying marks. Much of it is copper tubing, wiring, cut aluminum or other relatively common items that can come from any number of sources."

Hirsch continues, "Further, the idea that you could hold 400 truckloads of material for 30 days—that’s 12,000 piles—is unreasonable." He adds that this is especially unreasonable for small yards or those in urban locations, which often lack physical storage space.

"Lastly, I must mention that our members are essentially in a commodity business. The price of copper goes up and down and can vary quite rapidly," he says. "When our members purchase material, oftentimes their costs have been set at the then-current market price. Accordingly, they want to process that material and sell it fairly quickly because the market may change.

"So for all those reasons, we think that the "tag-and-hold" provision is a bad idea."

Hirsch adds, "We recognize theft is a problem and we want to be part of the solution; but, it should not be on the scrap dealers alone to solve this problem."

IMPACT ON OPERATING COSTS. ISRI’s Hirsch says that, for the most part, the ordinances’ impact on dealers’ operating costs has been incremental and not significant. "Some members keep a paper ledger and copy down information by hand," he says. "Many of our members have a computerized system of one sort or another. There is some cost, but oftentimes it’s not a substantial additional cost if it’s part of their record-keeping and internal reporting," Hirsch says.

However, Hirsch points out that some ordinances require more from recyclers. "Some of the ordinances would require video security systems or would require computer programs to transmit information to the police…and those would have more substantial costs that we would have some issues with." (For example, a video security system could run from $5,000 to $20,000, depending on the system’s complexity.)

In addition to the reasons already offered, ordinances that call for recyclers to tag and hold incoming material are not practical because of the operational disruptions they create, which can be translated into additional business expenses, Hirsch says.

MINIMIZING EXPOSURE. To minimize the possibility of dealing in stolen scrap, scrap processors have adopted a number of policies.

For instance, ISRI members have posted ISRI-furnished signs around their yards that warn would-be vendors that identification will be required to complete a transaction. The association’s members have reported to ISRI that upon seeing these warning signs, some peddlers have turned around and left the scrap yard.

Other recyclers suggest distancing yourself from any would-be seller offering material that raises suspicions.

Carter says he keeps his eyes open for things that are out of the ordinary—say, a guy driving in an old pickup truck with a bed full of brand new aluminum extrusions that look like they’ve come out of a factory.

In such instances, "The first thing we do is offer them pennies-on-the-dollar for the material," he says. "Then we’ll set that material aside, notify the police and let them take it from here. Nine times out of 10, we find it was stolen from a local factory and then we work it out with them. It was their material, maybe we can buy it at (scrap) market value."

OmniSource’s Eisbart advises, "We categorically will not buy manhole covers unless the city brings them to us and says they’re being scrapped. The same for water meters—if clipped off the side of a house, we’re not going to buy them. But, if we get a truckload in from the city, and they confirm they’re destroying them, then we’ll buy them. So, if we see such highly portable items cut apart from a municipal base, the city would have to sell it to us. We won’t buy from anyone else."

After asking for the seller’s photo ID, Katz recommends writing a check for the transaction if the sale amount is greater than $50. "That deters a lot of stolen stuff from coming our way," he says. "Nobody wants a check that can be tracked back."

Many recyclers may wonder what to do when a peddler offering suspicious material enters a scrap yard. Is it best to buy the material or to turn the seller away?

"My local Akron police tell me to buy everything we see because we are doing what we are supposed to do," Katz says. "On the other hand, if the customer ever comes in and claims that ‘You bought my stolen merchandise; I want that back,’ we’d be out financially. Luckily, the customer has always paid us. It’s cheaper to buy it back for scrap value than to re-purchase it new."

SOUNDING THE ALARM. ISRI started a fax-based theft-alert system more than 10 years ago in which it would fax information to scrap recyclers typically within a 60-mile radius of where the theft was reported. Now, ISRI has expanded and modernized the theft alerts into an e-mail-based system. If ISRI gets information on a theft, it will send out an e-mail alert to its members in that state and surrounding states.

In addition to ISRI’s theft-alert system, some pro-active members have established their own informal alert systems. Katz of City Scrap & Salvage was among the first. "I started that whole process, coming up with it about a year to 18 months ago. It just made sense. I have a list of about 25 police detective departments throughout our area. Whenever anything is stolen, they come to me and let me know about it. I send out an e-mail to all the scrap yards and include the police on the distribution list," he says.

"I showed ISRI what I was doing," Katz continues, "and they backed it and built it up from there."

Katz says, "In our facility, about 60 percent of our trade is industrial. The most important thing is notification from the industrial account or the municipality. If we don’t know it’s stolen, we can’t report it and start the process. If something comes in and we don’t have any report of it being stolen, we would buy it and process it and ship it. Whereas, if we know what we’re looking for, we post signs where everybody punches in on the time clock. They see what has been stolen and keep an eye out for it," Katz says.

"Everybody has to have open communication all the way around; it’s the key to making it work," he adds.

Katz has also done reverse theft alerts when the yard receives material that raises his suspicions. In such cases, he alerts the police about the material City Scrap has received, providing a copy of the peddler’s driver’s license. "This way they can search through their records and see if they have any reports," he says.

By virtue of its size, OmniSource has more diversified operations than many other recyclers, meaning it also has more opportunities for exposure to stolen scrap. Eisbart says the insulated wire and cable processed through the company’s granulator results in "chops" that "are very easily traceable because you just don’t get them if you clean out your garage. You have to steal it. So, if we are aware that someone has stolen that material, we’ll call the area scrap dealers, and we’ll let our other yards know." He adds, "We caught somebody who drove 60 miles to one of our other OmniSource facilities trying to sell ‘chops’ to them, and obviously we had the license number and all that [information]."

HELPING YOURSELF. Katz offers this advice based on his experience: "You really need to be very open with your local police department. Show them what you’re doing. Invite them to your yard. If we’re not proactive, they will pass laws and make things very difficult, as they have done in other cities." Katz adds, "It’s in every scrap yard’s interest to be proactive and avoid legislation."

Eisbart says, "Because the price of copper is now relatively high, we’ve spoken with the Realtors’ and the building contractors’ associations advising them how they might help themselves. If, for example, there are copper coils placed on new building construction sites, they ought to spray the copper with fluorescent paint, which wouldn’t impact its suitability for fluid flow." He also suggests spraying the back of aluminum siding with fluorescent paint.

"We’ve alerted our yards that if they’re offered a piece of copper that has a fluorescent paint smudge on it, it’s been stolen and not to buy it."

With these suggestions, perhaps recyclers can take a proactive approach in dealing with scrap theft in their areas, preventing the need for ordinances that could unreasonably hinder their operations.