Wired thieves insatiable demand for copper creates chaos

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In the middle of the night, a Muswellbrook farmer smelled smoke. A grass fire was spreading quickly across his bottom paddock.

Criminals looking for copper to sell as scrap metal had used a chainsaw to bring down a power pole and left live electricity wires trailing through the grass in their wake. As the farmer rushed out to fight the flames, he had no idea of the danger he was rushing towards. The fire engulfed 50 hectares of farmland before it was extinguished.

Copper thieves started a fire in Muswellbrook when they cut down a power pole with a chainsaw.Credit: Ausgrid

Since that bushfire in the Upper Hunter of NSW in September 2021, copper thieves have caused chaos of all varieties. They have stripped copper from electricity substations and plunged thousands of homes into darkness, ripped it out of the rail network and caused train delays, and used shovels to dig cables out of the ground.

In June, thieves near Merriwa cut the copper earth tails off more than 50 Ausgrid power poles along the Golden Highway in the Upper Hunter. The Sydney Trains network has reported 57 copper thefts this year alone – an average of more than one a week. Thieves have also targeted the National Broadband Network on the Central Coast, prompting warnings to recyclers to look out for cabling with “nbn” printed on the outer sheath.

In early 2020, thieves lifted 2.5 kilometres of freshly laid copper traffic signal cables worth an estimated $200,000 from a new housing estate at Oran Park in Sydney’s south-west. The case remains open.

The thieves are driven by the opportunity to cash in on the high prices copper and other recyclable metals are collecting on the international market. Copper is one of the best conductors of electricity and used widely in electrical circuits. It fetches about $12.80 a kilogram on the international market, though the price was as high as $16 in early 2022.

Petty thieves and meth addicts sell it to scrap metal yards, where it is packed into shipping containers and exported overseas. Those working in the industry suspect organised-crime groups are using it to legitimise dirty cash.

The state government regulated the scrap-metal trade in 2016, prior to which the industry had been a free-for-all that was highly attractive to criminals. The new laws prohibited the sale of scrap for cash, and required dealers to report to police any metal that they reasonably believed was stolen. Dealers were also required to keep records of their transactions.

But the laws did not eliminate criminality from the scrap-metal trade, and it opened new opportunities in the black economy. Many dealers continue to openly advertise scrap for cash.

Operational police told a statutory review of the laws last year that the number of registered dealers had roughly halved since the act began, though the evidence suggested many businesses continued to trade outside the law. The fine for trading without a licence was only $1900 less than the cost of registration and could easily be absorbed as a business cost. Revenue NSW said they had issued 36 fines for breaching the act since January 2017.

Scrap metal to be sorted at a legally compliant scrap metal recycler in Sydney’s west.Credit: Nick Moir

National Waste and Recycling Industry Council chief executive Rick Ralph said unscrupulous scrap-metal dealers were driving the crime spree, flouting the law and accepting cash payments before exporting the valuable metal overseas.

“The fact all this copper is disappearing and nobody knows where it is going is a part of the industry that needs to be investigated,” Ralph said. “It will probably involve, in some respect, money laundering. You need a dedicated squad that is focused on illicit activities to stop it.”

While police recorded 678 copper thefts across the state in the 12 months to March – a 35 per cent increase on the previous 12 months – there were only three recorded instances of people receiving or handling stolen copper.

One business owner, who asked not to be identified due to fears he would be targeted by organised-crime groups, said police recently visited his scrapyard and seized stolen metal that he was able to identify had been sold to him by another scrap dealer. But when police visited the original dealer they learned that the stolen metal had been acquired in a cash sale, with no record of the seller. They took no action against the dealer who had paid cash.

The power pole cut down with a chainsaw in Muswellbrook.Credit: Ausgrid

“In 20 years in this industry I’ve seen everything,” an employee of the business owner said. “I’ve seen pipes ripped from churches, and plaques ripped from cemeteries.”

Waste Contractor and Recyclers Association of NSW executive director Tony Khoury said the laws were sound but their lack of enforcement had put law-abiding businesses at a competitive disadvantage. The act was tightened last year, and higher penalties were introduced, but it had not been accompanied by an increase in enforcement and there has been no change on the ground.

“The rogue element of the market have little regard for the laws and they know that the police aren’t enforcing them,” Khoury said. “They continue to pay cash and that then takes business away from the legitimate operators.”

Further down the line, the mills that buy scrap metal to produce steel are also feeling the pinch. Legitimate scrap dealers strip out the valuable components of the metal and sell it for re-use, sending the remainder to landfill and paying a tax on that component. But cheaper operations typically skip the recycling part and send the entire package overseas in shipping containers to avoid the waste levy.

Scrap metal is being exported overseas, causing issues for steel manufacturers.Credit: Louise Kennerley

This is occurring in such vast quantities that steel mills are struggling to source recycled metal locally. Australia exported more than 2.5 million tonnes of scrap metal in 2021-22, and the value of the export has increased by about 50 per cent in just two years, to more than $3 billion.

In 2020, steel manufacturer BlueScope started importing scrap metal from overseas for the first time. Corporate affairs director Michael Reay said the biggest factor driving the scarcity of scrap metal was the “containerisation” of metals. BlueScope had increased its recycling in each heat of steel from 18 per cent to 25 per cent in recent years to improve its carbon intensity, and aimed to boost the figure to 30 per cent. “But we are constrained by the local scrap steel supply,” Reay said.

Australian Council of Recycling chief executive Suzanne Toumbourou said the undercutting of scrap dealers that had the capacity to separate recyclable metals for re-use meant more scrap was being exported to countries that did not have robust infrastructure or adhere to the same environmental standards. The council wants the federal government to require scrap-metal dealers to process their materials before export, which is already a requirement for plastics, paper and tyres. “We want to see much, much stronger enforcement for rogue operations,” she said.

The NSW Environmental Protection Authority only requires licences for businesses with the capacity to process more than 150 tonnes of scrap metal per day, or 30,000 tonnes per year. Just seven companies in NSW hold an environmental protection licence for processing scrap metal.

Hot coil rolls produced at BlueScope Steel at Port Kembla’s Steelworks.Credit: Bloomberg

Police told last year’s statutory review that it was difficult to prove that dealers who advertised cash for scrap were actually doing so. In some cases the dealers were placing a small “no” before large lettering that advertised “cash for scrap”. Dealers can also get around the rules by registering as car-wreckage dealers, who are not subject to the same ban on cash – although that ban is due to come in this year. About 30 per cent of scrap-metal dealers also hold motor recycler or repairer licences.

Business records of scrap-metal dealerships that advertise cash payments show a complex web of interconnected companies, controlled by the same individuals. Those contacted by the Herald denied actually handing out cash and insisted that payments were completed by electronic funds transfer.

A director of a Sydney-based copper recycler said his business did not occupy enough land to run an export operation, and scrap received was sold on to middlemen as quickly as possible. The man who could not be identified for legal reasons said he did not always know the source of the metal he received. “If someone turns up in a ute or a car with metal, we’re not going to ask, ‘Where did you get that from?’” he said. “They will never come back to us. They will say, ‘It’s none of your business’, and they will go to the other place.”

Police Minister Yasmin Catley said she had recently met with representatives from the scrap-metal industry and would continue to engage with them.

Scrap metal at a legally compliant yard in Sydney’s west.Credit: Nick Moir

“Police resources are an operational matter for the NSW Police, they’re deployed when and where they’re most needed,” Catley said.

“Officers are highly mobile and flexible to respond to the full gamut of incidents across the state. This includes undertaking compliance inspections of scrap-metal dealers where there is intelligence or complaints that indicate possible non-compliance and/or criminal activity.”

Meanwhile, copper theft continues to occur in fits and spurts. Ausgrid has had a spate of thefts from its network in the past three to four months, especially around Newcastle and the Hunter Valley. Essential Energy said its network has also been hit, particularly on the North Coast, with some thefts compromising the safety of maintenance crews.

“They’re choosing some of the more rural locations to cut some of these poles down – poles that may go through other people’s properties or go down roads that are untravelled as much as others,” Ausgrid’s field operations executive general manager Sam Sofi said.

Ausgrid said the case of the felled power pole that started the Muswellbrook bushfire has never been solved.

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