Manufacturers must take action against secret scrap thieves, says expert

Out-Law Analysis | 07 Dec 2011 | 5:05 pm | 2 min. read

OPINION: Railway tracks and church roofs have never been more in the news. The steady rise in commodity prices has led to a rash of thefts of metals from unlikely places, but it could be manufacturing companies who are the biggest victims.

The profile of the issue is such that there is a bill progressing in the Lords . Lord Faulkner's bill seeks to implement changes suggested by chief constables recently . It seeks  to tighten up on registration of scrap dealers and to prevent payments for scrap being in cash to aid tracing of thieves.

Periodic thefts of lead from church roofs and copper cabling from railways are serious, but manufacturing companies can suffer systemic thefts over surprisingly long periods . This is happening because scrap metal is so valuable.

Scrap copper is now called 'semi-precious' by some. Even after recent price falls it trades at around $8,000 per tonne, and with a high density it is easy to transport and hide high values of metal , so is ideal as the subject of thefts.

While some of the reports about thefts may make company management feel powerless, there are measures that they can take to stop them happening.

In a recent case a long term fraud was uncovered involving a scrap merchant and a manufacturer's own staff. Weighbridges had been interfered with to give false readings of what was being taken out of a facility, and container weights were overstated for the same reason.

This allowed scrap worth more than £500,000 to be stolen from a manufacturer over a two year period.

Another company recently found that scrap had been undersold for five years without a price check. The prices being paid were significantly below market rates and the case only emerged when an employee went on holiday and a colleague providing cover obtained three quotes which showed that the prices that had been paid were inexplicably low. 

So what can manufacturers do? There are some simple measures which should catch many instances of organised theft.

The keys to finding and stopping thieves are strong custody of materials and effective stock keeping and supervision systems.

CCTV systems are frequently installed on weighbridges. But the coverage needs regular review to look for suspicious behaviour. Audits should be carried out regularly to make sure that policies are being fully followed and that equipment is not interfered with or bypassed.

Effective capture of scrap volumes at point of despatch , and audits of scrap sale estimates versus actual quantities sold should be carried out. Tendering of scrap should also be the subject of independent oversight from persons not tasked with carrying out the tender. This helps to ensure that prices accord with market rates and that there are clear reasons if some buyers are preferred on a regular basis .

The systems for physically moving scrap around should be checked for weaknesses.

If anomalies are found they should be investigated thoroughly  so that essential proof of the scam  can be captured and preserved to enable effective disciplinary and recovery action.

Regular deletion of CCTV records is one of the typical shortcomings and something that can be easily avoided when data storage is so simple and cheap today.

Scrap theft on an industrial scale is happening and it is affecting the very manufacturing firms on which the Government is placing so many hopes for economic recovery. Those companies should be finding out if it is happening to them because if it is, there most certainly is action they can take.

Andrew Masterson is recovery expert at Pinsent Masons, the law firm behind Out-Law.com.