The 2013 edition of the 20 Largest Nonferrous Scrap Processors List is a reflection of the changing dynamics in the scrap metal business. In years past, scrap metal companies grew through acquisitions, which rapidly boosted the volume of nonferrous scrap they handled.
However, the trend toward large-scale consolidation has slowed. Whether an after-effect of the recession that hit in late 2008 or the fairly slow recovery, many of the dominant scrap metal recyclers have been less willing to take on significant debt to acquire additional capacity.
One of the few large acquisitions in North America in the past year was the purchase of Milwaukee-based Miller Compressing by Alter Trading, headquartered in St. Louis. The combination of the two, both of which appeared in our 2010 20 Largest Nonferrous Scrap Processors List, has boosted Alter’s position on this year’s list. Along with increasing the volume of nonferrous metals the company handles, the merger boosted the number of scrap yards Alter operates to more than 40.
Although acquisitions haven’t been as significant throughout the past three years, that doesn’t mean that larger scrap metal recyclers haven’t grown the number of operations they manage. According to our 2010 list of the largest nonferrous scrap metal processors, OmniSource operated 42 yards. The company now has more than 80 scrap yards under its control. While OmniSource continues to strengthen its coverage in the Midwest, it also has recognized opportunities in the South. The company presently has roughly two dozen scrap metal processing facilities in the Southeast.
CMC Recycling also has grown its operations. The company, which reported 48 scrap metal facilities in 2010, now says it operates more than 60 recycling facilities, primarily in the South and Southwest United States. CMC also has added to its shredder capacity, which provides the company with more zorba.
Other companies also have expanded their number of operations, which ultimately helps to boost the volume of nonferrous scrap they handle.
Benefits of Scale
The largest nonferrous scrap processors continue to be publicly traded companies, such as OmniSource, a part of Steel Dynamics Inc.; Sims Metal Management, a stand-alone scrap recycling company; David J. Joseph, a part of Nucor; Commercial Metals; and Schnitzer Steel.
Of these publicly traded companies, four of them also operate steel mills. And, perhaps more uniquely, SDI, through a joint venture with Spain’s’ LaFarga Group, recently opened a secondary copper smelter in Indiana.
Companies such as DJJ, OmniSource and Schnitzer have larger footprints than their private competitors, so they are able to process greater amounts of material.
Ostensibly, companies installed auto shredders to boost the amount of ferrous scrap they had access to. These shredder operators also are installing far more sophisticated downstream separation and sorting systems, which allow companies to recover more nonferrous metals (zorba) from their auto shredder residue (ASR). The Institute of Scrap Recycling Industries Inc. (ISRI), Washington, D.C., defines zorba as a fragmentized nonferrous mixed metal scrap from auto shredders. Zorba consists of a combination of nonferrous metals, such as aluminum, copper, lead, magnesium, stainless steel, nickel, tin and zinc, in elemental or alloyed form.
The growth in zorba as a nonferrous metal, however, has skewed the profile of the large nonferrous operations. In the past, companies that focused on nonferrous were content to handle less material by volume, though price spreads were more lucrative. However, that situation has since changed. Along with copper, brass, aluminum and other nonferrous metals, zorba is entering the market in much larger amounts.
Despite the ups and downs in the metals recycling industry throughout the past five years, the number of auto shredders operating in North America has soared to roughly 350. As a result of the increase in the number of auto shredders in operation in North America, scrap processors have experienced significant margin compression because of the intensified competition for material to feed their auto shredders.
However, Sims Metal Management, still one of the largest processors of nonferrous scrap in the world, has been closing down its inefficient operations and selling off some of its assets as it seeks more control over its operations.
Many of the largest scrap metal companies operate a greater number of auto shredders, which means they handle more zorba. However, while updating and amassing information for this list, several sources have nitpicked the inclusion of zorba, which is recovered from auto shredder fluff. Several companies say they classify the material with ferrous, while still others say they do not consider the material a nonferrous metal and do not track its volume levels.
While privately owned companies may lack much of the capital required to open dozens of locations throughout the country, they do have their advantages. Alter Trading, for example, has grown its locations in the upper Midwest through a combination of steady expansion and strategic acquisitions (the company’s purchase of Milwaukee-based Miller Compressing in the third quarter of 2012) has strengthened its position on this year’s list of the largest nonferrous processors.
Additionally, the retrenching of some larger players has opened the field to smaller, aggressive regional players, who have been building up their assets and widening their coverage areas.
The sale of some assets wasn’t necessarily enough to drop some of the largest scrap metal companies (especially the publicly traded firms) from the list of the largest nonferrous processors in 2013, but it could provide an avenue for regional players to add to their portfolios of locations with strategic purchases.
Other companies have been able to hold onto sizable operations by sticking to their core businesses. For instance, Cohen Brothers, a Middletown, Ohio-based scrap metal recycler, has steadily grown its operations, which were at one time focused in southwestern Ohio. The company now has 20 facilities throughout Ohio, Indiana, Kentucky and Tennessee.
Going forward, the spread between the largest nonferrous processors and those further down the list may narrow as the scrap metal sector undergoes refragmentation.
Danny Rifkin, president and CEO of Waterloo, Ind.-based Metal-X (profiled on page 56 of this issue of “Recycling Today”) notes that after bulking up through consolidation, many large scrap companies have been selling off assets or closing down operations. This has, in turn, created opportunities for small, nimble scrap metal recycling companies to grow and build their operations.
The author is senior editor of Recycling Today and can be contacted a firstname.lastname@example.org. Editorial Director Brian Taylor also researched figures for this list.