China introduced “Operation Green Fence” in February, and recyclers in the United States began feeling its effects in March. As I write this in early May, the topic is still very much on the minds of domestic recyclers, as many of them wonder whether the initiative will last through November as the Chinese government has indicated.
The effects of Operation Green Fence illustrate just how much influence China continues to exert on secondary commodity markets in the United States, even though the country’s economic growth is said to be losing its momentum. Pricing has softened for a number of commodities, including some recovered fiber grades, copper and commodity-grade plastics. Some materials, such as old newspapers (ONP) and mixed paper from single-stream material recovery facilities (MRFs), according to sources, simply are not moving overseas any more for fear of rejection. Other sources say shippers are reticent to ship clean postindustrial plastic scrap to China because if trace amounts of unwanted materials are present, it can lead to trouble for the shipper in terms of rejections and demurrage charges.
According to PPI Pulp & Paper Week, pricing for recovered fiber destined for export to China declined nearly across the board for transactions in May. DLK (double-lined kraft) saw steep declines, falling by $12 per ton to $188 out of Los Angeles, which includes the Port of Long Beach.
Pricing for commodity-grade secondary plastics is declining more quickly than that for engineering grades, sources say. They also express reserve on the part of U.S. buyers, who they say are purchasing smaller amounts of material in anticipation that pricing will decline further as a result of China’s enforcement of its existing policies.
Copper scrap naturally also has felt the effects of China’s crackdown on incoming shipments of scrap material, considering how much of the material the country consumes. According to the London Metal Exchange, the price of copper per metric ton declined from $8,069.55 in February to $7,202.57 in March.
Some recyclers express hope that Chinese consumers of scrap materials will become frustrated with the declining flow of recyclables into the country and urge the central government to ease off of its aggressive inspections. Others wonder if the lower commodity prices were an intended consequence of Operation Green Fence. While the answers to these questions are far from clear for the time being, recyclers say they hope the situation will become less murky with time.
Robert Brewer, CEO of Cleveland-based PSC Metals, wants to remake the scrap recycling company so it can thrive in the rapidly changing scrap metal industry.
Brewer took the top spot with PSC in September 2012 and brought with him a significant background in the metals recycling industry, having spent nearly 20 years working at scrap metal giant OmniSource Corp.
“I had the opportunity to sit in every chair at the company’s Fort Wayne, Ind., headquarters except the CEO position,” Brewer says of his time with OmniSource.
When Brewer says PSC Metals needs to respect its past but also look for ways to change, his industry background gives his outlook weight. The challenge, Brewer says, is changing areas of the company to reflect where the industry is headed while maintaining PSC’s strengths.
“I see myself coming to a company with a group of people who are looking for someone to move the ball forward,” he says. “I found lots of talented people who have some ideas on how to move the business. People are aware and want to be a part of it. What I see is a willingness to take what we know and get to the new place.”
Brewer says a key will be tapping into the backgrounds of many of the company’s employees. PSC has roughly 50 locations in 10 states, in part because of the many acquisitions it has made over the past 20 years. Companies acquired during that span include Luria Brothers, Steiner-Liff Iron, Southern Foundry, Knox Metals, Cash’s Scrap Metal and Iron and Luntz Corp. Brewer says his goal is to reflect the entrepreneurial spirit possessed by these earlier companies.
While tapping into the legacy of the company may help, PSC also must overcome a past that includes having gone through two bankruptcies.
Growth at All Costs
As a result of numerous acquisitions in the mid- to-late-1990s, PSC Metals and its former parent company, Philip Services Corp., became over-leveraged. Ultimately, the weight of the debt and an economic downturn resulted in Philip Services Corp. and several of its subsidiaries, including PSC Metals, filing for bankruptcy protection in the middle of 1999 and again in 2003.
“I think most companies who went through this tremendous growth of consolidation and technology had problems. Everyone grew too fast. There was no thought of what happens when the cliff comes,” Brewer says.
The cliff Brewer refers to is the drop-off in volume and the margin compression that can come with a market downturn.
The involvement of famed investor Carl Ichan has helped PSC Metals to return to its position as one of the largest scrap metal recyclers in the country. Icahn and his affiliates increased their ownership stake in the company to 100 percent during the 2003 restructuring. On Nov. 5, 2007, PSC became a wholly owned subsidiary of Icahn Enterprises LP. The move helped to put PSC on solid fiscal footing.
While the deal gave PSC breathing room, the company needed to reinvent itself to be successful, Brewer says.
To Shred or Not to Shred
One item near the top of the list in PSC’s reinvention is the state of the auto shredder market. According to PSC Metals, which operates 10 shredders in the United States, repositioning its operations to maximize its shredding opportunities is one key to future success.
Brewer says plenty of sharp scrap metal operators feel there is an overcapacity of processing equipment in the market, especially auto shredders. “We have learned that the overcapacity of processing equipment has caused a phenomenon in the market and leaves many shaking their heads,” he comments.
Brewer adds, “Something has to happen internally. We can’t do it the way things were done in the past. We are going through a genesis moment on how we operate. We have to take knowledgeable scrap people and guide them through the paradigm shift.”
Stu Block, president of PSC’s Midwest region, says a current key to success in the scrap metal business is being able to make changes quickly. “Change is important and has to be done quickly.”
Block, who came to the company when his former company, St. Louis-based Cash’s Iron & Metal, was acquired by PSC in 2011, says the acquisition will be beneficial for the company in the long run. “We are making decisions today that will benefit us not only today but tomorrow as well. Our challenges are to think outside the box.”
The shift Brewer wants to implement will require changes in PSC Metals’ approach while still focusing on its auto shredding operations. “There is a new way to do it,” he says of auto shredding. “The market has created a condition that we must react to and conquer. That is what we are looking to do.”
One step the company is taking is empowering the management and staff in different regions to respond to new industry dynamics. “With Bob, PSC is now giving people the room to do what they need to do to grow the business,” Block says. “The first thing Bob Brewer said to us was, ‘What can I do to make you more successful?’ He has encouraged us to grow the business, to make big moves.”
Despite its legacy as a traditional scrap metal company, Brewer says all opportunities are being investigated to strengthen PSC Metals’ bottom line.
For instance, Brewer says he is looking to change PSC Metals’ approach to scrap buying. “Many companies have become fixated on building a system of feeder yards to supply their shredder machines and have lost sight of the value of scrap metal recycling for the community. While keeping the company’s shredders supplied with enough material is important, absence of any focus on community recycling needs is shortsighted,” Brewer says.
Brewer also stresses the importance of trading scrap with other recyclers. “If we are second- or third-best in class in a marketplace, and our technology is not up to the level of the other guy’s a few miles away, we will most likely be most successful as a supplier [to other recyclers with better processing technology]. But, when we are best-in-class in a market area and we have superior technology, we will exploit the opportunity to grow and maximize our success,” Brewer observes.
Brewer says he sees great promise in focusing on PSC Metals’ strengths. “You look at some scrap companies and say, ‘Why are they trying to do it all? They are blowing their brains out to buy scrap and process it with little regard or knowledge of the margin results.’ Today’s successful scrap metal companies have a common theme: Focus on where you are best.”
He continues, “The recognition of the industry paradigm shift drives our strategy on doing what it takes to meet our profitability objectives. If that means we must change our model and process less material in some areas to gain profit, that is what we will do,” Brewer notes.
In the past, large volumes of material with big margins gave scrap metal companies the ability to “hide sins.” However, with margin compression, companies have to be efficient. “You have to do more with less. You have to attract people who bring the work ethic and are willing to drive to push the business to where it needs to be.
“The efficiencies of our business is job one for everyone here at PSC Metals,” Brewer says. “We have had to reinvent and go back to the entrepreneurial roots and look at running the company like a smaller business rather than a big business.”
Brewer says PSC’s business will continue to be focused on scrap metal. However, he acknowledges that customers likely will ask more of the company. “To stay on the cutting edge we must address other customer requirements, like total waste management services and zero-landfill objectives.” He says a better approach to providing such services is to partner with companies focusing on these other business sectors. “We have partnered with the proper people,” says Brewer.
Brewer says he wants PSC Metals to adopt the type of technology that encourages other companies to work with it. “I don’t think you should be a scrap dealer and do everything within a wall around your business. There should be legitimate trading over these walls.”
As for the overall shredding industry, Brewer says the business will continue to change and margin compression will continue to be a key issue for companies.
These challenges aren’t limited to any specific group of shredder operators or one geographic region, Brewer continues. Some larger companies also are making the decision to get out of markets where they are losing money. He says he expects to see many shredders idled in the current business climate.
At the same time, PSC is spending a significant amount of time working to develop a more comprehensive plan to handle the auto shredder residue (ASR) generated at its plants. “Nothing has to be waste. We are close to coming up with an answer for that.” He adds, “We are at the point of putting those technologies and capabilities within our grasp.”
While PSC is known for its 10 shredders, the company also has a significant position in nonferrous metals, handling 25 million pounds per month of this material. Because of the size of its nonferrous business, Brewer says the company converted its Harriman, Tenn., shredder into an aluminum shredder with a downstream system. “It is 100 percent dedicated to shredding aluminum products specifically for a single customer.”
Even in this sector, Brewer says PSC Metals needs to change its approach. Quality, whether on the ferrous or nonferrous side, is more important. In terms of shredded nonferrous scrap, Brewer concedes that PSC Metals is a few years behind, though it is in the process of evaluating new equipment that will allow it to further refine the nonferrous metals it handles to make them more marketable. “It is just the idea of having the right machine that will maximize metal separation,” Brewer says.
He continues, “We took the gamma technology, which is typically only used on the ferrous side, and we are doing that for aluminum; we are doing it because it is a value-added product the customer wants.”
Brewer’s paradigm shift includes taking a critical look at the company’s operations and being willing to act upon the information. “Get out of what you aren’t good in and focus on what you are good in.”
This move, says Block, is a difficult one. “Rightsizing is a painful but important step companies such as ours need to take. It is needed but difficult. It affects peoples’ lives. While we struggle to do it, it is something we have to do.”
PSC Metals remains a significant player in the scrap metal market. The company has 16 scrap metal facilities in the north; 19 facilities in the south; 12 in the Midwest; a catalytic converter decanning (disassembly) facility; an aluminum conversion business called Metal Solutions; a secondary pipe distribution business called CAPPCO; a plate distribution business; an auto parts business; and its corporate office in the Cleveland area.
“Our mission now is to make that transition of change,” Brewer says. “Innovation is what we are focusing on. We don’t want to just be recognized as the scrap dealer who is doing well today, but we want to leapfrog the competition and be recognized as the company that employs innovation and value. I want to see people knocking on the door saying, ‘How can I get in?’”
Regarding the current market and the recent refrain by scrap recyclers that there is a significant shortage of scrap in the market, Brewer contests the point. “I don’t think there is a major problem with available volume. The bigger problem is the competiveness for the feedstock. Mills are not begging for more material and exports are light, so scrap is staying within our borders. As a result there is a balance of scrap. It gets met every month.”
As for the future, Brewer is moderately optimistic, though realistic. “We see slow growth but nothing on the horizon that shows a cliff is coming,” he says. Another factor that makes Brewer sound more bullish is the fiscal situation of scrap metal recyclers. “We are seeing most businesses demonstrate fiscal responsibility. People aren’t involved in runaway growth based on the future. They are basing it on what is a sure thing today.”
The author is senior editor of Recycling Today and can be contacted via email at firstname.lastname@example.org.
Recyclers of almost every material in North America have grown to expect consuming mills and plants in China to absorb a healthy percentage of the scrap materials they package and ship.
Few materials or grades have been more reliant on the Chinese market than the mixed nonferrous metals churned out on a daily basis by operators of metals shredding plants.
A number of recent developments in China, however, are causing producers of these grades to begin to examine what the mixed, shredded metals market will look like in an era when the market in China no longer provides a “bottomless pit” for these scrap metal grades.
A Second Great Wall
Followers of general business news and economic indicators have been able to read a great deal in 2013 about shifts and changes taking place within China’s economy. A number of these changes are likely to have a fundamental impact on metals production and demand for scrap in the near- and long-term future.
An issue that has had a more immediate impact on recyclers, however, has been the Chinese central government initiative known as “Operation Green Fence.” Green Fence is an effort by Chinese environmental and customs officials to more vigorously inspect (and more willingly reject) what they consider to be sub-par container loads of scrap materials.
At a session called the “U.S.-China Scrap Trade Consult Meeting” at the Institute of Scrap Recycling Industries Inc. (ISRI) Annual Convention and Exposition, held April 9-13 in Orlando, Fla., Wang Jiwei, vice president and secretary-general of the China Nonferrous Metals Industry Association Recycling Metal Branch (CMRA), referred to Operation Green Fence as a 10-month effort by China’s customs agency “to strengthen the supervision” of environmental standards. Wang said the effort includes random inspection of all forms of “imported waste,” meaning metallic, plastic, textile, rubber and paper scrap materials.
He said the intention of Operation Green Fence is in part “psychological,” to make shippers know China will “strictly examine the import application and [consider whether] to approve the import license” of shippers who are caught sending substandard material.
Shipments of “zorba” and other mixed metal grades do not generally contain excess liquids or other contaminants, and their intrinsic value puts them in a category far removed from waste.
Nonetheless, shippers of zorba to China are finding the Green Fence initiative can cause lengthy delays as ports are clogged by the inspection process. Rejections also may loom if inspectors see traces of items like circuit boards in loads of zorba.
Shipping mixed metals through Hong Kong has become one preferred option, according to several recyclers attending the ISRI convention in April. Other processors and brokers told Recycling Today editors they are assessing how to avoid shipping to China entirely in 2013 if the situation at Chinese ports does not improve.
While some shredder operators in North America are saying they will bypass the hassles of the Chinese market, it is not clear how many are actually sending more zorba to U.S. heavy-media separation plants, such as those run by Huron Valley Steel, Trenton, Mich., or Audubon Metals LLC, Henderson, Ky.
Regardless of scrap flow patterns, as of mid-May the Green Fence initiative seems to have become a factor affecting pricing within the mixed shredded metals market.
American Metal Market (AMM), which tracks pricing for scrap grades in the U.S., reported that the mixed metal grade “twitch” had fallen 9 percent (from 82 cents per pound to 75 cents) in the May buying period compared with April. The culprit was deemed to be Green Fence, which is causing an over-supply of zorba and twitch on the domestic market.
Exporters of scrap materials around the world and manufacturers in China who rely on secondary commodities are anxious for any signal from Beijing as to whether it fully understands the implications of Green Fence for its manufacturing sector if scrap materials become scarce.
In mid-May, the Beijing-based China Daily newspaper and website continued to publish stories of “waste smuggling” cases, though distinctions between “waste” and “recycling” (recognizing the value of secondary commodities) are sometimes made.
“Some waste — such as newspapers and magazines, that contains impurities of less than 1.5 percent — are imported legally,” a May 10 China Daily article noted, adding, “but waste that endangers the environment and costs a lot to recycle, especially household garbage, is banned from entering the country.”
End of an Era?
A number of wider economic trends taking place within China also may affect the demand for mixed, shredded metal grades produced in North America beyond 2013.
Some economic indicators pointing to slower GDP growth, stagnant overall manufacturing output and decreased spending on major construction projects raise the possibility that China’s 20-year run of rising metals production may finally be ready to level off. Over that span, metals production in China has soared to make it the No. 1 producer of steel, aluminum and copper.
Veteran scrap recyclers and metals industry analysts are familiar with the term “intensity” typically used to chart when an industrializing (or rebuilding) economy goes through its greatest period of metals production growth.
For several years after World War II, as Europe and Japan recovered from the devastation, scrap dealers on the Atlantic and Pacific coasts seemed to have an export market that knew no limits as those nations rebuilt.
Some of the most common shredded mixed metals grades as defined by the Institute of Scrap Recycling Industries Inc. (ISRI) “Scrap Specifications Circular” include:
• Twitch: Floated Fragmentizer Aluminum Scrap (from Automobile Shredders); derived from wet or dry media separation device, the material must be dry and not contain more than 1 percent maximum free zinc, 1 percent maximum free magnesium and 1 percent maximum of analytical iron.
• Tweak: Fragmentizer Aluminum Scrap (from Automobile Shredders); derived from either mechanical or hand separation, the material must be dry and not contain more than 4 percent maximum free zinc, 1 percent maximum free magnesium and 1.5 percent maximum of analytical iron.
• Zebra (High Density); shall consist of high-density nonferrous metals produced by media separation technology containing brass, copper, zinc, nonmagnetic stainless steel and copper wire.
• Zeppelin (Light Density); shall consist of light-density nonferrous metals produced by media separation technology and contain thin-gauge aluminum and magnesium.
• Zorba: Shredded Nonferrous Scrap (predominantly aluminum); shall be made up of a combination of the nonferrous metals aluminum, copper, lead, magnesium, stainless steel, nickel, tin, and zinc, in elemental or alloyed (solid) form.
• Zurik Shredded Nonferrous Sensor Sorted Scrap (predominantly stainless steel); shall be made up of a combination of the nonferrous metals stainless steel, insulated copper wire, aluminum, copper, lead, magnesium, nickel, tin, and zinc, in elemental or alloyed (solid) form.
The above are partial specifications for these grades, and for all grades the end note “any variation to be sold by special arrangement between buyer and seller” applies.
The full descriptions and the complete ISRI “Scrap Specifications Circular” is available at the ISRI website at www.isri.org/specs.
Another export boom took place as the “Asian tigers” of Taiwan, South Korea and an export-driven Japanese manufacturing sector went through a metals intensity phase in the 1960s and 1970s.
Those nations generally continue to import scrap, but their peak intensity growth years are behind them. As well, they have evolved household consumer economies that now generate significant amounts of scrap domestically. Determining when and how China shifts to a similar postintensity stage remains to be seen.
On the demand side, China’s manufacturing sector is far from lifeless. The nation’s National Bureau of Statistics (NBS) reported in mid-May that China’s industrial output rebounded in April to increase 9.3 percent year-on-year, which was up from the 8.9 percent figure recorded in March. The growth of consumer goods provided a major boost behind this figure, with that sector growing by 12.8 percent in April. Construction spending also remains significant, although it may be leveling off.
The NBS reported in May that fixed asset investment grew 20.6 percent year-on-year to $147.3 billion in the first four months of 2013, with April recording slower growth than what occurred in the first three months.
An analyst from CITIC Securities contacted by China Daily said the growth that has taken place “was mainly driven by infrastructure and property investment, while investment in the manufacturing sector remained weak.”
As 2013 continues, some of the building activity also could decline if property market restrictions put in place by Beijing when the economy was deemed to be overheating slow property-related lending and, thus, construction.
Leveled-off metals production in China is bound to occur at some point. On the supply side, the collection of more domestically generated scrap within China is equally inevitable.
At the 2013 Middle East Metals Recycling Conference, held in March in Dubai, United Arab Emirates, Scott Newell of The Shredder Co. LLC, Canutillo, Texas, noted that 30 auto shredders now are installed in China and he predicted that it will take only a few years before that number grows to 100. The increase, he noted, is indicative of a larger stream of end-of-life cars and appliances that not only will produce ferrous scrap but also additional nonferrous flows. Newell added that China has an expanding network of more than 70 licensed electronic scrap shredding facilities, which likewise will yield more red metal scrap from the postconsumer sector.
China now has in place an urbanized and middle class population that purchases as many or more passenger cars and consumer electronics goods annually as are purchased in the United States.
With the country’s government and citizens having expressed a desire to recycle and recover the secondary raw materials contained in these streams, the nation’s domestic scrap generation is destined to increase for the foreseeable future.
Options and Futures
Shredder operators have choices when producing mixed metals products, including the use of separation specialists. How plant operators configure their downstream systems (to produce some combination of zorba, zurik, zebra, zeppelin, twitch or tweak) is often the first consideration.
Before China’s secondary aluminum producers (and a layer of recyclers who serve them) set up massive hand-sorting floors to purify these grades, North American shredder operators more routinely turned to domestic heavy-media and specialty magnetics plant operators. But now, most shredder operators remain inclined to ship mixed metals to China, in part because they often receive payment much faster, the margins can still be healthy and the demand—despite Green Fence—remains strong.
Recyclers are not convinced that 10 months of newly zealous customs scrutiny will create rapid changes in mixed metals flows. Later in the decade, however, demand in China that is destined to level off and decline coupled with greater scrap generation within China’s borders has many American mixed metals shippers being mindful to stay on friendly terms with domestic buyers.
The author is editor of Recycling Today and can be contacted at email@example.com.
The Institute of Scrap Recycling Industries Inc. (ISRI) 2013 Convention and Exposition, held April 9-13 in Orlando, Fla., at the Orange County Convention Center, featured a diverse array of educational sessions addressing topics as varied as ferrous scrap markets, plastics identification, electronics recycling and the benefits of Recycling Industry Operating Standard (RIOS) certification. The convention also featured international summits on electronics recycling and a meeting of the U.S.-China Scrap Trade Consult. The range of programming as well as the multiple networking opportunities and the destination helped to draw attendees out for the show, which, according to convention organizers, marked ISRI’s third-largest convention—and the largest attendance outside of Las Vegas—with more than 5,200 attendees.
Celebrating Victories, Addressing Challenges
The April 10 opening general session provided an overview of the development of the scrap recycling industry in addition to highlighting recent advances and areas that require further progress.
ISRI Chairman Jerry Simms of Atlas Metal & Iron Corp., Denver, acknowledged a recent regulatory triumph for the industry, noting that ISRI successfully obtained approval to recycle the plastics recovered from auto shredder residue from the U.S. Environmental Protection Agency after convincing the agency the practice did not endanger the health or safety of workers or the environment. This was welcome news to plastics recyclers and auto shredder operators.
Simms also stressed the importance of safety, adding that ISRI members needed to do a better job of emphasizing safe operations, as the industry is the fourth deadliest in America according to figures from the U.S. Department of Labor Occupational Health and Safety Administration.
Following Simms introductory remarks and honors bestowed to Arnold Gachman of Fort Worth, Texas-based Gachman Metals and Recycling Co. (See “Personnel Notes,” page 134) and Francis Veys, the retiring general director of the Brussels-based Bureau of International Recycling, former governors Ed Rendell, a Democrat from Pennsylvania, and Haley Barbour, a Republican from Mississippi, shared their views on the current political landscape in Washington, D.C. Despite their differences of opinion, both men stressed their long-time friendship and mutual respect.
Barbour’s association with the scrap recycling industry dates back to the days of the Superfund battle, when his lobbying firm, Barbour Griffith & Rogers, assisted ISRI in “Operation Breakout,” which was the scrap recycling industry’s strategy to win Superfund relief for recyclers of metals, paper, plastics, glass and textiles.
Regarding today’s political climate, Barbour said the government is a reflection of divided politics. He added that President Barack Obama’s campaign during the 2012 general election sought successfully to make Mitt Romney, the Republican candidate, unacceptable to the electorate. While the majority of voters polled said they felt Romney would be better for the economy, 81 percent of those in exit polling said Obama cared for “people like me.”
The current electorate is the “most polarized” Barbour said he has “ever seen,” adding, “Washington magnifies that.”
However, he said this political division does not have to lead to gridlock, pointing to former U.S. presidents Ronald Reagan and Bill Clinton and what they were able to accomplish when control was split among the parties. “Reagan and Clinton thought like governors in that it was their job to get things done,” Barbour said.
Rendell said Obama’s track record as a leader has been mixed, as he has done well in some areas and not in others. “You know he is exercising leadership by the response to his proposed budget,” he said. “He is getting grief from both sides.”
Among the pressing issues Rendell said need to be addressed are the national debt, immigration, gun violence, energy, infrastructure, education and health care.
He pointed to the need to reform entitlement programs, saying, “Medicare and Social Security were never meant to cover 20 years.”
Rendell also said the federal government needed to start investing in the nation’s growth by ending subsidies for companies such as Exxon Mobile, which records record profits year after year.
He closed by mentioning his book, A Nation of Wusses: How America’s Leaders Lost the Guts to Make Us Great, which encourages political leaders to stand and defend what they believe in, even if it means not winning re-election. “There are some things worth losing for,” he added.
Subsequent sessions at the ISRI conference narrowed the perspective to topics currently affecting recyclers in the United States, such as China’s recently erected Green Fence.
China's Green Fence
In early 2013, shippers of secondary commodities to China have slowly begun to learn about “Operation Green Fence,” an effort by Chinese environmental and customs officials to more vigorously inspect (and more willingly reject) what they consider to be subpar container loads.
At the U.S.-China Scrap Trade Consult Meeting during the ISRI Convention and Exposition, those in attendance learned a little bit more about this developing issue.
Wang Jiwei, vice president and secretary general of the China Nonferrous Metals Industry Association Recycling Metal Branch (CMRA), referred to Operation Green Fence as a 10-month effort by China’s national customs agency “to strengthen the supervision” of environmental standards. According to Wang, the Green Fence initiative will run from February to November 2013 and will focus on random inspection of all forms of “imported waste,” meaning metallics, plastics, textiles, rubber and recovered paper.
Wang said the initiative does not involve new regulations but “strengthens Article 12,” which was issued in April 2011. (That article states: “In the process of importing solid waste, measures shall be taken to prevent it from spread[ing] seepage and leakage or other measures to prevent pollution of [the] environment.”)
He said the intention of Operation Green Fence is in part “psychological” in ensuring shippers know China will “strictly examine the import application and [consider whether] to approve the import license” of shippers who are caught sending substandard material.
In his presentation, the CMRA’s Wang showed photos of inbound containers whose shortcomings went beyond liquid contamination. Problems presented in Wang’s photos included living mice, bullets and combustible flares included in a container load of juice boxes. “These prohibited materials are not allowed to enter China,” he said.
Severe interruptions in scrap shipments to China are bound to have a significant effect. Speaking at a different ISRI Convention session, Liu Shengming of the China Certification & Inspection Group (CCIC) noted that the number of containers filled with scrap materials continued to grow from 2010 to 2012.
Liu said North America sent 698,000 containers filled with scrap materials to China in 2012, up from 635,000 in 2011 and 570,000 in 2010. Only 0.04 percent of those containers were found to be “unqualified,” according to Liu.
By volume, recovered fiber was the foremost commodity shipped in 2012, followed by plastic scrap and nonferrous metals.
The Outlook for Ferrous Scrap
Ferrous scrap is another material that is frequently shipped to China as well as to other overseas destinations in addition to feeding domestic mills in North America. Speakers addressed the changing nature of ferrous scrap markets during the Spotlight on Ferrous session, held April 11.
Phillip Hoffman, vice president of U.S. ferrous scrap trading for Medtrade, the U.S. subsidiary of Turkish steel producer Colakoglu Metaluji, said 1.56 billion metric tons of steel were produced worldwide in 2012 using 579 million metric tons of ferrous scrap. He added that U.S. scrap exports accounted for nearly 21 percent of this material, with nearly 20.90 percent of scrap shipped from the United States destined for China.
Turkey is another popular overseas destination for U.S.-generated ferrous scrap, with Hoffman saying 27 percent of scrap imports to the country are from the United States. Turkey continues to add steelmaking capacity, despite excess industry capacity on a global scale, Hoffman added.
In terms of the U.S. market, he said 10 scrap processors control 63 percent of the market, while four processors control 40 percent of the seaborne trade.
Sachin Shivaram, general manager, metallics purchasing for the steel company Severstal NA, Chicago, spoke about his company’s approach to purchasing ferrous scrap. Severstal ships some 5.5 million metric tons of steel per year and purchases 3.5 million metric tons of scrap metals.
Shivaram said the company’s ferrous scrap purchases are guided by steel pricing, with Severstal preferring to purchase material consistently throughout the month rather than at the beginning or end of the month. “The impression now is if I buy scrap midmonth, I am desperate for scrap,” he said. “That is not the case.”
He told attendees, “If you are not selling scrap in the middle of the month, you are missing out on a dynamic market.” Shivaram added that there is value in having more chances to transact purchases throughout the month.
Some buyers and sellers of ferrous scrap have been using risk management tools to hedge their purchases. According to speaker Spencer Johnson of Intl-FCStone, New York City, ferrous scrap risk management has experienced considerable changes in the last 12 months with the advent of the CME U.S. Midwest scrap futures contract. While he said scrap futures contracts are not fully developed in terms of liquidity, he added that this creates both opportunity and risk for traders.
Johnson said that traders who take an opposite position in the physical market than they take in the futures market risk the difference between the two prices.
In terms of pricing for No. 1 busheling scrap, he said he expected to see some backwardation between the present and the fourth quarter of the year but added that prices should pick up later.
During the Q&A portion of the session the topic of shredder overcapacity was raised by an attendee. Hoffman said there was no doubt that the number of shredders and scrap yards were increasing, causing competition to heat up among yards and squeezing margins. As a result, he said the spoke-and-hub approach to shredder operations may be giving way to smaller, portable shredders.
Shivaram added that he felt the market was reaching saturation, adding that shredder operators are right to put in capacity in an effort to maximize freight.
Pathways for Plastics
The session Plastics from Construction and Demolition Debris at the 2013 ISRI Convention and Exposition looked at the potential growth of this sector. Paul Degnan of E.L. Harvey & Sons, Westborough, Mass., and Todd Byrum of Butler Paper Recycling, Suffolk, Va., each provided attendees with knowledge gained from their experience of seeking end markets for plastics generated at C&D job sites.
Session moderator Brian Taylor of the Recycling Today Media Group provided a partial list of plastic items commonly found in the C&D stream, including:
- Carpet and padding;
- Plastic film;
- Tarps and sheets;
- PVC (polyvinyl chloride) pipe;
- PVC siding;
- Drywall and paint pails;
- Corrugated tubing (as used for irrigation and drainage);
- Plastic and composite fencing and decking; and
- PET (polyethylene terephthalate) water and soda bottles.
“We see a lot of pails and old buckets,” said Degnan regarding one form of plastic entering E.L. Harvey’s mixed C&D facility. Such materials increasingly have a domestic home rather than having to be exported, Degnan observed. “There are more opportunities for regrinders here, and domestic markets have definitely developed.”
Degnan added, “There have been significant investments” made in plastic scrap grinding, reprocessing and consumption in the United States. “The demand for postconsumer resins is really driving this; there has been a big push.”
Degnan said just 33 percent of rigid plastic scrap was being recycled when E.L. Harvey opened its mixed C&D facility in 2007, but by 2010 that recycling rate had grown to 61 percent.
Byrum said one of Butler Paper Recycling’s challenges is regional. “Virginia is a trash state,” he stated, noting that the state is a net importer of solid waste and that its tipping fees can be as low as $23 per ton.
Despite the low cost of landfilling, there is global demand for plastic scrap that has created export markets, as well as a desire by U.S. manufacturers to use recycled content in their products, Byrum said.
As attendees learned at this year’s ISRI Convention and Exposition, challenges and opportunities await recyclers in a number of areas in 2013. Those eager to learn more should mark their calendars for the 2014 ISRI Convention and Exposition, which will be April 6-10 at the Mandalay Bay Resort and Casino in Las Vegas.
The authors are editor and managing editor of Recycling Today.
Downtime is unthinkable in scrap processing operations, particularly those operating automobile shredders.
Wear and tear—normal and exceptional—is what causes downtime.
“Downtime is my biggest concern,” says Adam Weitsman, owner and president of Upstate Shredding, Owego, N.Y. One of the high-volume shredders in upstate New York, the company operates six days per week. On a typical day, 3,000 to 3,500 tons of material are processed through the company’s auto shredder in Owego.
Upstate Shredding stockpiles a variety of wear parts, including hammers, anvils, rotor caps, end disk caps, pin protectors, side liners, grates and reject doors, to keep downtime to a minimum, Weitsman says.
Parts on Hand
While everything within the shredder box will eventually need to be replaced, the degree of wear varies for each part. Shredder operators expect to replace components like bottom grates, anvils/cutter bars, rotor caps, pin protectors and upper anvils/upper breaker bars, too.
“We stock things, so we are not worried about lead times for replacement parts,” Weitsman says.
Upstate Shredding’s auto shredder features a 122-inch mill and uses 1,200-pound hammers. Because a machine of that size is larger than normal, getting replacement parts can take weeks rather than days.
Since Upstate Shredding performs its own maintenance and repairs, price, rather than service, is the primary concern when the company purchases equipment and wear parts. “It is important we keep (repair) materials here,” Weitsman adds.
Upstate can just about rebuild its entire auto shredder from parts it has in inventory. However, in a business where downtime is costly, that is not an unusual approach.
Even operations with more commonly sized auto shredders stock multiple spares. “We stock a complete inventory of every single wear part,” says Gary Chandler, chief operating officer of LNM Holdings LLC, Girard, Ohio. In fact, the company stocks at least two replacements for each wear part. Otherwise, “at the point you install the new one, you have no backup,” he says.
LNM operates an 80x104 shredder from American Pulverizer (APCO), St. Louis. The shredder is powered by two 2,000-horsepower DC motors running in tandem.
“I like to see 800 to 1,000 tons out per day. And I want to get 100,000 total tons before replacing grates and anvils,” Chandler says. He says he expects to be able to process 180,000 to 200,000 tons on the lower liners before replacing them.
LNM aims to produce 4,100 gross tons of shred per set of hammers, Chandler says. That gives the company about 3,200 net tons of shredded ferrous scrap. The rest is auto shredder residue (ASR), aluminum, copper, brass and wire.
The company uses disc, not finger-style, hammers. However, regardless of the hammer style, evening out the flow of material to the shredder helps to spread the wear.
At the other end of the wear parts inventory spectrum is Complete Auto Recycling Service (CARS), Farmington, Mo.
“Because APCO is located so close, I don’t keep much in stock,” says Jason Shipman, president of CARS. For him, same-day or next-day delivery is normal. As a result, CARS keeps only hammers, caps, pins and disc end caps—parts that are more consumable than structural— in stock.
Still, Shipman says he is well-aware of the problems faced by other recyclers who need parts delivered yesterday. “This was a major concern for me,” Shipman says. “I hear of guys with other brand machines waiting weeks for foreign parts.”
He continues, “Our situation is unusual because we are only 75 miles from the manufacturer. We don’t keep much on hand because it is rare that they don’t have something we need.”
A real advantage is that CARS does not tie up much money in its spare parts inventory.
“Normally, we stock one to two sets of consumables. But grates or rotors we buy on a supply-and-demand basis,” says Nick Schlipp, vice president of Indiana Metal Group (IMG), New Carlisle, Ind.
Like LNM, the company runs an 80x104 American Pulverizer shredder. A typical day sees IMG processing 80 to 100 tons per hour.
Schlipp says he finds that more vendors are doing a better job of stocking inventory, which makes it more practical for IMG to order replacement parts just in time.
“Grates are not only about tonnage,” Chandler of LNM says. “If your product gets too big, you lose density and get bigger frag. Then the nonferrous yield drops off. In this business, it’s all about nonferrous yield…if you have a good back end,” he adds.
LNM switches hammers daily. “We like new edges,” Chandler says.
A key to maximizing hammer wear is getting the proper mix of material into the shredder.
For instance, an operator seeing a load of domestic transmissions heading for the shredder may expect the mainly aluminum material to shred like butter. However, it contains hardened steel tool parts, which are hard on hammers.
“We try to avoid a large volume of hardened steel early in the day,” Chandler explains. “We space it out through the day.”
While monitoring feedstock is important, maintenance also plays a big role in keeping the machinery operating.
Keep in Mind
It does not have to be costly to keep things in good shape. Simply being mindful when wear parts are being broken in can help.
“We try to run a little heavier material with new hammers to harden them,” says Shipman. “After half a day, though, it’s back to [processing] everything.”
IMG and LNM follow similar routines.
Schlipp says he finds that the center hammers wear more quickly than those on the side. “We will put a new set in the center to work-harden them and then move them to the outside,” he says. “By moving them to the outside, we get longer life out of them.”
Regular maintenance is another key to extending wear part life, Schlipp says. “We are a bit stricter than most with our maintenance,” he says. Every shift does greasing and visual checking.
“Rather than run a rotor out, we do hard-facing on the rotor,” Schlipp says. That job, like other major maintenance, is done at night.
“Abrasives and dirt will wear out parts faster than anything,” says Weitsman. “Fines and dirt definitely are not good. We try to keep it clean.”
“We weld on our wear parts a little about every day,” Shipman says, noting that they rarely wear evenly. “We weld the low spots,” he explains. But, he says, that job should not be left exclusively to the operator on the floor.
Buying alloy hammers is more expensive but can help. “We are always discussing with our vendors what the best chemistries are,” Chandler says. He relies on the equipment vendors to recommend the best chemistry for his operation’s hammers and the like. “The more tons you push through the shredder, the better,” Chandler says.
Using the proper part chemistry for a yard’s applications also will help extend part life. Shipman says his company learned where to use the different alloys by trial and error.
The Schlipps also work with their vendor to determine an optimum hammer. “The company is working with me on a new hammer with 1 percent more moly (molybdenum),” he says. The idea is to see if it will reduce wear on the hammers.
Extending the useful life of wear parts does not mean babying units. Upstate shows its machinery little mercy. But the company maintains it well, Weitsman says. “We are loading heavy with two grapples,” he adds. “We don’t have time to stop.”
Still, Upstate Shredding does take time to look at different configurations. “We are playing with staggered hammer patterns to see how they work out,” Weitsman says.
Recyclers can try several maintenance practices to reduce wear on parts to prolong their lives. With hammers likely to shorten up a couple of inches in a day’s work, operators have to keep a close eye on the patterns forming. Different hammer patterns will provide different distributions of materials and cause eccentric wear elsewhere. It works the other way around, too. When outside liners are at the end of their useful life, they will push material between the end disc and the end caps.
“We inspect our shredder feed closely to keep the unshreddable stuff out,” Shipman says. “That is priority No. 1 and the most important advice of all,” he says.
Some industry estimates put the average cost of wear parts from $2 to $2.65 per ton of metal shredded. It can be difficult to get a firm fix on that number, because many operations shred a lot of aluminum. Aluminum will produce wear on parts but does not produce any serious tonnage of frag.
IMG tries to keep its auto shredder operating efficiently by using an infeed conveyor and spreading out the material at a steady clip, Schlipp says.
IMG runs more sheet iron than cars on a typical day, Schlipp says. “We do two grapple pulls of sheet iron to one car bundle,” he adds. That helps keep in the inflow mix in a ratio that optimizes the company’s production, he says.
Shipman offers a tongue-in-cheek solution to all of the industry’s shredder wear problems: Take more vacations, he suggests. That, or shred only plastic and wood, he chuckles, and those shredder parts will last forever.
The author is a contributing editor to Recycling Today based in Cleveland. He can be contacted at firstname.lastname@example.org.