The topic of certification received quite a bit of attention during the Institute of Scrap Recycling Industries (ISRI) 2014 Convention & Exposition in Las Vegas in April. ISRI offers its Recycling Industry Operating Standard (RIOS), which it describes as “the sole program on the market that combines quality, environmental, health and safety requirements in a single management system.” It can be paired with the Responsible Recycling Practices (R2) Standard for electronics recyclers.
However, RIOS and R2/RIOS are not the only standards that recyclers have felt the need to be certified to. Many recyclers also or instead possess the more general ISO 9001 (quality management), ISO 14001 (environmental management) or OHSAS 18001 (occupational health and safety) certifications or e-Stewards certification, which is designed for electronics recyclers and specifies an ISO 14001 certified environmental management system.
While the subject of this month’s cover story, Arrow Electronics, Englewood, Colorado, has achieved R2/RIOS and e-Stewards certification for its IT asset disposition (ITAD) facilities, the company’s Tim Kolbus says there is yet to be a single “right” industry standard.
In addition to the R2 and e-Stewards standards, Arrow is certified to the Transported Asset Protection Association standard for trucking security, and the company’s Scott Venhaus, director of global quality and compliance, says Arrow is examining additional certifications. (See “Reverse logic,” beginning on page 38, for more information.)
While Kolbus says a single stringent standard eventually may emerge for the electronics reuse and recycling industry, in the meantime, Arrow has established its own global standard that it says goes above and beyond currently available standards.
Venhaus says Arrow had the unique opportunity through acquisitions made over the last four years to combine EHS (environmental, health and safety), data security and recycling standards that were already compliant with R2 and/or e-Stewards in addition to other standards. “By combining those internal standards and leveraging the voice of our customers, we developed what we believe to be a best-in-class globally consistent program,” he says.
Venhaus adds that the adoption of a single stringent global standard rather than the competing standards available today would streamline costs for electronics recyclers, allowing responsible recyclers to apply the resources and costs they currently incur to support multiple standards toward meeting a single standard. This would relieve the need for client audits, providing a financial benefit to the company’s clients and its asset management and recycling partners as well.
How likely such a move is remains to be seen; but, in the meantime, recyclers and their clients have no shortage of certification tools that can help them distinguish and improve their operations.
In the short time since Arrow Electronics, headquartered in Englewood, Colo., established its value recovery division, it has emerged as a leader in the field of IT asset disposition (ITAD), helping clients maximize the value of their end-of-life electronics while safeguarding the data stored on these devices.
Arrow, a Fortune 150 firm, has long been a leader in the computing services sector, providing products and services to industrial and commercial users of electronic components and enterprise computing solutions. Arrow serves as a supply channel partner to more than 100,000 original equipment manufacturers (OEMs), contract manufacturers and commercial customers through a network of more than 460 locations in 58 countries.
The company’s ITAD, remarketing and reverse supply chain services division, known as “value recovery,” grew out of Arrow’s desire to provide additional support to its OEM and reseller customers and in response to customer requests, says Tim Kolbus, vice president of global logistics services for Arrow.
Kolbus says Arrow includes an enterprise computing solutions division, which offers distribution services and business solutions to companies such as HP, IBM and NetApp, connecting them with enterprise and data center customers. The company’s global components team is focused on providing supply chain and logistics services to manufacturers of products that contain printed circuit boards, including devices used in medical applications, aerospace and defense and transportation as well as in alarm clocks and air conditioners.
“We are helping customers on the front end to design a product. We are helping customers on their production and go-to-market strategy. And now what we have evolved to is focusing on the end of life,” Kolbus says of Arrow’s various divisions.
To grow its expertise in the area of ITAD, Arrow embarked on an acquisition strategy that focused on ITAD firms with reputations for being environmentally sound, vigilant in the area of data security and knowledgeable about the various state electronics recycling laws, Kolbus says. These acquisitions included Jackson, Miss.-based Intechra as well as Columbus, Ohio-based Redemtech; Austin, Texas-based TechTurn Ltd.; and St. Paul, Minn.-based Asset Recovery Corp.
In deciding which ITAD companies to acquire, Kolbus says Arrow turned in part to the Gartner Magic Quadrant for ITAD worldwide, assessing the benefits of each firm. Intechra (profiled in the October 2007 issue of Recycling Today, available at www.RecyclingToday.com/Article.aspx?article_id=20827) stood out among these firms as the initial acquisition on which to build Arrow’s value recovery business, he says, because the company seemed to offer the greatest value.
“We obviously look at how a company is run [and] the profitability of a company, but we also look at the culture,” Kolbus says. “It mirrored our culture,” he says of Intechra, noting the company’s high standards in the areas of quality, environmental performance and data security.
Following the integration of the acquired firms, Arrow now ranks as a leader in the most recent Gartner Magic Quadrant for ITAD worldwide, as announced in early February of this year. In response to its Gartner ranking, Arrow states on its website, www.arrowvaluerecovery.com: “We have put significant effort into integrating our ITAD facilities around the world and couldn’t be more pleased that the global analyst community has noticed. The fact that an increasing number of requests were entered for an evaluation of the worldwide ITAD market cements our belief that IT asset disposition is a global issue and ITAD vendors must be prepared with a single source solution for multinational companies.”
Arrow consolidated the Columbus-area operations run by Redemtech (profiled in the April 2007 issue of Recycling Today, available at www.RecyclngToday.com/Article.aspx?article_id=20519) into the former Intechra site in Gahanna, Ohio. Today, this location is the largest in Arrow’s network, says B.J. Karam, director of global logistics services for the eastern U.S. In addition to the Gahanna site, Arrow owns and operates value recovery facilities in the North American cities of Windsor, Connecticut; Smyrna, Georgia; St. Paul, Minnesota; Las Vegas; Reno, Nevada; Coppell, Texas; Ashland, Virginia; and Mississauga, Ontario.
Beyond North America, Arrow has value recovery facilities in Brazil, the U.K., Belgium, Germany, France, the Czech Republic, Norway, Sweden and Denmark.
Kolbus says the Gahanna site processes nearly 50 percent of the IT assets Arrow handles in the U.S. and is among the largest ITAD facilities in the world.
Karam, who formerly worked for Redemtech, says the Columbus-area plant accounts for so much of Arrow’s volume because of the area’s reputation as a distribution hub and the strong customer base Redemtech and Intechra established in the area.
Arrow sees asset recovery as one of the biggest growth opportunities in the business, Kolbus says. “The board is 100 percent behind it. Everybody in the company is totally on board with it. That is what has been exciting for me to see: how engaged everyone is in trying to make this a success,” he says of the company’s value recovery division.
Kolbus adds, “I look at it as a huge opportunity. Our desire is for this space to be as big as the forward side.”
Karam says he believes the ITAD industry is still in its infancy and has the potential for “tremendous” growth as consumers satisfy their hunger for the latest and greatest technology.
Honoring the hierarchy
Kolbus says he sees the rapid upgrading of technology as an opportunity for consumers in other regions of the world. “It allows us to leverage our strength because we are global, and there are not a lot of other players out there that are global like us.”
Karam adds, “I think it is an opportunity to do more reuse, repair and resale as opposed to recycling because the technology turns so much quicker.”
Approximately half of the 100,000 units processed per month at Arrow’s Gahanna plant are reused, he says, while the rest are disassembled for recycling. “We want to reuse, repair and resell as much as possible,” Karam adds.
Kolbus says Arrow’s value recovery strategy is to reuse products to the greatest extent possible. Jeff Hutchinson, vice president and general manager of global logistics services for Arrow’s value recovery business, adds that the company works diligently to extend the life of assets.
“For us, recycling is a last resort,” Hutchinson says. “We have developed a process to break assets down to as close to commodity as possible, allowing us to keep tight control over all materials.”
Kolbus adds, “Recycling is a necessary part of what we do—it is a byproduct of what we do—but our first priority is reuse; whereas, other companies in this space, their roots are in recycling. Their approach is feeding the machine.”
Hutchinson adds that Arrow avoids shredding where possible, though at times customers require the shredding of data-bearing media. However, he adds, “as a rule, shredding destroys value, and we work hard to make that a last resort.”
Kolbus says, “Our roots are in forward distribution. How do we reuse this product and resell it? That is what we want to do with it.”
The focus on reuse allows Arrow to provide more value to its customers, which tend to be Fortune 1,000 companies, according to Karam.
Ensuring data security is Arrow’s primary focus when it comes to reuse, Karam says. “That is the first thing we have to do to protect our customers.”
The company uses software from Blancco, with U.S. offices in Marietta, Ga., to overwrite data, making it inaccessible to new users. This service can be performed at a customer’s site prior to the transport of the assets, Kolbus adds.
“We excel at data security—providing a spectrum of data destruction solutions that protect our customers at their sites or ours,” Hutchinson says. “Proper data security protocols help return value through resale of equipment.”
For Arrow, data security begins long before the company overwrites data on or destroys a hard drive, Kolbus says. Good data security starts with good physical security from the time an asset is picked up through to its processing.
Once a device’s data has been overwritten, Arrow has several reuse options based on customer preferences, Karam says.
“We perform repairs when we believe it is value appropriate and when we are going to be able to regain our investment in the resale of that product,” he says. “We are a Microsoft Authorized Refurbisher, so we can put a certified, licensed image back on these machines, which will help us increase the resale value.”
In addition to resale, Arrow offers to redeploy assets for customers. “If a customer sends us equipment that they would like us to potentially hold for a certain period of time and then redeploy back into their corporate structure somewhere, we can certainly do that,” Karam says. Arrow offers additional services, such as equipment upgrades, for redeployment customers.
Lean and green
The IT asset disposition (ITAD) division of Arrow Electronics, Englewood, Colorado, known as its “value recovery” business, has applied much of the knowledge that has accumulated throughout the years from the company’s manufacturing side to its ITAD operations, according to B.J. Karam, director of global logistics services for the eastern U.S. This extends to facility layout as well as to incorporating Lean Six Sigma methodologies.
Lean Six Sigma is a continuous process improvement methodology that combines lean manufacturing and Six Sigma tools. It uses statistical analysis and waste observation to improve the performance of certain processes while reducing waste and costs.
A visit to the company’s processing facility in Gahanna, Ohio, near Columbus, reveals the effects of this effort. The company’s largest facility, the clean and tidy 400,000-square-foot building flows in a linear fashion from the receiving docks at one end to the shipping docks at the other. Processing stations are clearly defined, and all the tools employees need to perform their jobs are easily accessible.
Each processing station also features a board that includes information detailing the processes undertaken at that station as well as performance metrics and how the team is measuring up.
The facility, which operates 24 hours per day for five days per week, features video surveillance and is access controlled. Employees are not allowed to bring electronics devices into the processing facility, Karam says.
The company also works with customers on employee purchase programs as well as on charitable donations.
“Arrow truly partners with customers to develop programs that over time optimize return,” Hutchinson says. “We can act as their outsourced repair/refurbishment/redeployment partner, their remarketer and their donation facilitator—always protecting data, workers, the environment and brand, working to return value wherever possible.”
Kolbus says Arrow’s ability to offer a variety of solutions is another benefit it achieved through ITAD acquisitions, as each firm specialized in a particular area.
The product categories that hold the most potential for reuse to consumers via e-commerce are desktops and laptops, Karam says. However, he says he sees considerable potential in the data center server and mass storage device product lines.
Kolbus adds that smartphones and tablets also lend themselves to the reuse market. “We are at the beginning of that wave,” he says. “It is growing tremendously.”
Arrow uses a number of resale channels, including wholesale and resale outlets. The company uses eBay, Amazon and ArrowDirect.com for direct-to-consumer sales. Arrow is able to capture more value for devices through direct sales than through a reseller, which allows it to pass more value on to its customers in the end, Kolbus says.
Raising the bar
In addition to allowing Arrow Electronics, headquartered in Englewood, Colo., to quickly expand its resale options for customers, its ITAD acquisitions also gave the company input into certifications available to ITAD firms and electronics recyclers. When Arrow acquired Intechra and Redemtech, the company continued their work in guiding the e-Stewards and R2 (Responsible Recycling Practices) standards forward, says Tim Kolbus, vice president of global logistics services for Arrow Electronics’ value recovery services.
Despite the company’s work with the organizations that house these standards (the Basel Action Network, Seattle, for the e-Stewards Standard and R2 Solutions, Boulder, Colo., for the R2 Standard), Kolbus says, “There is no right single industry standard yet.”
Because of this, Arrow’s value recovery operations are certified to both the R2 and e-Stewards standards as well as to the Transported Asset Protection Association (TAPA) standard for trucking security. (Arrow’s truck fleet handles roughly one-third of the company’s value recovery transportation needs, Kolbus says.)
He adds that a single stringent standard may emerge for the electronics reuse and recycling industry eventually; however, in the meantime, Arrow has established its own global standard for value recovery that, according to Kolbus, goes above and beyond currently available standards for electronics remanufacturing and recycling operations.
“If we settled for the standards that exist today, we would not be where we need to be,” he says.
The company’s internal global standard is managed by Scott Venhaus, director of global quality and compliance.
“Arrow had the unique opportunity to combine EHS (environmental, health and safety), data security and recycling standards that were already compliant with R2 and/or e-Stewards in addition to other standards through the acquisitions made over the past four years,” Venhaus says. “By combining those internal standards and leveraging the voice of our customers, we developed what we believe to be a best-in-class globally consistent program.”
Venhaus says inconsistencies with published certification standards make maintaining quality compliance in the ITAD industry challenging. However, these inconsistencies also provide a client education opportunity, he says.
The company’s internal standard helps to distinguish Arrow’s value recovery services from those of its competitors, he adds, by exceeding the published standards.
“As both standards are supported by our clients,” he says of R2 and e-Stewards, “our clients may require one of the two or even both as they relate to recycling practices,” Venhaus says of R2 and e-Stewards.
"In addition to recycling, there are standards being adopted within our industry, including ADISA (Asset Disposal and Information Security Alliance), NAID (National Association for Information Destruction), TAPA, ISO 27001 (information security management), etc., that focus on data security and compliance that are facing the same challenge—which ones will our clients adopt," Venhaus says.
He adds that Arrow’s internal standard Our program must be able to meet or exceed all globally.”
While Arrow’s value recovery business was built on acquisitions, the company plans to grow through acquisition as well as organically, Kolbus says.
He points to Arrow’s Brazil location, which opened in 2013, as a recent example of organic growth. The plant has the distinction of being the first R2 certified site in South America. It also is certified to the Recycling Industry Operating Standard (RIOS), developed by the Institute of Scrap Recycling Industries Inc., Washington, as well as to the Occupational Health and Safety Advisory Services (OHSAS) 18001 and ISO 9001 and 14001 standards.
Hutchinson adds, “Arrow plans to leverage its presence around the globe to establish Arrow-owned facilities to better serve our global customers. We are in the Leader’s Quadrant in Gartner’s Magic Quadrant for Global IT Asset Disposition, where we are shown as having the most expansive vision, even superior to the OEMs. We are truly the ‘value recovery’ arm of Arrow, where we aim to shift the market away from immediate recycling to getting the most use and value out of usable/remarketable IT equipment.”
The company sees opportunities to work more directly with OEMs to facilitate reuse and recycling opportunities, Kolbus says. Arrow has long worked with design engineers from major OEMs on its global components side, he says, and those relationships are beginning to extend to the value recovery division as designers start to think more about design for recycling.
“It is happening,” he says of design for recycling, “but it will occur more often as the end of life of electronics becomes more top of mind.”
In terms of partnering with OEMs on end-of-life solutions, Arrow has a point-of-sale arrangement with Lenovo, a maker of desktops, laptops and tablets, Kolbus says. When an individual purchases a new Lenovo laptop from the company’s website, he or she has the option to purchase recycling of that device in the future, which Arrow manages for Lenovo. “It is OEM-led to try to figure out how to support the customer on the back end as well,” he adds.
Arrow understands this philosophy, as the same desire to support its customers throughout their products’ life cycles led to the establishment of Arrow’s value recovery business.
“Arrow prides itself on its ethical standards and exists as a trusted partner to more than 100,000 OEMs, contract manufacturers and commercial customers,” Hutchison says. “Our vision of ‘Five Years Out’ reflects our commitment to sourcing and protecting the electronics industry through diligent life cycles services, from source through end of life. Wherever the technology market goes, Arrow works from original design through final disposition all the way downstream through trusted partners to ensure that nothing is wasted.”
The company that would become Arrow Electronics was founded in 1935 by Maurice Goldberg on Manhattan’s Radio Row as Arrow Radio, where it sold used radios and radio parts. The following timeline tracks the milestones in the company’s 80-year history.
The author is managing editor of Recycling Today and can be contacted via email at firstname.lastname@example.org.
Mark Millett, who along with Keith E. Busse and Richard P. Teets Jr. founded Fort Wayne, Indiana-based Steel Dynamics Inc. (SDI) in 1993, currently serves as president and CEO of the company. Throughout the years, Millett has held a number of senior management positions with SDI including executive vice president for metals recycling and ferrous resources and president and CEO of OmniSource Corp., the metals recycling business SDI acquired in late 2007 from the Rifkin family.
Millett also led SDI’s ferrous technologies team, creating and implementing SDI’s iron making initiatives Iron Dynamics and Mesabi Nugget.
When Millett was responsible for SDI’s flat-roll steel business from 1998 to 2008, he and his team initiated a plan to increase the mill’s production capacity to 3 million tons per year and add significant coating capacity, resulting in SDI operating six galvanizing lines and two coil-coating paint lines. As a result, according to SDI, the company now operates one of the most productive and profitable flat-roll minimill operations in the country.
Before forming SDI, Millett worked for Charlotte, North Carolina-based Nucor Corp. for 12 years. While at Nucor, he served in technical and management roles, including the design, construction and operation of the melting and casting facility at the world’s first thin-slab flat-roll minimill at Crawfordsville, Indiana.
In the following Q&A, Millett shares his outlook on the U.S. scrap and steel industries as well as the factors that have contributed to SDI’s success over the years.
Recycling Today (RT): How do you see 2014 shaping up in terms of demand for SDI’s steel products? What economic barometers do you watch most closely?
Mark Millett (MM): We have come into the year very optimistically. Our economy is growing and certainly in areas that will support the steel industry. We all took a beating early on because of the brutal winter, and I think that tended to soften things momentarily. Apparent demand seemed to drop off for a moment. I don’t think there is any structural change in demand growth. We have seen over 2012, 2013 and so far this year an incremental upward movement in our economy and in our order books, and I think that is going to continue throughout 2014 and into 2015.
If you look at what really drives our business, it is principally the automotive arena. Actually, automotive is incredibly strong right now. They still predict 16.5 million units in production this year, and that is projected to continue for the next two to three years, at the very least. I think that is a great indicator.
The second largest consumer of steel goods is the construction sector—both residential and nonresidential construction. And, as we look forward, we see continued signs of growth in that arena as well. In residential, the macro market indicators are generally good, as is the nonresidential arena.
We look at the ABI (Architecture Billings Index) for nonresidential construction [and the] PMI (Purchasing Managers Index) for manufacturing.
But, in all honesty, a wise man told me many years ago that your order book tells all. It is one thing to see market indicators on a macro basis, but when you actually start seeing the orders come in those sectors, you can be assured of some positive growth, and we are seeing that across our order book.
RT: What do you see so far in 2014 in terms of scrap generation and demand?
MM: On the prime side, generation is very strong. Obviously, the bulk of that comes from the automotive arena, and some of it comes from manufacturing. We feel that the manufacturing sector is continuing to improve, so prime scrap is in ample supply.
On the obsolete side, it is a little tighter. Obviously the winter weather didn’t help; the brutal weather across most of the nation tended to slow that up a little bit, but not as much as I anticipated.
Demand has been quite healthy from the domestic mills. The export arena has dropped off a little. I think that tends to be in part because the global economies tend to be somewhat weak, which affects demand flow. Also, there are currency changes, particularly in Turkey, where scrap for them has been more attractive to import from Europe than from America, and so their demand from the States has dropped off a little.
RT: Margin compression appears to be a major concern for the scrap industry. Is this an issue with the finished steel products sector as well? Are there steps that SDI can take to protect and maintain its margins?
MM: For sure. Steel is a global market. You have a world where growth has been exponential in China, and most of the world’s economies are in dire straits and are lacking demand; so, you have a very large overhang of global excess capacity. It is difficult to count the numbers, especially in China, but some would say its 300, 400 or 500 million tons. When you put that in perspective, it is three or four times the domestic demand in the United States—it is quite considerable.
That overhang obviously creates a headwind for domestic pricing that tends to suppress margins or keeps them in check.
On the scrap side, you have a very competitive marketplace, particularly for obsolete material. You have had a fairly substantial increase in [domestic] shredding capacity over the last six or seven years, and you also have had an increase in the export market relative to a few years back, when we exported 10 million or 12 million tons, and now we are exporting in the 22 million and 23 million ton range. Those markets—the increased [domestic] shredder capacity and the export market—are both competing for the same obsolete flow, which is a predefined reservoir.
In turn, that same competitive pressure has appreciated the costs. Margins have moved upstream or back stream, depending on what you like to call it, from the scrap processor back to the dealer.
RT: Do you think the proliferation of shredders has done more to help or to harm scrap processors?
MM: It has had a significant negative impact on their margins for sure. I think we’re in a time when many of the shredder operators are under financial distress, and over time—it won’t happen overnight—the industry will rationalize itself.
RT: SDI has invested significantly in an alternative iron facility in Minnesota with Mesabi Nugget. What is the long-term future for Mesabi Nugget with SDI?
MM: We invested in our Ferrous Resources Group, to eliminate our dependence on imported pig iron.
Actually, before Mesabi Nugget, we had an enterprise called Iron Dynamics. They are currently producing about 240,000 tons of liquid iron per year. That has been a great benefit for us, not only on a cost basis, but also because we are utilizing steel mill waste as our raw material, so it is not dependent on the iron ore market. Secondly, the liquid iron boosts the productivity of our electric arc furnaces quite significantly. So, Iron Dynamics has been quite a success.
Mesabi Nugget is a pioneering effort and is still in its developmental stages today.
RT: During the ISRI conference Ferrous Spotlight, there was a debate about the role of DRI and other materials that are commonly termed scrap alternatives. One gentleman said they are not alternatives at all but help to adjust chemistry. Do you have a view on that?
MM: Generally, you are looking for iron units in the electric arc process, whether that comes from scrap or DRI or pig iron. Different types of scrap all have different qualities and attributes to contribute to an electric arc furnace. Basically, [scrap, DRI and pig iron] are all electric arc furnace raw materials.
In combination, the more DRI or the more pig iron in domestic production in North America will, from my perspective, have a positive impact because, for any commodity, if you have additional supply and constant demand, the market price will drop, and that is good for the electric arc furnace industry.
RT: SDI has had to shutter some of its OmniSource locations, especially in the South. Additionally, the company has had to idle some auto shredders (as have many other companies). Do you think most of the OmniSource closures are done or do you see more consolidation of operations?
MM: We continue to assess our business and the market conditions in the Southeast, and we are going to continue to act accordingly to make sure we have a sustainable business model down there.
I think the team is doing a good job focusing on its cost pressures and its market activities to improve the margin.
RT: Are there other regions of the U.S. where OmniSource may look to grow?
MM: I don’t think so—not appreciably anyway. I think our strategic objective, which was originally to develop a secure source of scrap, is pretty complete. We have today 7.8 million tons of steelmaking capacity, and we have around 7 million tons of scrap collection, processing and supply capacity. Strategically, we are reasonably balanced.
Not all that OmniSource scrap goes to our own mills—only about half does. Because scrap tends to be a fairly freight-sensitive commodity, it makes sense for some of our scrap to flow to our own steel mills, while the rest is sold to third parties. Nonetheless, I think we have a pretty good balance of supply, and I don’t anticipate any appreciable growth outside our existing geographical footprint.
RT: Several steel companies have criticized trade policies of other countries and have complained that the domestic steel industry is at a distinct disadvantage to other countries (especially China). Can you comment on this opinion and what role, if any, SDI should take with helping to educate policymakers on the global steel industry?
MM: We don’t believe in protective trade, but we certainly believe in fair trade. I think we have a responsibility to educate our policymakers as to the impact and effect of unfairly traded goods coming into this country.
We actually don’t do a great deal of lobbying independently; we work through an entity called the Steel Manufacturers Association (SMA, www.steelnet.org) to gain a greater voice.
RT: You’ve been personally involved in considerable technology advances for EAF steel production. Do you see further advances that will increase EAF steel production and thus the demand for steel scrap?
MM: If you look at America, it is one of the only mature economies that is actually steel short. In a normalized economy, America needs 130 million tons or more of steel, and we have the steelmaking capacity for 100 million or 105 million tons. In that environment, although it is difficult to envision today given where the steel economy currently is and where the markets are, you can see room for additional capacity. With time, some of the older capacity will continue to come offline, and any growth, given the environmental concerns of today, is likely to be electric arc furnace, and that will increase the demand for scrap and for pig iron.
RT: But there are no advances that you know of that could result in additional efficiencies?
MM: I don’t see there being any technology on the horizon that would be considered a leap-frog technology. But the industry is pretty innovative, and things will continue to improve on an incremental basis.
RT: President Obama recently paid a visit to U.S. Steel. If he came to SDI and asked you for advice, what would you tell him?
MM: First and foremost, I would ask him to promote the shale gas industry. I think the shale gas phenomenon can lead to American prosperity going forward and to significant economic growth. If our country could become energy independent again, which shale gas properly developed would allow us to be, we would again be a world leader. I’d ask him to perhaps focus on that and not suffocate it through regulation.
I would also request that he assures our trading partners adhere to our and to WTO (World Trade Organization) trading policies.
I think I would also ask him not to suffocate basic industry by overregulation. I think everyone gets caught up in regulation, and regulation should be focused on those companies that don’t adhere to environmental and safety standards and not suffocate quality companies that make every attempt to do what is right.
And I’d say that all very politely.
RT: Is there room for more steel capacity to open in the U.S. in the near future?
MM: I think over time, yes. I think in the immediate market with 500 million tons of excess global capacity and slow growth in foreign economies, it will take a little while to absorb that capacity. But, thereafter, yes.
RT: What is one thing that gets you excited about working at SDI?
MM: I get impassioned and inspired by our people. We have a phenomenal culture, I do believe, and esprit de corps. When I go out and visit our guys and girls in our scrap yards and our fabrication plants and steel mills, I get energized. They are the ones who drive our success. It is an incredible team of people. … They are all driving our company forward.
RT: How does the copper smelting partnership with Spain’s LaFarga Group fit in with the overall SDI business strategy?
MM: I think in some respects it mirrored the evolution of the electric arc furnace industry in that the electric arc furnace industry used scrap, which was a relatively economical raw material compared to the iron ore integrated route.
SDI La Farga takes No. 2 copper scrap and produces a prime product. We thought that it presented a value-add downstream enterprise for us and that the LaFarga Group was a very high-quality organization—great people—and it gives us an outlet for our No. 2 copper scrap.
We are one of the largest nonferrous scrap companies in the States, and the No. 2 copper market has been pretty reliant on China, which has been a volatile arena and not a market that has the highest ethics, I would say. So, we wanted to get a consistent outlet for that No. 2 copper scrap.
RT: SDI LaFarga has been operating now for about a year and half. Have you realized the gains you expected to see there in terms of it being a reliable consumer of No. 2 copper scrap?
MM: Things never happen quite as quickly as one would like, but it is progressing quite nicely.
RT: Can the United States maintain and grow its manufacturing base in the global economy?
MM: I think so. I think America, particularly with its potential energy position, could have a phenomenal basis for growth. We are one of the most attractive countries to produce steel and manufacture goods. We are politically stable, our energy basis is very low, we have one of the most productive workforces in the world—one that may be paid a little more per hour—but our productively is second to none. I think there are quite a few things going for America.
RT: Do you ever think we’ll regain the position we once had in regard to manufacturing?
MM: One would hope. Again, as long as business is allowed to thrive, it will then in turn create jobs and continue to fuel the economy.
RT: What makes the SDI culture unique?
MM: I guess we believe in our people, first and foremost, and our people believe in us. It is one thing to have state-of-the-art equipment and technology, which is essential for us to compete today, but it is even more important to create a culture in which to leverage that equipment. I think we have a passionate team. It is their company; it is our company. We reward everyone’s efforts through profit sharing. If the company does better, everyone does better. There is an equity component; we use stock options, they are called RSUs (restricted stock options), which gives each and every employee ownership in the company—it’s not just a perk for the upper leadership. Building a spirit of ownership, I think, is crucial. We have a performance, incentive-driven company. As we all work hard or harder, we share in the rewards of the company.
I think you just have to treat people right in life. It may sound simple, but you have to have strong ethics, loyalty, respect and communicate well.
One has to promote innovation, and that comes, again, from all 6,700 employees. They are all creative people. They all come up with ideas, whether it be ways to improve safety, quality, customer service or just make things a little easier every day. But you have to listen to them. You can’t dismiss those ideas because then suddenly those ideas start drying up.
One of the principal roles of the senior management team is to listen, read between the lines and react and get back to our employees. Whether the answer is yes or no, whether it is good news or bad news, they need to know.
It is a whole conglomeration of simple things, but in the end you get a powerful, impassioned team that can do anything in life.
During the darkest days of the recession that followed the subprime mortgage crisis of 2008, the steel mill capacity rate in the United States as calculated by the Washington-based American Iron and Steel Institute (AISI) fell below 50 percent—a dramatically rare occurrence.
Subsequently, the story of the steel industry has been, first, one of steadily rising output to reach the 75 percent neighborhood and, since 2010, a second chapter involving a plateau at that 75 percent mill capacity rate that the industry has found difficult to exceed.
In 2014, a lukewarm construction sector continues to shoulder some of the blame for the “stuck in third gear” nature of the U.S. steel industry, but an influx of imported steel also is starting to share the blame in the eyes of many U.S. steelmakers.
Not a full throttle
Steel output data collected and distributed by AISI demonstrate that the industry in the U.S. continues to languish at a capacity rate in the 75 percent range rather than at an 85 percent-plus rate indicative of more prosperous times.
AISI’s data for the week ending May 10, 2014, indicate steel production at U.S. mills was 1.84 million tons at a mill capacity rate of 76.6 percent. That represents a modest 0.5 percent gain over the 1.83 million tons produced in the comparable week in 2013.
Another (slightly) positive trend is that weekly output in early May was up 1.5 percent from the previous week (the one ending May 3, 2014), when production was 1.82 million tons and the mill capacity rate was 75.5 percent.
Year-to-date AISI figures show, however, that flatness remains the predominant feature of the U.S. steel industry in the first half of 2014. AISI figures show 33.9 million tons of output through May 10, 2014, compared with the 34.2 million tons produced during the same period of 2013, a decline of 0.8 percent.
Electric arc furnace (EAF) steelmakers based in the U.S., who consume a healthy percentage of the ferrous scrap generated in North America, are generally reporting modest profits but are not portraying 2014 as the start of a new boom cycle.
Steel Dynamics Inc. (SDI), Fort Wayne, Indiana, pointed to severe winter weather as a restraining factors in the first quarter of 2014. “The uncharacteristically severe and prolonged winter weather conditions resulted in increased energy costs, reduced production, diminished availability of transportation and lower shipments,” said SDI CEO Mark Millett in comments accompanying SDI’s first quarter report.
“This environment was a major driver of the 25 percent decline in our consolidated operating income for the first quarter [of] 2014 as compared to the sequential fourth quarter of 2013,” Millett added.
SDI’s quarterly net income of $39 million was down from the $48 million earned in the first quarter of 2013.
Millet expressed optimism that with a change in the weather will come increased sales and profitability. “As weather conditions improved, demand also strengthened with increased order activity throughout our steel operations,” he commented. (To read more comments from Mark Millet, see the Recycling Today interview with him starting on page 52 of this issue.)
The nation’s largest EAF steelmaker, Charlotte, North Carolina-based Nucor Corp., demonstrated slightly better earnings in the first quarter of 2014 compared with 2013.
Nucor’s net earnings of $111 million marked a 30.9 percent increase over the $84.8 million earned in the first quarter of 2013. The figure, however, was down 34.9 percent from the $170.5 million the company netted in the fourth quarter of 2013.
In comments accompanying its quarterly results, Nucor also pointed to severe weather as a factor hampering profitability. The company also referred to an influx of imported finished steel as a source of trouble. “Import levels negatively impacted pricing and margins at our bar and sheet mills,” Nucor said.
Steel industry trade associations have begun issuing position papers and press releases regarding imports indicating the U.S. steel industry is already pressing the executive and legislative branches in Washington to act.
Dockloads of arrivals
The AISI is among the trade associations sounding the alarm on what it considers to be unfair competition faced by steelmakers based in the U.S.
Citing U.S. Commerce Department data, the AISI issued a statement in early May saying “steel import permit applications for the month of April totaled 3.68 million net tons. This was a 4 percent increase from the 3.55 million net tons recorded in March and a 14 percent increase from the March final imports total of 3.23 million net tons.”
In the first four months of 2014, AISI says, “total and finished steel imports were 13.4 million net tons and 9.8 million net tons, respectively, up 29 percent and 19 percent from the same period in 2013.”
Considering the U.S. steel mill capacity rate is in the 76 percent range, many steelmakers are citing a correlation between the imports and the “stuck in neutral” domestic capacity rate.
Pipes and drilling equipment used in the energy exploration, pipeline and early production stages (referred to as oil country tubular goods, or OCTG, by steelmakers) drew attention of the Financial Times in a May article, as America’s growing energy sector has been hailed as an engine of economic growth.
The real and anticipated need for OCTG steel products has resulted in new investments in steel tube and pipe making, including a $1 billion tube plant built in Youngstown, Ohio, built by France’s Vallourec Group and a $1.5 billion OCTG mill under construction in Bay City, Texas, by Luxembourg-based Tenaris.
Politicians as diverse as Democratic Sen. Sherrod Brown of Ohio and Republican Sen. Jeff Sessions of Alabama are working together to rally Congress and executive branch agencies to keep import levels at bay in the belief it will benefit steelmakers and foundry operators in their home states.
The duo appeared together at a May press conference endorsing a 62-page report that spells out alleged unfair steel import practices.
AISI and Commerce Department figures point to a broader range of imports that is not skewed toward OTCG products. “Products with significant year-to-date increases versus the same period in 2013 include wire rods (up 105 percent), plates in coils (up 63 percent), cold-rolled sheets (up 54 percent), reinforcing bars (up 40 percent), sheets and strip hot-dipped galvanized (up 36 percent), sheets and strip all other metallic coatings (up 35 percent), hot-rolled sheets (32 percent), mechanical tubing (31 percent), oil country goods (up 16 percent) and cut lengths plates (up 12 percent),” AISI reports.
To what extent a trade case brought by the U.S. can convince the World Trade Organization (WTO) that OTCG products are being dumped onto the North American market remains to be seen.
A WTO case generally has to prove that “dumping” is occurring, or that steelmakers in another country, possibly backed by government subsidies, are shipping products overseas and selling them at a loss compared to production costs.
Measured by volume through the first four months of 2014, the largest offshore suppliers of steel to the U.S. were South Korea (1.57 million net tons, up 27 percent from the same period in 2013), China (965,000 net tons, up 73 percent) and Japan (692,000, up 5 percent), putting those three nations among the potential targets in a U.S. trade case.
Despite the unwelcome competition from overseas, U.S. steelmakers also retain reasons for optimism, according to participants in a roundtable at one recent industry event.
While steelmakers and politicians grapple with deriving immediate benefits from America’s energy boom, a longer-term benefit may be the ability of steelmakers in the U.S. to obtain ongoing access to affordable energy.
At the Ferrous Spotlight session of the Institute of Scrap Recycling Industries (ISRI) 2014 Convention & Exposition, held in Las Vegas in April, a former steel industry association executive director commented on the challenges and opportunities in front of the steel sector in the U.S.
Thomas Danjczek, past president of the Washington-based Steel Manufacturers Association, noted that in recent years the U.S. has been the world’s leading importer of finished steel while it is not even in the top 10 among steel exporting nations.
Since 2003, Danjczek said, imported steel has accounted for an average of 26 percent of the steel consumed each year in the United States.
Although this open market may have cost the U.S. steel industry up to 87,000 jobs, Danjczek estimated, it has made the domestic steel industry resilient and well-positioned to compete.
He said low energy costs, access to the world’s largest capital markets and self-sufficiency in steelmaking raw materials are reasons for optimism within the U.S. steel sector.
Access to affordable energy has spurred Nucor, Charlotte, North Carolina, to build a direct reduced iron plant (DRI) in Louisiana. While DRI may supplement or even compete with scrap as feedstock at some mills, Danjczek said the investment should be considered a commitment to the electric arc furnace (EAF) process.
Scrap processors and dealers were likely pleased to hear Danjczek predict that the EAF sector’s share of production was “likely to increase” and that U.S.-based steelmakers overall “have stronger balance sheets” that are “much better than they were in the 1980s and 1990s.”
The recent earning reports of Nucor, SDI) and other steelmakers bear out Danjczek’s observation, as even during a time when the nation’s steel output seems stuck in third gear, EAF steelmakers are figuring out how to operate profitably in the lukewarm environment.
The author is editor of Recycling Today and can be contacted at email@example.com.
Owners and operations managers of scrap companies strive to provide and maintain a safe working environment, which can include investing in additional options and features when buying a scrap handler.
Even in a safe working environment, pieces of scrap can fall from a grapple or magnet in transit. This can put the scrap handler’s operator at risk and has the potential to cause damage to any exposed components.
Makers of material handlers have been aware of this potential problem for decades and have responded with a variety of solutions designed to protect people and property.
On the fly
Scrap processing machinery is not designed to send material flying through the air; but, as a recent complaint in Illinois demonstrates, it can happen.
In April of this year, the Illinois Environmental Protection Agency (EPA) referred an enforcement action to the state’s attorney general’s office in response to a complaint about an auto shredding plant in the Chicago area that allegedly ejected one or more pieces of metal onto an adjacent property.
While visiting the facility, the Illinois EPA says its inspector “observed objects that had allegedly been ejected from the company’s shredder onto adjacent property beyond the facility’s boundaries.” The agency says it also observed damage to a nearby structure allegedly caused by an object ejected from the shredder.
The state EPA recommended measures including “the development, implementation and submittal of a compliance plan to address projectiles and particulate matter emissions from the facility.”
Fortunately, fast-hurtling objects leaving a shredder are relatively rare, but they do present one of several potential hazards facing a worker inside a scrap handler operator’s cab.
Scrap handler operators are working amidst one or more pieces of processing machinery and also are trying to pick up and move as much loose scrap as their machine and its attachment can safely handle.
When a piece of scrap metal falls from a magnet or grapple, it may not fly at the speed of a shredder projectile, but it nonetheless can present a danger to a machine operator if he or she is sitting in a cab with an open window or unguarded, nonshatterproof glass.
Three Ps in a pod
A “Safety Point” issued by the safety division of the Washington-based Institute of Scrap Recycling Industries (ISRI) in May 2014 offers recommendations to scrap handler operators that all begin with the letter “p.”
Before mobile material handler operators rev their machines up to begin loading or unloading material, ISRI recommends they check for the following things:
1) People – “Take a walk all the way around your machine to make sure there’s nobody cleaning up near it or leaning on your wheels or tracks,” says ISRI. The organization also urges machine operators not to “rely solely on mirrors or cameras” but to turn their heads and look for pedestrians in nearby areas. “Getting run over by a piece of mobile equipment was the No. 1 way to die in a scrap yard [in 2013],” ISRI says.
2) Potholes – Ground that is not level, with obstructions that can cause sudden steering movements, can be the cause of accidents, says ISRI. The group’s safety division advises operators to know the terrain and the traffic patterns of the areas of a yard in which they are working.
3) Power lines – “OSHA says to keep at least 10 feet away from a 50,000-volt power line,” advises ISRI, but “a good rule of thumb is to simply stay as far away as possible.” The ISRI safety division recommends having “a ground man” who can advise operators when they are clear of lines. “Make sure [the ground person] is not too close to your machine. If your machine accidentally comes into contact with live electricity, he could become part of the circuit and be electrocuted,” ISRI adds.
More safety tips from ISRI on material handling and many other topics can be found at www.isri.org/safety-best-practices/isri-safety.
Andreas Ernst of scrap handler manufacturer Sennebogen LLC, Charlotte, North Carolina, says operator habits also play a role. “The main issues I have seen is with untrained and not careful operators,” says Ernst. “[Safety] is by far more the way how the operator handles the machine than the individual activity.”
He adds, though, that “handling material like pipes, I-beams or long pieces where the grapple tines have issues keeping it inside the grapple are probably the activity with the highest safety risk.”
Says Jerry Risley, a senior application engineer with Caterpillar Inc., Peoria, Illinois, “Every day is different and every hour is different in a scrap yard. We try to think of the worst-case scenarios and try to prevent them from causing harm to the operator in the cab.”
Suit of armor
Because of the potential hazards in the scrap yard environment, manufacturers of hydraulic scrap handlers have designed and now offer numerous forms of guarding to protect people and machine components.
On the personnel front, the operator’s cab has, logically, received much of the safety attention.
Visitors to the exhibit hall of the 2014 Institute of Scrap Recycling Industries (ISRI) 2014 Convention & Exhibition, held April 6-10 in Las Vegas, had the opportunity to view scrap handling machines on display from several different manufacturers. Virtually every machine on the show floor featured operator cabs outfitted with protective vertical bars or steel wire caging on the front of the cab or on all sides.
Excavating and material handling machinery maker LBX Co., Louisville, Kentucky, describes its operator cab guarding options as including “three different front guards: a full bar guard, a mesh guard and a hinged bar guard so [machine owners] can easily clean the windshield.”
Steve Brezinski, material handler product manager with Terex Fuchs, Southaven, Mississippi, says “guarding is typically optional equipment and purchased at an additional cost,” but he adds that very few recyclers choose to be without this form of protection for their employees.
“We are seeing a trend of more companies requesting these safety features,” he comments. “Although they are not standard equipment, in many instances guards are added and stocked by equipment distributors. However,” Brezinski adds, “the final decision is up to the buyer.”
In addition to guarding, manufacturers such as Liebherr, with U.S. headquarters in Newport News, Virginia, tout cabs made of “robust steel” and safety glass that offers additional protection to the occupant.
Liebherr also offers a feature designed to prevent an attachment or its contents from getting too close to the operator's cabin. "Liebherr offers an automatic proximity switch, which prevents the working attachment from being positioned too close to the operator’s cabin, as standard equipment on all current scrap handlers," says Paul Hill, a senior product manager with the company.
Beyond the armor, manufacturers also have taken steps to try to prevent falls and other hazards that can be encountered by those working to maintain, repair or simply climb into a scrap handler. Machines also are increasingly designed with a hydraulic lift-and-lower cab option that can bring the cab down to ground level for the operator to enter and exit.
A model MH3037 scrap handler on display in the Caterpillar exhibit area at the 2014 ISRI Convention & Exposition featured a textured metal surface designed to prevent slips and falls on parts of the machine likely to be stepped on by operators and service personnel.
The machine also featured work lights (covered in steel wire guarding) designed to provide a better and safer work environment for maintenance personnel serving the scrap handler during nondaylight hours.
As another way to cut down on slip-and-fall accidents, manufacturers also have increasingly configured the placement of engines and of oil and hydraulic systems so service personnel can gain access to commonly maintained areas at ground level.
The federal Occupational Health and Safety Administration (OSHA), in a 2008 publication called “Guidance for the Identification and Control of Safety and Health Hazards in Metal Scrap Recycling,” addresses machine guarding in the context of protecting vulnerable machine components and systems. “Employers must consider equipping vehicles with guarding to protect any vulnerable brake lines from incidental damage during operation,” the guide reads.
“We’re trying to protect the operator first and foremost but also the components,” says Risley. “Safety is first and foremost to scrap processors, and machine reliability is No. 2 on the priority list.”
Brake lines are not the only high-risk or high-cost component that machine designers have been working to protect.
As the very name “hydraulic scrap handler” implies, the hydraulic system plays several critical functions in a scrap handling machine.
A hydraulic hose that is accidentally severed in the course of work may not only put a machine quickly out of commission, it also could expose the operator to danger in the form of a lost load or a suddenly off-balance machine.
Those reasons have prompted manufacturers of scrap handlers to take particular care in incorporating design features to protect hydraulic hoses. "On all Liebherr material handlers, hoses are routed through the inside of the stick to protect against this type of (cutting) occurence," says the company's Hill.
The Caterpillar MH3037 on display at the ISRI 2014 Convention & Exposition featured “load-lock valves” on all hydraulic cylinders. According to Jeremy Middleton, an alliance account manager with Caterpillar, the valves are designed to prevent “sudden boom movements” in the case of a hydraulic system failure caused by a severed line or any other reason.
Hydraulic lines on the MH3037, as with scrap handlers currently built by the majority of manufacturers, often are protected by sheet metal or otherwise kept from open exposure to the scrap yard environment. Manufacturers also are employing new materials in their quest to protect the complete hydraulics system of scrap handlers.
Ernst of Sennebogen says his company is “making sure that the exposed hoses in front of the stick are protected by covers. These hoses, plus the hoses connecting the grapple to the machine, are the highest concern as they are close to the material.”
Brezinski says Terex Fuchs “designs and equips our material handler boom and sticks with a combination of rigid pipes that help reduce the risk of exposure to the elements and work environment.”
Another option, he says, are “flexible hoses that are predominantly located in areas that flex or bend. In addition, we include protective plating around lines.”
The material handlers deployed at scrap yards are increasingly equipped with an array of features (some visible, like a cab surrounded by a steel wire cage, and others less visible, like hidden hydraulic hoses) that are designed to improve the industry’s safety record and keep material handlers on the job with a minimum of component damage.
The author is editor of Recycling Today and can be contacted at firstname.lastname@example.org.