When several of China’s government agencies banded together to create Operation Green Fence, environmental protection was touted as the key goal behind the heightened scrutiny of secondary commodity shipments into China.
Subsequent statements from customs and inspections officials have made it clear that Green Fence also has a “follow the money” aspect. While keeping out low-quality and especially contaminated shipments is one desired result, so is ensuring that scrap buyers are properly representing the full taxable value of the containers of material they import.
Scrap metal, paper and plastic exporters in North America and scrap buyers in China agree that the inspectors enforcing Green Fence have taken their task seriously, if not always consistently, from port to port.
Transactions have been delayed, renegotiated and in some cases cancelled throughout the year because of the increased scrutiny brought about by Operation Green Fence. In the plastic scrap sector in particular, some North American exporters have had difficulty accessing the Chinese market. As well, manufacturers in China who rely on imported plastic scrap feedstock are struggling to make it through 2013.
Although some initial statements from Chinese government employees referred to Green Fence as being phased out in late 2013, the operation’s timeline may well be extended if customs officials are convinced it is yielding additional tax revenue.
For North America’s recyclers, if Green Fence extends into 2014, it could mean shipping to China will remain a less-favored option, especially if they have experienced uncertainty and unpredictability when sending similar loads to different ports or even to the same port in different months.
In the abstract, many recyclers describe their operations as manufacturing processes and they strive for the highest levels of product quality and uniformity. Many scrap consumers have long held recyclers to these same high standards, so there is nothing novel about meeting tight specifications.
From this point of view, perhaps Green Fence can be seen as a long-term positive—the closing of a loophole that allowed some industry practitioners to get away with giving less than their best effort while making minimal investments in quality.
As the year of the Green Fence, 2013 will yield bad memories for recyclers on all bands of the quality spectrum. It remains to be seen whether recyclers who have responded earnestly with investments to upgrade quality will be rewarded with a smoother path in 2014.
Pacific Steel & Recycling at a Glance
Executive Team: (Pictured above from left) President and CEO Jeff Millhollin, Vice President of Steel Operations Ed Leppien, Incoming Vice President of Steel Operations Ed Joyce, Vice President of Scrap Operations Patrick Kons, Vice President of Business Development Stuart Boylan, Vice President of Ferrous Processing and Trading Ken Halko, (not pictured) CFO Tim Culliton, CIO Dave Richards and Human Resources Manager Jayne Merrill
Locations: Headquartered in Great Falls, Mont., with 46 branch locations in the U.S. states of Colorado, Idaho, Montana, Nevada, North Dakota, South Dakota, Utah, Washington and Wyoming and in the Canadian province of Alberta
No. of Employees/Owners: 820
Equipment: Two 80/104 3,000-horsepower shredders from Metso Texas Shredder with downstream separation systems from Steinert, four Lindemann 1025 stationary shears from Metso, 36 mobile shears mounted on excavators, 120 tractor/trailers and 16 mobile 580 model balers from Al-jon
Services: Ferrous and nonferrous scrap processing, deconstruction, transloading at the inland Port of Tacoma in Washington for its own materials, new steel sales and first- and second-stage processing
Pacific Steel & Recycling, headquartered in Great Falls, Mont., has kept a relatively low profile over the years, quietly expanding its presence in the Mountain West region. The company, which was founded in the 1870s by German emigrant Joe Thiebes and was incorporated in Washington state in 1918 as Pacific Hide and Fur Depot, currently operates 46 branch offices in nine U.S. states and Canada. The company’s recycling division processes some 500,000 tons of ferrous and nonferrous scrap per year in addition to catalytic convertors and electronics. Pacific’s steel division also sells from 60,000 tons to 65,000 tons of new steel annually.
The company’s management team credits its success to its employee-ownership as well as to its diversified operations.
Benefits of Diversity
“We are unique in that we have a new steel division and a recycling division,” says Patrick Kons, vice president of Pacific Steel & Recycling’s recycling operations. “We work closely with the mills in that we are selling scrap or bringing scrap into those domestic mills on the back end, and we’re buying new steel products and selling for retail. It is good vertical integration with that business model and aligns us with domestic producers of new steel products.”
Ed Joyce, the incoming vice president of the company’s steel operations, adds, “Diversification is a good word to use as far as our business. It has helped us weather this tough economic environment being both in scrap and in steel.”
Joyce will replace Ed Leppien, who is retiring from the company at the end of the year.
Pacific Steel & Recycling’s steel division seeks to add value for its customers, Joyce says, as many of the products steel distribution centers sell have been commoditized. A large percentage of the tonnage leaving the company’s Coeur d’Alene, Idaho, facility involved some degree of first- or second-stage processing. Pacific recently acquired this facility, which has one of the largest press brakes in the western U.S. with a capacity of 1,500 tons, Joyce says.
Pacific Steel & Recycling President and CEO Jeff Millhollin adds that the company’s Coeur d’Alene plant also operates several plasma tables, a water jet and a laser multitool. He says the facility is largely geared toward plate processing and serves clients not only in the Northwest but also throughout North America.
“Our customers are under as much economic and regulatory pressure as we are in this business,” Millhollin adds. “If we can work to help them have less manpower out there or less equipment, then they are saving money.”
In addition to its two business segments, Pacific has diversified its recycling operations by adding catalytic convertor processing nearly four years ago and electronics recycling last year, Kons says. Its branch locations collect catalytic convertors, which are transported to a single location for processing. Electronics also are collected at the company’s branches and processed at a single location, which is certified to the R2 (Responsible Recycling Practices) standard.
“We went for R2 certification at the onset,” Kons says of the company’s electronics recycling facility in Nampa, Idaho. “We said, ‘We are going to do this thing right,’ and we put a lot of energy into it with our environmental compliance specialist and our branch managers.”
While Millhollin and Kons characterize the company’s electronics recycling business as off to a gradual start, Millhollin adds, “We are happy to have launched that business. We see that as a growing recycling stream in the future and there was a need in our footprint for that service.”
Pacific Steel & Recycling disassembles electronics by hand and operates a shredder on site for hard drives. Metal housings and other components from the devices are transported to Pacific’s auto shredder near Boise, Idaho, for shredding.
Matters of Geography
Transporting material long distances in the sparsely populated Mountain West can be considered a drawback of Pacific’s operating region, but the company’s management team also sees many benefits associated with its geographic coverage.
Pacific Steel & Recycling, headquartered in Great Falls, Mont., is an employee-owned company. President and CEO Jeff Millhollin says the average tenure for the company’s employee-owners is 18 years, while turnover at the company is in the 3 or 4 percent range. Millhollin credits these statistics to Pacific’s pre-employment screening process and the culture that is unique to employee-owned companies.
The company administers personality and integrity tests to job candidates and prioritizes ongoing training for employees, Vice President of Business Development Stuart Boylan says. Pacific also promotes from within. Millhollin started as a ferrous salesman, while Boylan began his career with the company pulling orders for its new steel division.
Millhollin says Pacific has a well-thought-out and sophisticated employee development program, including an in-house Web training system geared toward employee-owners in the management track that is similar to a capstone MBA program. Pacific also offers Web-based sales training and safety training that includes a review of Department of Transportation regulations. In fact, before employees begin work in the company’s branches, each one undergoes two full days of safety related training.
Pacific’s employee-owners are actively engaged in their communities, Boylan says, volunteering for various charities and fundraising events. The company requires each branch to give a certain dollar amount based on a formula related to the location’s profitability, Millhollin adds.
The charities a branch supports are at the discretion of the branch manager with the input of the location’s employee-owners. Pacific also has a corporate community contributions committee that helps to vet the various requests for help the company receives.
One such benefit is related to the growth in the energy and mining industries in the region. “When you have a stagnant economy, it is hard to move tons of new steel,” says Millhollin. “We are fortunate in our region that we have a lot of oil and gas activity and [mining] extraction activity.” He adds that activity in these sectors has benefitted Pacific’s new steel division as well as its recycling division. It’s also changed the company’s customer mix.
“Peddler traffic has been the mainstay of the business for many years,” Kons says. “All of the branches are set up for peddler traffic and they do a fair amount of that business.”
However, with the growth of the mining, oil and gas industries, Pacific has seen its industrial business grow, he adds.
Despite this regional activity, the business climate in the scrap recycling industry remains challenging. Kons says markets have contracted, compressing margins throughout the industry. “I would say it’s a combination of less available scrap and more competition,” he adds. “With prices dropping off, not as much scrap is being generated.”
Scrap industry competition has fueled some investments in Pacific’s recycling operations. The company is finalizing the installation of its second shredder, an 80/104 from Metso Texas Shredder, San Antonio, in Lockwood, Mont., near Billings. The installation also will include an upgraded downstream sorting system from Steinert, Walton, Ky., designed to improve the company’s recovery of nonferrous metals. Pacific Steel & Recycling also operates a shredder of the same make and model in Mayfield, Idaho, near Boise.
While markets were fairly strong in 2011 when Pacific decided to open a branch in Lockwood and install the shredder, the market has softened since. Kons says, “We will be challenged.”
The challenges relate in part to the sparsely populated region in which Pacific operates. (For instance, the population of Montana only recently passed the 1 million mark.) Kons says larger population centers in the Mountain West region can be 300 to 400 miles apart. “We have to reach a long way to get tonnage,” he says.
The company has recently invested in four Metso Lindemann LUC 1025 stationary shears for its operations; it used only smaller stationary and mobile shears in the past. The stationary shears, Kons says, “are all about efficiency and man hours per ton.”
In a region with dispersed population centers, transportation costs also have a considerable affect on the company’s profitability. Pacific Steel & Recycling has tried to address this issue through strategically locating its operations on railroad lines as well as by establishing a transloading facility on the Port of Tacoma in Washington.
Pacific’s operations are primarily served by one of two rail lines: the Union Pacific (UP) and the Burlington Northern Santa Fe (BNSF) and Montana Rail Link (MRL).
“We’ve placed the shears and the shredders in geographic and railroad locations so that we have the ability to ship internal tons between processing facilities based on markets and railroad rates,” Millhollin says. “We have two shears and a shredder on the UP and two shears and a shredder on the BNSF/MRL.”
Pacific opened its transloading facility roughly three years ago. Gondolas of scrap are shipped via rail to the facility, where the material is then loaded into containers for shipment overseas. Much of the material shipped from this location is zurik and zorba, however, Millhollin says quite a few ferrous tons also head overseas from this facility. In the last year, he estimates that 45,000 tons have been shipped through the transloading facility.
Perks of Ownership
While the current business environment presents many challenges to Pacific Steel & Recycling as well as to scrap recyclers and steel distributors in general, the company’s management team says its ownership structure offers a distinct advantage over its competition.
According to Pacific Steel & Recycling, the Thiebes family believed in sharing company profits with key employees, awarding them company stock beginning in the late 1930s. This program led to a profit-sharing program through which employees could purchase company stock. When the Thiebes family was ready to exit the business in the 1980s, the family allowed employees of Pacific Steel & Recycling to purchase the company through an employee stock ownership plan (ESOP). The purchase was finalized in the 1990s.
Pacific Steel & Recycling Vice President of Business Development Stuart Boylan says the culture that is created through employee ownership has contributed to the success of the company. “There is sense of empowerment and enthusiasm for the industry and the company,” he says. “The employees benefit directly as the company succeeds. This provides strong motivation for improved customer service and maintenance—they want to put their best foot forward as owners.”
While Boylan says employee-owners begin receiving shares in the company the day they start, Pacific uses a vesting schedule for its ESOP that the federal government established, with employee-owners becoming fully vested in their sixth year with the company.
Boylan says because Pacific Steel & Recycling has a lot to offer its employee-owners, the company’s turnover rate is low and its screening process is rigorous.
Because seniority leads to higher stock accumulation, roughly 75 of Pacific’s employees own 50 percent of the company, he says. However, Boylan adds, “All of our employee-owners are engaged and thinking about things to make us better all the time.”
This mentality extends to determining how to best navigate the company in the current economic and regulatory climate.
“We are very cost conscious,” Millhollin says of Pacific Steel & Recycling. “We are looking at reduction in overtime hours—manpower is your No. 1 cost. We are looking at efficiencies and have invested where we think we will get a bang for our buck on cap-ex material and equipment.”
He continues, “The bottom line is that we are trying to take care of business the best we can because costs are going up and prices are going down. It is a difficult scenario, and everyone is under pressure to drive profitability.”
Pacific Steel & Recycling, headquartered in Great Falls, Mont., is an employee-owned company that says it strives “to be the business of choice by providing high-quality services and products that meet our customers’ needs.”
According to Pacific Steel & Recycling, the following values help the company achieve its mission:
1. Pacific Steel & Recycling values honesty and integrity, keeping commitments to employees, customers and stakeholders.
2. Pacific Steel & Recycling values strength and stability created by quality employees, sound financial management, an entrepreneurial mindset and operational flexibility.
3. Pacific Steel & Recycling values continuous improvement in employees, products, services and operations.
4. Pacific is committed to serving its customers (external and internal) to consistently meet or exceed their expectations.
5. Pacific is committed to meeting or exceeding regulatory requirements to entrust a legacy of safe work practices and environmental stewardship that contributes to sustainability for our families and the communities that it serves.
The author is managing editor of Recycling Today and can be contacted via email at email@example.com.
Ferrous scrap recyclers have several unpleasant near-term memories they can draw upon to recall when conditions were worse than they have been in the summer and fall of 2013.
However, unlike the frog who sits comfortably in warm water as it is slowly brought to a deadly boil, many of them have been sensing that the market has steadily become less enjoyable throughout 2013.
Statistics for pricing and export volumes and those in the ledgers of publicly traded companies show that the first nine months of 2013 can hardly be described as prosperous, and few forecasters are predicting a final quarter boost to close out the year.
Waiting for a Spark
Metals recyclers who gathered in mid-September for the 2013 Commodities Roundtable Forum, hosted by the Institute of Scrap Recycling Industries Inc. (ISRI) in Chicago, heard from speakers who do not foresee a steel industry or ferrous scrap price surge in the near-term future.
Mike Marley, an analyst with MetalPrices.com, Basalt, Colo., described the ferrous market as quiet, adding that fewer deals were being made domestically and in the export market in September, with most of those being for small tonnages. “There is no panic selling,” Marley commented. “In September, prices were down $10, and shredded prices were down $15 or down $20 in some regions.”
Marley said there appeared to be an overall bearish sense in the market, with shredded scrap continuing to show weakness. “It was almost a given that shredded would fall,” said Marley, adding that bundles and busheling also fell in September.
Lead times for orders at steel mills globally were not stretching out as far as they had been, Marley added, which suggests steel sheet supply was catching up with demand. As well, some steel mill capacity was down for maintenance. This might help firm up steel prices, Marley speculated, but would reduce scrap demand. Further out, Marley said more shutdowns of steel capacity over the next few months would balance out against the mills coming back online.
With the general bearishness in the ferrous market, “No one is looking for a rebound in prime scrap [pricing],” Marley remarked. “Lots of guys sold what they had this month. They want to see just dirt by the end of the month.”
Going forward, Marley predicted a “soft, sideways market. From a seller’s perspective, it means zero to down a bit. For a buyer, it means that you will [ask for] a $10 cut, maybe more.”
Jarek Mlodziejewski, a scrap analyst with The Steel Index, with U.S. offices in Pittsburgh, also referred to the downward trend in ferrous scrap pricing and focused on the export angle. “Markets have been [oversupplied] over the past several months,” he said. While Turkey bought somewhat steadily in August, purchasers from that nation “recently dropped out of the market,” Mlodziejewski said. Overall, he said exports from the U.S. to Turkey had decreased by approximately 20 percent year to date.
Mlodziejewski also told attendees that Turkey was striving to become more self-sufficient in scrap, eventually causing Turkish steel mills to reduce their intake of scrap from outside of the country.
Meanwhile, buyers from India are largely unable to place additional orders, with a key reason being the weakness in the Indian rupee. Ferrous scrap exports from the U.S. to India are down around 50 percent, Mlodziejewski pointed out. Additionally, some Indian firms were purchasing more ferrous scrap from the Middle East and Africa, he added, at prices far cheaper than from the United States.
John Harris, who has retired as one of ArcelorMittal’s top scrap purchasing managers, touched on the perceived overcapacity of shredders and the move toward smaller and even portable shredders. “That will change the dynamic,” predicted Harris. “The [super-sized] shredders that were only operating part time in many cases now could be a thing of the wayside, sold to China.”
Competing for Less
Throughout 2013, the predominant business condition causing challenges in the ferrous sector has been a lack of scrap generation. Scrap processors point to a lack of construction and demolition activity as one factor as well as the brutal competition among shredder operators for auto bodies, appliances and loose sheet.
The struggle for feedstock to keep equipment fed is reflected in the results of publicly traded scrap companies such as Sims Metal Management, New York.
A presentation accompanying results for the firm’s 2013 fiscal year, which ended June 30, 2013, reports a 20 percent decline in global sales volumes compared with fiscal year 2012.
In North America, Sims Metal Management’s volume (ferrous and nonferrous combined) in its 2013 fiscal year was down by more than 1.7 million tons, or more than 15 percent, compared with the year before. The company points to a drop in brokered export tons off the Pacific Coast as one of the factors.
Sims Metal Management sounds an optimistic note in terms of the potential for scrap generation and shredder feedstock in North America to increase in the second half of 2013, citing the following factors:
- Light vehicle sales in the U.S. in 2013 are expected to increase by 6 percent compared with 2012;
- U.S. household appliance manufacturers forecast their shipments to be up 7 percent in 2013 compared with 2012; and
- Consumer confidence in the U.S. is up 13 percent compared with 2012.
In terms of its North American ferrous export tonnage, Sims Metal Management indicates conditions could be improving in the second half of the year. “East Coast export ferrous scrap markets improved through July and August, with West Coast export markets initially lagging but show[ing] increasing demand in August,” the company states in its presentation for investors.
Schnitzer Steel Industries Inc., headquartered in Portland, Ore., points to sagging export demand as a reason why its sales figures will be down for the quarter that concluded at the end of August 2013.
“Export demand for recycled metals weakened versus the third quarter as reflected by lower shipped volumes and lower average sales prices,” the company says, giving guidance for its fourth quarter, which ended Aug. 31.
“Ferrous [scrap] sales volumes are anticipated to be 5 to 10 percent lower than the third quarter, and average ferrous selling prices are expected to decline from 8 to 10 percent sequentially,” Schnitzer Steel Industries says.
One Mission Accomplished
Finding enough ferrous scrap and then processing it and selling it with a profit margin have been daily challenges for scrap processors throughout 2013.
One bit of good news for scrap recyclers is that Americans have become increasingly efficient at making sure that anything obsolete made out of metal is recycled rather than thrown out.
The Steel Recycling Institute (SRI), a business unit of the American Iron and Steel Institute (AISI), Washington, D.C., says since the formation of SRI 25 years ago more than 1 billion tons of steel have been melted by steelmakers in North America.
SRI was commissioned by the North American steel industry in 1988 to develop an infrastructure for the recycling of steel cans and to serve as a primary information and technical resource. By 1993, SRI’s focus expanded beyond steel cans to promote the recycling of all steel products.
“For a quarter century, SRI has been the local face of the steel industry, providing advocacy, information and assistance in facilitating increases in the recycling of major steel products, including cans, cars, appliances and construction materials,” says Gregory Crawford, SRI executive director.
SRI says in 2012 the overall recycling rate for steel in the U.S. was 88 percent, with nearly 84 million tons of steel recycled. This included the more than 1.3 million tons of tin plate steel, which were recycled at a rate of 72 percent, the highest among packaging materials, according to SRI. More than 16.3 million tons of automotive scrap were recycled at a rate of 92.5 percent in 2012.
Other rates, including appliances and construction products, are based on industry estimates of retail and scrap collections, including more than 2.7 million tons of appliance steel recycled in 2012 at an estimated 90 percent. Also, each year, based on construction and demolition industry estimates, about 98 percent of out-of-service construction plates and beams are recycled, and 70 percent of rebar and other structural steel are captured for recycling through demolition and disassembly.
The commitment to collect and recycle steel has been inherent to steelmaking for nearly as long as steel has been made in North America, says Thomas Gibson, president and CEO of AISI. “For 25 years, steel’s recycling successes have been spearheaded by the SRI,” he comments.
Even as prices have stagnated and then slumped in the previous 18 months, ferrous scrap recyclers were initially concerned about a lack of scrap and not a decline in demand.
As 2013 has taken shape, however, the tepid demand from export brokers and some domestic steel mills has created problems on the sell side.
Figures collected by the American Iron & Steel Association (AISI), Washington, D.C., show that year-to-date steel production in the U.S. stood at 70.3 million tons through Sept. 21, 2013. That figure represents a 3.6 percent decrease compared with the 72.9 million tons produced during the same period in 2012.
The decline in U.S. steelmaking has been joined by a considerable drop in demand from some key players in the export market. According to the U.S. Geological Survey (USGS), in the first half of 2013, the U.S. shipped 9.9 million metric tons of scrap overseas, down more than 12 percent from the 11.3 million tons shipped in the first half of 2012.
Buyers in each of the four nations that were the largest international buyers of ferrous scrap from the U.S. in the first half of 2012 have purchased less scrap from the U.S. in the first half of 2013:
- Turkey purchased 580,000 fewer tons (-17.5 percent).
- Taiwan purchased 180,000 fewer tons (-10.2 percent).
- South Korea purchased 640,000 fewer tons (-37.4 percent).
- China purchased 173,000 fewer tons (-15 percent).
These declines do not mirror identical drops in steel production in these four nations. According to the World Steel Association, Brussels, steel output in both China and Taiwan has actually increased during the first eight months of 2013 compared with 2012.
Although steel production is down by 5.4 percent in Turkey and by 6.3 percent in South Korea, those figures do not match their more dramatic drops in U.S. scrap purchases.
As mentioned by Mlodziejewski at the ISRI Commodities Roundtable, scrap buyers in these nations are seeking more tonnage within their own borders or in other nations that may offer better currency exchange options.
As 2013 nears its end, it appears that, for ferrous scrap recyclers, the year will go into the books as one where the competition for available scrap was tough, prices drifted downward and eventually even the sell side of the business presented its challenges.
The author is editor of Recycling Today and can be contacted at firstname.lastname@example.org.
Paper recyclers and recovered fiber brokers have a business model directly tied to the next month’s output at paper mills and the future demand for finished paper.
The paper recycling loop relies in part on ongoing demand for fiber at packaging and board mills, newsprint and uncoated freesheet mills and tissue mills.
Likewise, the scrap paper that recyclers collect and place onto a truck or cargo ship often has been manufactured within the past two or three months.
While recyclers may direct most of their energies toward obtaining supply and doing so affordably, a struggling paper mill sector causes distress from several different angles.
More Bad News
One of the greatest changes taking place in paper production (as well as in the recycling supply side) is tied to Americans—and people in many other parts of the world—not reading nearly as many newspapers as they used to. Daily newspapers increasingly are cutting back print edition home delivery to three days per week or to a similar partial schedule.
As well, newspaper pages have smaller dimensions, and the average daily paper has fewer pages. This combination of circumstances means newspapers and newsprint production never bounced back from the financial crisis.
The newsprint decline in the U.S. actually predates the financial crisis, with output having fallen from 16.4 million tons in 2000 to 12 million tons in 2007. By 2012, newsprint production in the U.S. fell to about 8.7 million tons, representing an incredible drop of nearly 47 percent in 13 years.
The output plunge has had a tremendous effect on recovered fiber supply sourced through municipal recycling programs, which have long focused on old newspapers (ONP) as a key commodity. Since 2007, material recovery facilities (MRFs), brokers and mills that had once relied on ONP as an important part of their business have struggled to adjust to the decline in the newspaper industry.
Statistics gathered by the American Forest & Paper Association (AF&PA, www.afandpa.org), Washington, D.C., point to recyclers having done an admirable job of increasing the ONP recycling rate since 2000 as one response.
In 1997 when ONP and OMG (old magazines) were more readily available, they were being recovered at a rate of 48 percent (for a total volume of 8.8 million tons). In 2008, as the decline of newspapers was well underway, a 69 percent recycling rate helped recyclers recover 9.8 million tons of the two grades, keeping many buyers satisfied.
By 2012, however, a 70 percent recycling rate only netted 6.1 million tons of ONP and OMG. As well, by this time buyers often were highly critical of the bales of ONP they were being shipped, claiming MRFs were adding considerable amounts of junk mail and other types of mixed paper. (See the sidebar “Over the Fence” below.)
Despite residential recycling programs that are as widespread and full service as ever, ONP and OMG recovery volumes have dropped steadily since 2006. Recyclers can work as hard as they want, but far fewer newspapers simply are available to collect, bale and ship.
A Package Worth Opening
The news is all-around better for containerboard and packaging grades in the United States. Unlike newsprint, production of packaging grades has rebounded since the financial crisis. While production of these grades has not bounced back to its 2006 level, it has rebounded enough to demonstrate that paperboard is retaining its market share in the packaging sector.
Over the Fence
Many of the paper mills constructed in China in the 21st century were built with systems that tolerated mixed-grade shipments by installing the best screening systems available. This didn’t improve their yields, but it allowed them to buy any material on the market and acquire the total tons they needed.
Since Operation Green Fence—a joint initiative by several central Chinese government agencies—began in February 2013, several reasons for the operation have been offered by government officials. The two main reasons include prohibiting unwanted, contaminated shipments and also matching up the contents of containers with what is actually inside them to collect the proper import duties.
Chinese mill buyers have at times had their lives made more difficult by Operation Green Fence, yet the sentiment also has been expressed that in the long run it will be good for them. Most mill operators would be happy to see increased yields from their bales to improve their bottom lines.
In North America and parts of Europe, the biggest investments in collecting and processing scrap paper have been made by solid waste companies that operate material recovery facilities (MRFs). They have delivered the needed tons but, in some cases, not always the desired quality.
Operation Green Fence is reportedly causing some of these MRF operators to invest in additional sorting machinery and more people on their sort lines, increasing their operating costs but allowing them to re-enter the global market.
The investments are likely necessary, as little indicates the U.S. will move away from commingled collection. Likewise, some comments from Chinese authorities are being interpreted as meaning Operation Green Fence has no anticipated end.
After 34.2 million tons of containerboard were produced in the U.S. in 2006, that amount fell considerably (13.7 percent) by 2009 as the U.S. economy struggled in the midst of a recession.
Much of this old corrugated container (OCC) material does not go to MRFs where it is commingled but instead is collected at industrial, commercial and retail sources, thus maintaining a more universally accepted quality level.
Operators, though, are seeing more OCC coming into and out of postresidential MRFs. Some observers call this the “Amazon effect” because of increased online buying. Telecommuters and others working from home offices also are cited as a factor in this phenomenon.
Whether traditional paper recyclers or MRF operators are doing the work, they both can take credit for a recycling success story. AF&PA statistics point to an OCC recycling trend that has been heading in a positive direction for 20 years, from 54 percent in 1993 to an impressive 91 percent rate in 2012.
As much as this is a good news story, there is an extenuating factor. The 91 percent recycling figure is derived by using U.S. containerboard production as its denominator. An unknown but likely significant percentage of the OCC collected, however, consists of boxes that were shipped from China, Mexico or other places supplying the U.S. with consumer goods, agricultural products and industrial components.
While OCC collection in the U.S. is thorough, almost certainly more than 9 percent of the OCC available is heading to a landfill.
China’s recycling rate suffers from the corollary to this equation. It ships out so much of its containerboard to the export market that its recycling rate is artificially low. Its collectors and processors are doing a much better job than is reflected in a recycling rate often estimated in the 45 percent range.
In Europe, newspaper circulation may not be fading as fast as in the U.S., but the sector is struggling. In 2012, newsprint production in the European Union (EU) declined by 4.5 percent, or by 400,000 metric tons, according to the Confederation of European Paper Industries (CEPI), Brussels.
Similarly, EU output of other graphic papers was down by 4.2 percent in 2012, according to CEPI, a decline of some 1.35 million metric tons in production.
As well, Europe’s containerboard sector is awaiting a more robust rebound from the financial crisis and, in many nations, the resulting austerity measures. In 2012, EU containerboard production of 24.7 million metric tons was about even with 2011 production.
As in North America, Europe’s ability to produce and ship ONP also is likely to suffer as electronic media wins out over print. Books, magazines and office paper also are being used less, hampering the production of other export grades. Steadier containerboard production likely means OCC availability will be stable in the EU.
For more than a decade, recyclers in the U.S. have been primarily affected by accelerating paper production in China while only occasionally considering scrap paper recovery rates in the nation. But China has been a net importer of recovered fiber for so long that changes taking place to its domestic supply will affect the entire world market.
A first source of concern, however, is occurring on China’s demand side. In September 2013, the nation’s Ministry of Industry and Information Technology declared China’s paper industry to be in an overcapacity situation.
The ministry reportedly sent a notice in early September to more than 60 paper manufacturing companies in the country informing them that they were expected to identify and shutter more than 6.3 million tons of capacity. The ministry has previously and similarly targeted other industrial sectors (such as steel and cement) with goals that include preventing a flood of inventory as well as eliminating what are deemed older and inefficient factories—especially those that contribute above-average levels of pollution.
Newsprint production in China peaked, at least temporarily, in 2009, according to the China Technical Association of the Paper Industry (CTAPI), based in Beijing. As in other parts of the world, ink-on-paper publishing is competing with smartphones, tablets and laptop computers to gain the attention of readers and news seekers.
In other sectors, the notion of production cuts is a radical change for an industry that has grown rapidly. Figures from CTAPI indicate that China’s paper and board production zoomed from 37.8 million tons in 2002 to 99.3 million tons in 2011, an increase of 163 percent in 10 years.
Such a growth rate cannot be sustained indefinitely. The question is whether China’s paper industry goes into a slow-growth mode or whether it might actually shift temporarily into reverse, as hinted at by the September notice.
The overall prospects for packaging grades and for tissue products in China, fortunately, cannot be considered gloomy.
It cannot be assumed that China or other Asian nations will follow household consumer trends as they developed in North America or Europe. However, in the U.S. in particular, as people’s incomes increased and as they spent more hours working away from home, they increasingly relied on processed, packaged foods they could store for long times versus fresh produce or meats purchased daily.
As reported by The Atlantic on www.theatlantic.com, a study released in September 2013 by Euromonitor International, London, forecasts that “in terms of volume the Chinese market for packaged processed food like ready-made meals, snacks and drinks like cookies, chips and soda will surpass America’s by 2015.” Euromonitor forecasts that in 2015 China will consume as much as 107 million tons of packaged food compared with 102 million tons in the U.S.
This trend may not have a great effect on corrugated boxes as both fresh and processed foods are shipped in boxes. In the U.S., however, it has resulted in more boxboard or paperboard packaging and cartons produced and available later to be collected for recycling.
Whether disposable tissue and towel products use will increase in China cannot be assumed, but most analysts who look at the existing trends and the comparative numbers in nations with higher average incomes can foresee considerable growth in the tissue sector as well.
As these products have a very low recycling rate (with paper recyclers unlikely to ever want to handle used hygiene products in their facilities), tissue mills can only serve as consumers of recovered fiber.
Even in the creation of new tissue products, in some people’s minds recycled fiber is not welcome. That stigma has largely been overcome in the U.S. and Europe, and in Asia tissue products labeled as being made with recycled paper are beginning to appear on shelves.
In addition to the perceived overcapacity issues on the paper mill side, China seems poised to furnish more of its own recovered fiber to domestic mills in the next several years, both in total volume and as a percentage of the overall supply.
Stated goals and funding mechanisms included in China’s 12th Five-Year Plan are intended to set up municipal recycling systems similar to those established throughout North America and Western Europe in the 1990s.
Much like in pre-1970s America, OCC has thus far been the focus of collectors and recyclers in China. Government programs catering to residents and retailers are likely to increase the collection of boxboard, OMG, mixed paper and other grades that have not traditionally been harvested in China.
Parts of the world still remain where the paper industry does not yet seem to be in an overcapacity situation—in some cases not even the newsprint or printing and writing sectors.
India has shown steady growth in papermaking in the past 15 years. The nation has more than 500 paper mills, though many of them are small, and some do not use any recovered fiber. The country’s overall ability to import and use scrap paper, however, has grown steadily.
The Middle East North Africa (MENA) region is another place with a growing paper and board industry. (Those seeking more information from this geographic region may wish to investigate the 2014 Paper and Plastics Recycling Conference Middle East, March 4-5, 2014. Information is available at www.paperrecyclingconference.com.)
Africa south of the Sahara remains one of the more underdeveloped regions, though many nations there are enjoying GDP growth. The fact that paper machines are being installed in the midst of this GDP growth ideally is a sign that higher standards of living are setting in for more than just ruling elites. A growing paper industry in Africa rests on the creation of a middle class there.
Despite the declines in ink-on-paper communication, recyclers still have reasons to be optimistic about the paper industry. In the tissue sector, a 4.9 percent global compound annual growth rate (CAGR) from 2012 to 2016 has been predicted by London-based Technavio. A forecast from Ireland-based Research and Markets, meanwhile, predicts 5.9 percent CAGR in global paper industry revenue between 2012 and 2017.
The fear that communication will continue to shift away from paper remains legitimate. On the hope side of the ledger, however, other paper sectors are more likely to stabilize and grow, especially in parts of the world with emerging economies.
The author is editor of Recycling Today and can be contacted at email@example.com.
When Joel Back, production manager for Gold Metal Recyclers, describes his company’s Dallas processing facility, he challenges anyone to “think of the harshest environment possible for a forklift, such as a construction site … and then multiply it by a factor of 10.” As if this statement was not enough, Back is compelled to offer justification for the claim.
“We transport and move large pieces of metal and concrete, often in 100-degree heat. We have huge cranes picking up busses and chunks of bridges. It’s a rough and dusty application, with slick spots, large potholes and ruts, and big pieces of rebar sticking out of the ground like landmines. And that’s on a good day.”
Dallas-based Gold Metal Recyclers is one of the largest metal recycling organizations in the United States. The company currently has large recycling yards in Houston and Dallas and smaller operations in various locations throughout Texas and New Mexico. The company’s Dallas processing yard encompasses 38 acres and ships approximately 200 to 300 trailers of scrap metal and concrete—about 1.5 billion tons—per week.
The processing yard operates seven days per week with two shifts per day. Forklifts are primarily used to transport scrap from trucks to balers or other types of processing machinery. Given the rough terrain and harsh environment the trucks must operate within, Back says the No. 1 challenge regarding his company’s forklift fleet is downtime.
“I’ve seen industry stats that put the average usage for forklifts at around 2,000 hours a year,” he says. “In our yard we operate 22 hours a day, seven days a week. We easily average 3,000 hours a year. My two biggest issues are overheating and busted steer axles,” Back says.
“The way I look at it is time spent on repairing steer axles and blowing out the radiators is time that my trucks are not being used.”
He says that if one of the forklifts that would normally be feeding one of the company’s balers is down, Gold Metal Recyclers can lose up to $1,000 per minute.
“I’m not in the forklift business; I’m in the production business,” Back says. “I don’t have time to worry about my trucks. I need to keep things moving. That’s why I’m always on the hunt for a more durable forklift that is readily available when I need it.”
In 2010, Back met with Craig Lummus and Joe Bowers from the local Crown Lift Trucks branch. They spoke to him about a new internal combustion (IC) counterbalance forklift that is specifically designed to help customers move beyond the existing limitations of forklift performance.
Back liked what he heard, and after a successful demo period where he was able to put the truck to the test, he agreed to purchase two Crown C-5 Series cushion industrial forklifts.
The Crown C-5 Series is designed to push the limits of gas forklift performance and durability and to deliver advantages to owners and operators seeking improved power, strength, comfort, safety, service and uptime. It features an industrial engine, a proactive approach to engine cooling and radiator clearing via an on-demand cooling system and design innovations that improve operator visibility, comfort and productivity.
A main feature of the forklift that quickly caught Back’s attention was the cooling system that automatically clears itself of debris and is designed to provide precise cooling to effectively manage heat in intense and dirty environments. Each time a user starts the Crown C-5, the system’s radiator-clearing feature reverses the fan direction to dislodge any debris.
“The worst thing about our environment is the amount of dust in the air. Add in the fact that Dallas summer temperatures can reach 103 to 105 degrees, and it’s no surprise that overheating forklifts is such a big issue,” Back says.
“With our other forklifts,” he adds, “operators were manually blowing out the radiators at least once a day. Each blowout would take about 15 to 20 minutes and require that the forklifts be in the maintenance bay.
“The other big selling point for me was the durability of the forklift,” Back continues. “The abusive landscape of our processing yard definitely takes a toll on the forklifts. Damaged steer axles and transmissions are common and costly occurrences I experience with my other forklifts—often as a result of the rebar sticking out of scrap concrete.”
Reducing the Tally
Two years after buying his first two Crown forklifts, Back now has six C-5s in his fleet and is pleased with their performance.
“On average, I have about 8,000 hours on each of the forklifts, and they are performing really well. My maintenance costs for the C-5s are comparably lower than my other forklifts,” Back says. “I haven’t had any overheating issues or axle or brake problems. The same can’t be said for the other forklifts in my fleet. With these other forklifts, I’ve had to replace four transmissions in the last nine months, which are about $3,300 each; I’ve had to replace four steer axles in the last 12 months, which are about $2,700 each; and I typically replace the brakes on competitor forklifts every 15 to 16 months, which costs about $700 each.”
Back adds that he’s also happy with the level of attention he receives from Crown’s service team.
“Our Crown service technician, Steve Hill, is very knowledgeable and always has the right solution. Also, whenever I have a question or issue, Lummus and Bowers are always quick to respond with an answer,” he says.
“For instance,” Back continues, “when we received the first two Crown C-5 forklifts, we realized that modifications would need to be made to accommodate unique elements of our environment. Crown engineers worked with us to come up with a solution.”
As far as Back is concerned, the Crown C-5 has passed the test.
“Our processing yard is probably the worst application for a forklift, which makes it the perfect proving ground,” he says. “Five thousand hours in our scrap yard will let you know exactly how good your forklift is, and the Crown C-5 has proven that it is more than capable of meeting the challenge.”
This article was submitted on behalf of Crown, www.crown.com.