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Specialty processors continue to produce high-quality copper and aluminum scrap from discarded wire and cable.

Brian Taylor October 7, 2013

Sufficient scrap volumes have been difficult to come by for recyclers in almost every sector the past few years, and wire and cable processors have not been an exception. The lack of construction activity and other factors that have caused generation to be lackluster means competition for material is severe as North American processors struggle against one other and the export market.

Several years ago, the demand from China for baled wire and cable was causing some observers to wonder whether wire chopping in North America was going to become increasingly rare.

The combination of export demand and reduced scrap generation has indeed claimed some companies as victims, but several entrepreneurs and established processors also have gotten into the game even during the economic downturn.

In many of these cases, the availability of smaller-volume, affordable wire processing systems has provided access to the wire market.


Bouncing Back
The managers of one veteran wire processing firm, Safran Metals, Chicago, say some lean years have been among the past several but they add that conditions for their company in the second half of 2013 represent an upgrade over the recent past.

“We had been running five days a week the first few months [of 2013], but the last couple of months we’ve been back to six days, which we consider our full capacity,” says Todd Safran, vice president and chief operating officer of the company. “We remain busy; we can move the chops out as fast as we can produce them.”

Todd and his father, Steven, president of the company, keep in touch with wire choppers in other regions as well, however, and realize that the better conditions are not universal. “We hear from other chopper friends that they’re having trouble feeding their lines or they are resorting to buying low-quality material,” says Steven.

Todd and Steven say in the case of Safran Metals they have stayed with a strategy of seeking a narrow range of high-metallic-content materials even when the down market might have made it tempting to bring in any material available to keep their lines busy.

“We’re constantly feeding our lines with quality material,” says Steven. “The philosophy of some is to buy any material and you can turn it into gold; but it’s a chopping line, not a genie’s lamp.”

Operation Green Fence, a multiagency effort by the Chinese government to collect the proper tax duties on inbound secondary raw materials and to restrict contaminated material from entering the country, has not been a big factor in Safran Metals’ operations. “The Green Fence policy has created a problem on the lower-grade material, but we’re not going to run that material generally anyhow,” says Todd. “In Chicago here, our processing cost for something that is 20 percent metal is not worthwhile,” he adds.

That same commitment to run high-yield materials also means Steven and Todd do not consider newer entrants into the wire chopping market a major threat.

Steven says a combination of inexperience and limited capacity processing lines will make it difficult for some processors to try to profit by processing lower-grade wire and cable. “If you’re running 70 percent metallic material versus 50, 40 or 30 percent metals, you have that much more of a chance to make money,” he comments. “It has always worked out that lower grade material runs so much slower through the line. It’s a combination of these factors—less copper and it takes longer to run—so your processing costs go up.”

Steven and Todd credit their workforce for proper buying, sorting and estimating to determine when it is worthwhile to process material or when it is best to export it. He says a lot of the materials being processed by newer entrants into the wire processing sector are the “kinds of materials that we would rather ship overseas versus running in our plant.”

Steven’s advice to newer market participants is that a long-term business model is a marathon rather than a sprint. “How fast do you run the 100-yard dash? And then can you keep that pace up for 1 mile or then for 10 miles?” asks Steven.

“Basically it takes the whole team, from us trying to purchase quality, good material, finding that market, taking it in, grading it and then running it,” says Todd. “Having the operations people see what’s going on and not being afraid if there is a problem to stop the line is another key. From start to finish I think it takes everybody.”


On the Horizon
Scrap dealers tend to have a reliable internal barometer as to how the economy is faring in the form of the weekly and monthly volumes moving across their scales and into their facilities.

Statistics maintained by government agencies and other economic indicators, however, still can provide some helpful information and ideally confirm that what scrap dealers are experiencing reflects market realities.

For the past several years, the lack of construction and demolition activity has been one of the major drags on scrap generation, including wire and cable.

Scrap dealers reported that July was one of their busier months in 2013, and construction statistics gathered by the U.S. Census Bureau confirmed an uptick in activity. “Total construction spending hit a four-year high in July [2013] as private residential and nonresidential activity increased,” reports the Associated General Contractors of America (AGC), Arlington, Va., in a press release analyzing the data.

“The patterns seen earlier this year reappeared in July, with strong year-over-year gains in single- and multifamily building, a range of results for private nonresidential categories and deepening downturns in most public segments,” comments Ken Simonson, the AGC chief economist. “These trends are likely to hold for the remainder of 2013.”

Construction put in place in July, at $901 billion, was the highest mark since June 2009, according to the AGC. It also represented an increase of 0.6 percent from the month before and of 5.2 percent from July 2012.

The increased activity is occurring without the benefit of widespread public sector spending. Public construction spending slipped 0.3 percent for the month and 3.7 percent over 12 months. The two largest public components both dropped: the highway and street sector by 1.1 percent in July and by 3.8 percent year over year; and educational construction by 1.5 percent and 12 percent, respectively, Simonson says.

The AGC’s CEO urged for avoiding a standoff that will harm the country’s workers and business owners. “Congress and the administration shouldn’t play chicken with vitally needed infrastructure,” says Stephen E. Sandherr. “Shutting down a project, even for a day, can be very damaging to finishing it on time and keeping key workers on board,” he adds.

For wire and cable recyclers, the power sector can be particularly important, and it represents “the largest private nonresidential category,” according to AGC. In July 2013, the sector’s activity increased by 5 percent compared with its July 2012 level.

Calls to invest in the electrical grid are being made, while spending on new and upgraded transmission lines has been increasing. An analysis conducted by research firm Ventyx, Atlanta, for the Associated Press found that maintenance spending for overhead lines increased an average of 8.2 percent per year from 2003 to 2012 compared with an average of 3 percent annual growth from 1994 to 2003.

 

 


The author is editor of Recycling Today and can be contacted at btaylor@gie.net.

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