Canadian Companies Get By While Awaiting Brighter Days

Canadian scrap metals recyclers hope for a rebound in prices, while municipal programs remain well-funded and participation rates remain high.

There are those who still express concern about waste material being imported into Canada from the United States,” points out Brian Smith, a senior Canadian government civil servant. “Those critics see it as dumping. They don’t realize that the term ‘waste’ can be a misnomer; that 40%-50% of it is recycling material being brought in by Canadian companies, materials that when reprocessed add to our country’s economy and create jobs.”

Smith, Industry Canada’s specialist in minerals and metal recycling, reports that the industry in Canada consists of about 1,000 companies that employ 15,000 people. Canada annually recycles approximately 10-11 million tons of metals and metal-bearing materials valued at about $3 billion. While 1997 was a record year both in tonnage shipped – at 5,449,000 metric tons - and value ($3.4 billion Canadian), 1998 tonnage was down to 5,391,000 metric tons and earnings were down even more ($2.9 billion Canadian) reflecting low commodity prices worldwide.

“Everyone is blah,” says Jack Lazareck, president of Logan Iron and Metal Co. Ltd., a metals recycler based in Winnipeg in western Canada. The collapse of the Asian market has reduced demand for product, he notes. Mexico is dumping steel. Copper is at a 13-year low.

The figures for lead are also depressing, reports Bruce McIver, a vice-president of Nova Pb Inc., based in Montreal, Canada’s largest integrated lead recycling facility. “Last month’s price was 23.28 cents a pound,” McIver says. “In 1997, it was 28 cents per pound. In 1996, the price was 31 cents a pound. That is a drop in value by a third while raw material costs are the same and conversion costs are up.”

Nova Pb was built by Preussag AG of Germany in 1980. It is the only lead recycling operation in North America equipped with a completely closed-loop air and water circuit to insure compliance with all environmental norms by a considerable degree.

In 1994, the company installed in the Montreal plant a state-of-the-art after-burner and waste treatment technology on its long rotary kiln at a cost of more than $2.8 million Canadian. The technology more effectively processes material from the battery waste stream and recovers chemical and calorific values from the other waste products such as waste oils.

At 96%, lead battery recycling is one of the major success stories in the recycling industry, McIver points out, but the percentage of spent batteries that goes to recyclers varies according to region. In his region, McIver notes, four out of every five spent lead acid batteries are returned to the manufacturer rather than a recycler.

Nova is protected by the swings in the price of lead in large measure because a lot of its business is tolling - the process of picking up batteries from retailers and renewing them all at a fixed price. Most other Canadian recyclers are not so lucky.  

“Here in Canada, recyclers are fighting for anything we can get,” Jack Lazareck says. “There are no margins. Companies are trying to get by one week at a time. I don’t foresee any improvement in the next year or two. Some companies could find themselves in trouble this year if they have heavy payments to make.”

Thus far this year, six or seven Canadian recycling plants have closed, reports Len Shaw, executive director of the 180-member Canadian Association of Recycling Industries, Toronto. At the same time, CARI has picked up four or five new members in addition to 25 to 30 companies that joined last year.

Philip Services Corp., based in Hamilton, Ontario, continues to restructure, Shaw reports, as a result of the fallout from problems last year. In just three years, the company grew to become one of the largest metal recyclers in North America. Although Philip recently sold off its aluminum smelting business to Wabash and closed another of its plants in the last year, it still remains a major player in the industry.

“We made a corporate decision to concentrate on the ferrous business,” says Bob Merritt, a Philip senior vice-president. “Prices are down but they seem to have stabilized. We anticipate that prices will remain constant.”

While Philip Services Corp. still operates recycling facilities throughout the United States, its experiences may reflect the difficulties of integration on a multi-locational, multi-regional scale. Maxwell Zalev, president of Zalev Brothers based in Windsor in southern Ontario, notes that the problems that Philip and other major companies have had in trying to consolidate companies widely separated by geography have had a cautionary influence on the strategic planning of others in the industry.

“We watched the melt down of these three companies and have taken the appropriate lessons,” Zalev says of the publicly traded consolidators—Philip, Recycling Industries Inc. and Metal Management Inc.—who each struggled in 1998 and early 1999.

Last year, Zalev sold his own 85-year-old company to Ferrous Processing and Trading, a recycling competitor based in Detroit, just across the border from Windsor. The sale is a reflection of a new outlook in the industry on regional as compared to national consolidation.

“Ferrous Processing was our major competitor in this area,” Zalev notes. “We’ve been fighting head to head for many years. It made sense for one of us to buy out the other and become the dominant player in the Detroit-Windsor area.”

He reports that the integration process is proceeding well. There are a lot of synergies having the two companies’ operations and administration under one roof. Zalev reports that he is sticking around for a while to help with the transition but hasn’t yet determined his own future course.

“I think what we are going to see in the short term is a more structured approach to acquisitions and a more regional focus,” he predicts. “In Canada certainly, we don’t have the same access to markets as our American counterparts. You can’t go from nothing to a million dollars in sales almost overnight here. This business is up and down and you have to be prepared for that.”

PROVINCIAL TARGETS MANDATE CONTAINER RECYCLING

At the municipal recycling level, the story is the same - consolidation and depressed prices. John Hanson of the Recycling Council of Ontario reports that membership has dropped from over 800 members in the early 1990s to about 500 today.

Part of the drop-off is due to a reorganization and amalgamation of Ontario municipalities by the provincial government last year resulting in 200 fewer municipalities. There has also been consolidation on the private level, Hanson points out.

“Canadian Waste is buying out most of the competition,” he reports. “Thus, there are fewer small operators and people are less willing to share information. Also the cost of picking up recyclables has increased. The big guys are not interested in smaller recycling projects. That makes things more difficult for the smaller communities.”

In Ontario, in 1996, 507,000 tons of recyclable plastic, aluminum, metal, glass and other household and office products were recovered through the province’s Blue Box program. That figure increased to 595,000 tons in 1997.

Hanson reports that there is a law on the books in Ontario that requires 30% of soft drinks to be sold in refillable containers. Currently, he says, the bottlers only sell 1% of their product in refillable containers.

“The government doesn’t consider the legislation enforceable,” he says, “but there are no plans to change the legislation.”

The neighboring province of Quebec on the other hand, is much more aggressive in enforcing standards. Hanson reports that last October, the Quebecois government announced new requirements for the different sectors to meet specific recycling targets. Still ahead is new legislation that would have all soft drink bottlers contribute toward a fund to set up a deposit system.

The Maritime provinces have a half-back system to encourage consumers to conserve. Consumers receive the full deposit back if they bring in refillable containers but only half the deposit back for non-refillable containers. The revenue raised goes toward funding a curbside recycling program. One Maritime province - Nova Scotia – is considering extending the program to include the dairy industry.

On the West Coast, British Columbia has expanded its deposit system to cover all beverages except dairy while neighboring province Alberta has become the first to levy a deposit on dairy containers. Saskatchewan still pays a five-cent deposit on returned soft drink bottles.

Manitoba used to be unique in that it had a soft drink industry-funded system of paying for returned empty soft drink bottles and cans by weight. Four years ago, the provincial government replaced the system with a multi-material approach funded by a two-cent levy on all beverage containers. The money raised by the levy has been used to fund numerous municipal recycling programs throughout the province.

“We have 13 designated recyclable materials slated for collection,” reports Jim Ferguson, waste reduction officer for the Manitoba Product Stewardship Corporation, which administers the funding for the various municipal recycling programs. “We took about 33,000 tons of material out of the waste stream last year. One hundred and fifty municipalities are participating in the program. 95% of the population now has access to a multi-material collection system. That wasn’t the case in 1995 when we introduced this program.”

RE-DEFINING WASTE COULD BOOST RECYCLING

Industry Canada’s Brian Smith reports that Canadian provincial environment ministers are currently discussing coming up with a new definition for waste and are recommending to the federal government that a distinction be made between waste and recyclable materials.

There is also discussion at the governmental level about exempting five or six materials from the standard leach testing that all waste materials are subject to. Leach testing, Smith suggests, is only necessary for products destined for landfills.

“We should be promoting recycling rather than inhibiting it,” he says. “It is still an open question how the federal government will respond to the provincial recommendations. I expect there will be some vigorous discussion.”

Smith remains generally optimistic about where the recycling industry is going in Canada. “The majority of our trade is still with the United States,” he notes. “We want to preserve and enhance the infrastructure that supports the movement of recyclable materials between our countries.”

CARI’s Len Shaw is also optimistic. He has no doubt that commodity prices will bounce back in time. “There will always be a need for recyclable material,” he says. “In the long run, it is better environmentally.

“Mankind has been recycling for seven millenia. Once people learned to use smelters, they quickly realized that it was easier to take a broken tool and melt it down than trying to find new metal. Natural resources are all in finite supply. In the long term, recycling is the best alternative.”

The author, based in Winnipeg, Manitoba, writes frequently on the Canadian scrap and recycling industries.

 

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May 1999
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