Dan Poris

Vice president of nonferrous at GLE Scrap Metal

When Dan Poris graduated with a bachelor’s degree in political science from the University of Michigan in 2008, he had considered working in the scrap industry.

“Danny Zack, who is the CEO of GLE Scrap Metal, had asked if I wanted to join the company and get into the scrap metal industry,” he says.

Poris says he and Zack had talked about that possibility for a couple of years, but Poris instead chose to work in real estate after graduating. He quickly learned that real estate wasn’t the best fit for him, though, Poris says, and in 2010, he joined Zack at GLE Scrap Metal, with operations in Michigan and Florida, to help with its sales team.

He adds that he hit the ground running at GLE thanks to sales training he received when working in the real estate industry.

“The sales training I got in my previous job in the real estate industry was really comprehensive,” he says. “They offered a three-to-six-month intensive training program. That was probably some of the best training I could have gotten for when I started at GLE and for what I still do now in terms of prospecting, building relationships and building credibility.”

“I think the pandemic and market environment show that relationships are more important than ever.”

Poris, who is vice president of nonferrous at GLE, says he’s had the opportunity to watch GLE go through a number of expansions the past decade, such as opening new yards and getting into wire chopping.

“We’ve grown in ways I never would have imagined when I started at the company 10 years ago,” he says, adding that he feels lucky that he really enjoys what he does for a living.

Recycling Today (RT): What lessons did you learn in real estate that translated to your career in the scrap industry?

Dan Poris (DP): [In real estate training], I had to make a lot of face-to-face mock sales calls. It got you over your fear of cold calling, which, without that experience, can be intimidating. I also learned how to prospect and find new customers. It was basic sales training stuff, but they don’t teach you that in school generally. So, when I joined the scrap metal world, I didn’t have to learn to prospect or cold call—I’d been doing that for a couple of years.

RT: What’s the company culture like at GLE Scrap Metal?

DP: We have a play-hard-work-harder culture. A lot of people who are on the executive and management side of GLE all grew up in the same area of the suburbs of Detroit, so we all have that shared experience. Then, we all just really enjoy what we’re doing. We like figuring out how to close deals successfully.

RT: How has GLE Scrap Metal been responding to issues arising from the COVID-19 pandemic?

DP: I think April was a pretty wild month in the metals market, with wild swings in markets and values and spreads. So, that is still to be shaken out. I think the domestic aluminum market is a real challenge right now, with so many automakers still out of the market, hopefully to come back online in the middle of May. I think volatility is probably here to stay for a while, but I hope the worst effects of people being shut down are in our rearview mirror. The challenges we’re facing are the challenges most of the industry faces. I think the pandemic and market environment show that relationships are more important than ever.

Conditions for recycling company owners and managers have been as difficult as for those in any other sector during the turmoil caused by COVID-19 and subsequent restrictions on activity. Revenue and jobs have been lost, and material flows have dwindled.

Metals prices were hit with a vengeance, and most secondary commodities had no choice but to go along for the ride. On the municipal side, already tight state and local budgets are now in complete disarray, painting a potentially bleak scenario for government-supported collection and sorting of recyclables.

Does the recycling sector have a case for optimism? Some signs point to “yes.” As dismal as April was for the U.S. and global economy, upcoming months will be incrementally better, barring a second COVID-19 outbreak.

Even if a roaring V-shaped recovery is not in the offing, by the first week of May, negotiations between ferrous scrap sellers and buyers were pointing to a rebound in that market. Recovered fiber pricing, meanwhile, tracked upward during COVID-19-related partial shutdowns. Packaging remained in demand, as did tissue.

“The demand for raw materials is poised to increase sharply, and secondary commodities will be part of that rebound.”

As the away-from-home economy begins to show itself again, demand for raw materials is poised to increase sharply, and secondary commodities will be part of that rebound.

As a rebound ensues—even a medium-speed one—recyclers will struggle to secure adequate supply. Their challenges may be minor compared with those faced by miners of virgin raw materials used by metal and polymer producers.

Recyclers may have to bring back laid-off workers, reconfigure routes for industrial scrap generators that are back in business and convince peddlers that their scales offer pricing that is worth the collectors’ efforts.

That “to do” list likely can be achieved faster than restarting the global supply chains of consumers of iron ore, bauxite, copper concentrates and virgin polymers. These producers will need to sort out issues pertaining to labor, transoceanic bulk shipping, longer term price settlements and negotiations with governments in many nations.

One more intangible is in play for recyclers: whether the global pause button that was hit in March and April has slowed down sustainability momentum or boosted it.

I see reason to believe the latter. The internet has been abuzz with “before and after” photos of air pollution and discussions about reinvigorating domestic manufacturing and shifting to shorter global supply chains. These trends can be tied in to developed nations using their scrap resources effectively.

The first four months of 2020 provided sparse good cheer to people in most economic sectors. It is possible, though, that collectors, processors and sellers of scrap metal, paper, plastic and other materials have promising reasons to keep planning for the future of their businesses.

Recycling has been the subject of many negative headlines over the past two years: “The World’s Recycling is in Chaos;” “RIP: Recycling is Dead as We Know It;” “Recycling is a Waste.” The list goes on. Of the communities surveyed in The Recycling Partnership’s 2019 “The State of Curbside Recycling” report, more than 50 have canceled their recycling programs, and 29 percent have stopped collecting certain items.

It is undeniable that the past few years have presented unprecedented challenges to recycling globally. In the United States, costs are at historic highs, and revenues are at historic lows. And yet, the public, for the most part, still wants to recycle, and many manufacturers depend on recycled feedstock.

Consumer brands are responding with increasing commitments to design for recyclability and to use more recycled materials. But these commitments are not driving increased collection of the materials needed to meet those goals. In fact, current and projected demand for recycled content far outstrips the supply of key recyclables, including plastics such as polyethylene terephthalate, high-density polyethylene and polypropylene.

How can these diverging trends be reconciled? A growing chorus is pointing to extended producer responsibility (EPR) legislation for printed paper and packaging (PPP) as a solution.

What is EPR?

EPR is a practice and a policy approach in which producers take responsibility for managing products and/or packaging they produce at the end of their useful lives. Responsibility may be fiscal, physical or a combination of the two. EPR shifts the financial burden of recycling from the ratepayer or government to the producer and consumer of the products and packaging being recycled. The theory behind this approach to materials management dates to a 1990 report by professor Thomas Lindhqvist of Lund University in Sweden that suggests the internalization of end-of-life costs would encourage more environmentally friendly design.

In these times of challenging recycling economics, EPR presents a sustainable financing model for managing materials that does not rely on local governments and/or ratepayers to make up for revenue. The stable funding provided through EPR mitigates market risk for local recycling programs as producers are obligated to cover the costs of recycling (or a designated portion thereof) regardless of the revenue generated from the recovered commodities. In down years, the added cost burden would be placed on producers, which would pay higher fees to fund the system; in up years, their fees would decrease. Through these ups and downs, recycling programs would function uninterrupted.

A producer responsibility organization (PRO) is created by the producers (brands/retailers) for the purpose of meeting their EPR obligations. PROs develop and execute a program plan to comply with legislative/regulatory requirements and also set and collect fees from producers to finance those activities.

EPR also appeals to circular economy advocates, and sometimes to the brands seeking to increase use of recycled materials, as it allows producers to manage the recycling system like a supply chain by more directly connecting recycled commodities with production.

How common is EPR?

EPR is not a new concept in the U.S., though it has typically been applied to hard-to-recycle materials. Twenty-six states have EPR policies for electronics, and several programs have been established for hard-to-recycle items, such as paint, mercury-containing thermostats, mattresses and batteries. Beverage container deposit systems are also a form of EPR that is in place in 10 states. However, EPR for PPP collected through municipal recycling programs is not currently in place in the U.S.

EPR for packaging was first implemented in Germany in 1991. It spread throughout Europe in the 1990s and is now required in all EU member states.

Implementation of EPR for packaging in Canada began in 2003 and has been adopted by most Canadian provinces.

Today, nearly all Organization for Economic Cooperation and Development countries, with the exception of the U.S., rely on EPR to finance PPP recycling. This trend combined with the perfect storm of economic conditions that challenge recycling have sparked growing interest in EPR in the U.S.

Will states adopt EPR for PPP?

Some states could see EPR legislation garner serious consideration in either 2020 or 2021:

Maine. In 2019, the Maine legislature passed a resolution (LD 1431), pursuant to its framework EPR legislation, directing the Maine Department of Environmental Protection (DEP) to develop draft EPR legislation for PPP in time for the 2020 session. The DEP issued a draft packaging EPR bill to the legislature in early 2020 that outlines a municipal reimbursement program, modeled on Quebec’s system. The legislation is currently being considered by the Maine Legislature.

New York. Chairs of the New York State Senate and Assembly Environmental Conservation Committees introduced competing EPR bills for packaging in February. The Senate bill seeks to create a comprehensive EPR program for PPP where municipalities can choose to provide service and be reimbursed by producers, or producers can provide service directly. The Assembly bill initially focuses on plastic packaging and expands to cover paper and other materials in future years.

California. The California Circular Economy and Pollution Reduction Act (SB 54), which was considered during the 2019 legislative session, came very close to enactment during the final days of the session in September 2019. It was expected to be taken up in early in the 2020 legislative session. However, a ballot initiative that proposes several of the same provisions as those contained in SB 54 was submitted for inclusion on the 2020 election ballot. The initiative was collecting signatures (960,000 are needed) by April 21 to place this on the November ballot.

Recology, a key recycling company in California, supports the initiative, as do many environmental advocacy organizations. It had been assumed that the proposed ballot measure may encourage swift legislative action on SB 54 in 2020, but that has not occurred to date.

Washington. Following the consideration of legislation in 2019 that addressed single-use plastics and contained a provision for EPR, studies that included policy analysis with an emphasis on EPR were initiated by the city of Seattle and King County as well as by the Washington State Department of Ecology. Given the study timelines, it is expected that any EPR legislation for packaging will be considered in the 2021 legislative session.

Oregon. The Oregon Department of Environmental Quality (DEQ) is conducting an analysis of policy options (referred to as Legal and Relational Frameworks) to modernize recycling in the state. Oregon is evaluating five different options (scenarios), three of which use EPR constructs that draw from various programs worldwide. The five options under evaluation will be narrowed through analysis and consideration by the multistakeholder advisory committee in the spring. Any legislative action that might result from the study could be seen in 2021.

National. In February of this year, following a year of discussions with stakeholders, Sen. Tom Udall (New Mexico) and Rep. Alan Lowenthal (California) introduced the Break Free from Plastic Pollution Act. This proposed legislation incorporates a number of provisions, including EPR for PPP, a national beverage container deposit program and bans on certain single-use plastics.

Although we are witnessing some state- and federal-level interest in EPR legislation as a method for sustainably financing PPP recycling, a majority of U.S. communities continue to try to maintain their programs within the current system. Whether EPR is the solution, serious discussions around the U.S. recovery system are taking place, and the time for significant solutions has come.

Resa Dimino is a senior consultant with RRS (Resource Recycling Systems), headquartered in Ann Arbor, Michigan, and can be contacted at resa@recycle.com. Bryce Hesterman is a consultant with RRS and can be contacted at bhesterman@recycle.com. More information on RRS can be found at www.recycle.com.

In late March and early April, as corporations and other large organizations changed their advertising messaging in the wake of the COVID-19 pandemic, many settled on the word “uncertain” to describe the new economic and social environment.

For buyers, sellers and consumers of ferrous scrap, that uncertainty is likely to lead to another term that is familiar in the commodities trade: volatility.

Governments around the world, following the advice of their public health agencies, have shown little reluctance in massively scaling back economic activity. This sudden application of brakes to economic engines already has resulted in steep drops in demand for steel, with ripple effects in global ferrous scrap supply and demand.

To the extent that the remainder of 2020 is predictable at all, a leading storyline almost certainly will involve how governments and corporations restart what has been idled. For steelmakers and scrap recyclers, how that storyline plays out will impact every aspect of their businesses.

One direction

As the speed of commerce in the U.S. slowed to a crawl in late March and early April, few economic sectors were left untouched. Following a pattern that had been established in China in February, the consumption of energy was an initial victim, followed quickly by metals.

The plunge in global energy consumption caused by COVID-19-related lockdowns and “shelter in place” orders has led to a widely documented decline in oil prices. The reaction in oilfields around the world was one initial domino that contributed to a decline in demand and pricing for metals.

In the automotive sector, unions wary of exposing their members to the virus and board rooms anticipating a lack of vehicle purchases in the near term reached the same conclusion in terms of idling assembly plants. Automotive component plants followed, continuing a ripple effect that worked its way toward steel output. That last link in the chain presents a difference between the market economies of the world and the state-owned enterprise output of steelmakers in China.

Pittsburgh-based U.S. Steel Corp. and several other steelmakers had to adjust output at their mills in an attempt to bring mill capacity in line with anticipated finished steel demand over the course of the next two months or so. Between March 24 and April 11, crude steel output in the U.S. fell by more than 32 percent, according to the Washington-based American Iron and Steel Institute (AISI). All the factors were in place for a drop in ferrous scrap prices except one—the all-important supply half of the equation.

Slowing to a trickle

Historically, when scrap processors see a severe monthly drop in ferrous scrap prices, they also expect to see accumulated scrap inventory in their yards. When supply outpaces demand, it gives mills negotiating leverage.

In early April, most processors were not reporting that to be the case. By mid-March, scrap yards instead were experiencing a dwindling of inbound material that in theory could more than match even a 32 percent drop in domestic finished steel output.

The one pipeline of scrap that processors tried to keep open was the peddler and small contractor trade. A processor based in the Midwest noted, however, that if scale prices were to fall in early April, that would serve to diminish those scrap flows further.

Although the Institute of Scrap Recycling Industries (ISRI), Washington, lobbied consistently to ensure recycling is considered an essential industry so scrap can keep flowing, some locations have closed owing either to state and local laws or corporate decisions.

If falling scrap demand has been met by an equal or even greater plunge in scrap supply, one might conclude that this form of equilibrium would keep pricing relatively stable.

In early April buying, that did not prove to be the case, with Fastmarkets AMM Midwest Index pricing showing roughly $25-to-$50 per ton price drops in the heart of the country.

According to reports in that publication and others, the low prices were met with resistance by many processors. This faction chose to sell very little scrap at April prices, speculating that mills with scant inventory would be forced back into the market in a big way when governments, companies and households take measures to reawaken the dormant economy, whether that is in May or later.

Bullwhips and bull markets

In mid-April, as COVID-19 casualty figures and economic data painted a sobering picture for many Americans, it was difficult for some to conceive of life after the coronavirus impact. By that time, however, acknowledgements were being made that planning for the postpeak-virus era was growing in importance, and government and business leaders alike signaled that they were shifting their attention.

Commodity and investment analysts had been predicting a “bullwhip” effect starting with China’s experience with COVID-19. Downward pricing was predicted March 2 by Jason Schenker of Austin, Texas-based Prestige Economics. At that time, Schenker mentioned the possibility of a “bullwhip effect,” in which “a small move of the wrist turns into a big crack extending beyond China.”

As COVID-19 “shelter in place” orders hit Europe and then North America, exchange pricing for copper and aluminum tumbled to lows not hit for several years. Prices for steel and stainless steel were similarly affected by those orders and rapidly disappearing oilfield activity.

By early April, another investment analyst and advisor was pointing to the possibility of the bullwhip cracking in the other direction once economies in Europe and North America follow China in returning to a post-COVID-19 setting.

April 1, John Browning of Shanghai-based BANDS Financial writes that Goldman Sachs had warned that the economy in the United States “will go through an unprecedented drop” in the second quarter of 2020 but then “will be followed by a recovery that would be the fastest on record.”

Browning also writes that supply cuts in mined ores and primary metals mean that if the bullwhip cracks back to intense demand, prices would rise sharply in the absence of adequate supply. He cites this April 1 observation from Australian bank Macquarie: “As base metals prices test lows and governments curtail activity, a growing number of production assets are going offline, temporarily or indefinitely.”

In his April 1 email to clients, Browning writes, “The message from the fractured supply lines in metals is that demand is falling, but supply is falling also, so that we must expect short but painful disruptions in available location quality and delivery date. If we were to add this to Goldman’s expectation of a sharp recovery in Q3, it would seem we have the ingredients for an incendiary inflationary cocktail in the commodity space.”

That scenario could create a feast after the famine for scrap recyclers. With a sharp recovery, processors ideally can receive attractive prices on any existing inventory. Following that, recyclers can put their supply elasticity benefit to work by drawing in increased peddler scale traffic as prices rise and metals producers seek feedstock. As those same processors and traders struggle in the current low-supply and low-price environment, the idea of such a rebound presents a glimmer of hope.

The author is senior editor with the Recycling Today Media Group and can be contacted at btaylor@gie.net.