Hungry Mouths to Feed

For several years, PaineWebber researcher Peter Marcus has contended that North American industry will be faced with a shortage of ferrous scrap by the end of this century or early next century.

The theory, based in part on steel production and import figures from throughout this century, has not been accepted by everyone. But one of the earliest tests for validating the theory may come from the outcome of competition between the operators of automobile shredders to find feedstock for their hungry machines.

There is active competition for automobile hulks in several markets. Many scrap industry observers (and participants) believe that competition is heating up with the installation of the larger super-sized shredders, which can chew up more autos, vans and even light trucks in an hour than was previously possible.

MOST APPETITES ARE SATISFIED

While the scrap shortage forecast would seem to point to a vigorous search for shredder feedstock, most shredder operators contacted say they are not experiencing any current shortfall.

“With our current shredder, we’ve got all the feedstock we need,” says Maxwell Zalev, president of Zalev Metals Inc., Windsor, Ontario. Some time in late summer, however, the company will be running a newly-installed Newell Mega-Shredder. “With the Mega-Shredder, we still feel that we will be able to feed it,” says Zalev.

In Youngstown, Ohio, Scott Wilhelm reports that procuring auto hulks has not been a problem at Youngstown Iron and Metal Inc. “Feedstock isn’t really a problem,” says secretary-treasurer Wilhelm of keeping the company’s 80/104 Newell shredder running seven days a week.

In the current softening market, the price the company is paying for auto hulks is declining. Even the presence of three auto shredder competitors in an 80-mile radius (Luntz Corp. in Canton; Atlas Inc. in Cleveland; and a Luria Bros. shredder in Beaver Falls, Pa.) hasn’t triggered a price war. “I think everybody shops though,” Wilhelm says of auto recyclers and other suppliers of auto hulks seeking the highest price for their flattened cars.

Youngstown Iron and Metal Inc. is the newest player in the region, having just installed its shredder in 1997. Wilhelm says that the company is on track with volume projections for the amount of ferrous shred produced in the shredder’s first full year of operation.

But the competition is stiff enough that one shredder in the Cleveland area stands silent. The auto shredder operated by Luria Brothers in Brook Park, Ohio has been closed down while the company makes a decision on its future. “In our region there is an overcapacity problem,” says Ben J. Tripodo, manager of commercial operations development at the Brook Park site.

Competition for shredder feedstock is just as brutal in Texas, according to Jack Vexler, president of Monterrey Iron & Metal, San Antonio. The company operates a 60/104 Newell shredder that Vexler says he “pieced together” himself. He says buying auto hulks is “absolutely” a challenge. “More importantly, is it profitable?” he asks. “Buying them just to buy the tonnage doesn’t get you anywhere.”

Vexler says several shredder operators in the area have been actively bidding against each other for auto hulks, and he has for the most part withdrawn from that market. “The guy that wins really loses. I can’t see where the winner even makes a profit,” he says, referring to what he sees as a very thin margin on auto shredding in the region.

Several acquisitions announced this year demonstrate a step some shredder operators are taking to secure feedstock. They are entering the auto crushing and recycling markets.

Industrial Scrap Corp., East Chicago, Ind., acquired the assets of Paul’s Portable Auto Crushing of Hammond, Ind. this spring. “This acquisition is an important one for Industrial Scrap Corp. in anticipation of our new 98/104 Newell super-shredder coming online in the fall of 1998,” Herb Gertler, president of Industrial Scrap, said at the time of the acquisition. “The addition of Paul’s expertise and scope of operation will enable us to close the loop in automobile recycling,” he added.

Recycling Industries Inc., Engle-wood, Colo., made a foray into auto recycling with its purchase of Ferex Corp., Tyler, Texas. Ferex also operates K&L Auto Recycling in Tyler. K&L operates mobile crushing units that purchase and collect scrap automobile and truck bodies. “Ferex is one of the largest suppliers of scrap auto bodies in the region,” said Recycling Industries chairman and CEO Tom Weins when announcing the purchase. “Having Ferex join our family . . . will allow Recycling Industries to provide a continuous and substantial scrap material feed stream to our shredders,” he noted.

BEYOND AUTO HULKS

While automobile bodies are the preferred feedstock for shredders, they are far from an exclusive menu item.

Shredder operators are feeding a wide variety of materials into their machines in order to produce the stream of dense, ferrous shred desired by scrap consumers.

Objects mentioned by processors include sheet iron and steel, unprepared number two heavy melt, and appliances. “Just about anything that the machine will chew” has been fed into the shredder, says Scott Wilhelm.

Loose tin is the preferred feedstock material for Vexler, who faces the active competition for autos in San Antonio. He notes that his market is “not particularly good for ferrous shred. I’m getting more for my number two steel than I am for my shred. I think there is a surplus of shred in my market.”

What operators can feed into their shredders is dictated in part by the quality of the separation systems they are running behind the shredder. With consumers monitoring quality more closely than ever, an influx of unwelcome elements can make shredding certain items counterproductive.

“The positives of shredding things like plate and structural steel is that the density of the shred can be substantially raised and improved,” says metallurgist Dr. Richard Burlingame, Cleveland. “The melting yield should also be improved due to the lack of attachments,” he adds in regard to plate and structural steel.

“On the other hand, the thing I worry about is the chemistry of No. 1 and No. 2 heavy melting grades,” Burlingame continues. “Neither one of these is a prime quality grade in terms of non-oxidizable tramp elements,” he says, referring to copper, nickel, chromium, tin, molybdenum and other metallic elements.

Burlingame believes the problem could be accentuated in the future. “Plate and structural’s chemical quality is declining because we are alloying more and more steels into that grade. Mini-mills are making a lot more of that material,” he says, noting the tramp element content of those products is inherently higher than what is found in products made in an integrated steel mill.

LARGER AND HUNGRIER

How many shredders can a given metropolitan scrap market bear? Whatever the answer to that question was in the past, it may change as more super-sized shredders come on line.

The closing of one shredder in the Cleveland area occurred without the presence of a super-sized model in the immediate market. Some 180 miles away in the Detroit area, the completion of the Zalev Mega-Shredder in late summer will add capacity to an already-crowded market that includes other super-sized shredders.

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An elevated cab is one of several features improving operational efficiency at the Macon County Solid Waste Management agency in North Carolina. When it comes to waste management, efficiency, safety and reliability are priorities driving decisions from day one, according to staff members of the Macon County Solid Waste Management Department in western North Carolina. The agency operates a recycling plant in a facility originally designed to bale incoming materials. More recently, the building has undergone significant transformations centered around one machine: a SENNEBOGEN telehandler (telescopic handler).

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The fiercely competitive market in Texas has caused Vexler to withdraw from competing for auto bodies, since he feels he cannot process them profitably. “I don’t know when this idiocy is going to stop,” he says of the high bidding for autos in his market.

In markets where super-sized shredders are a factor, such “idiocy” may not stop until after some of the shredding capacity shuts down. Super-sized shredders are not just super because they can take in larger and heavier items. Their tons processed per hour can be significantly greater than that of their predecessors. Whereas shredders in the 60” to 98” size can process from 40 to 150 tons of material per hour, the new 120” inch super-sized shredders can handle from 200 to 350 tons per hour.

“I think it’s important for anyone running a super-sized shredder to realize there’s going to be intense competition within that market to buy up all the conventional shreddables,” remarks Burlingame.

On the one hand, that kind of competition has caused processors like Vexler in San Antonio to say, “I don’t even chase the flattened cars; let everybody else fight over it.” But another scenario is also possible.

A chain of circumstances surrounding the super-sized shredders could also lead to mergers and acquisitions in these larger metropolitan markets:

* Operators of the large shredders will need to process a sizable volume to pay for their investments.

* They will pay more for auto bodies to keep their volume high, resulting in thinner margins for everyone.

* At some point, some of the competitors in such a market will seek a truce, which legally can occur only through a merger or acquisition as opposed to any pricing agreements.

Whether such scenarios will pan out remains to be seen, but rumblings in several markets point to a situation that in its present state has many processors hoping for a change. 

The author is managing editor of Recycling Today.