Economists, researchers and analysts assigned to present forecasts, including several who spoke at the recently concluded ISRI (Institute of Scrap Recycling Industries Inc.) 2012 Convention and Exposition, sometimes use the phrase “black swan” event when offering disclaimers attached to extended forecasts.
This ballet metaphor seems to have grown in popularity since the release of the Academy Award-nominated 2010 motion picture of the same name.
The online Jargon Database (www.jargondatabase.com) defines a black swan event as “an extremely rare or unlikely event” or “a rare event that cannot be predicted.”
Those forecasting where the economy is headed certainly deserve such disclaimers, as unfortunately there have been no shortages of black swans swimming into the picture in the past 12 years, ranging from the 9/11 attacks to the tsunami that hit northern Japan. (Whether the U.S. sub-prime mortgage crisis or European debt problems should be regarded as “unpredictable” or simply “ignored” is a debate not to be addressed in this column.)
Despite several black-swan disclaimers, presentations at the ISRI convention, as well as comments made by recyclers in conversation, also yielded some positive insights.
Perhaps foremost among those is that the swelling of the ranks of the middle class in Asia has created an enormous surge in demand for recycled materials.
There are black-swan scenarios that could interrupt and disrupt this demand, but many recyclers and forecasters even offer a disclaimer to this disclaimer. What many have observed is that even if demand for scrap in one region abates, buyers from another region soon step in to take advantage of the price weakness and material availability.
For recyclers in a scrap surplus region like the United States, the biggest underlying problem is finding sufficient scrap to meet demand. This is by no means a small problem—veteran recyclers are quick to point out that scrap acquisition has traditionally been the most intensely competitive part of their business.
But others are quick to point out that the previous 10 years of surging global demand has helped create both an infrastructure and a mindset that has served the recycling industry well.
Many business owners and managers in North America and Asia (as well as economic planners in nations with managed economies) more fully understand the critical role of secondary raw materials in the global economy.
China cannot keep growing at the pace of the previous 10 years. But if the world is going to have a larger middle class using more appliances, more computers, more packaging and more vehicles, it will depend on keeping recycling loops intact to make it happen.
|Arman Sadeghi of All Green Electronics Recycling takes a slightly different approach to business. Photos: Bruce Morr|
Decision makers at companies, institutions and government offices throughout America always face a two-pronged decision when discarding obsolete office electronics: How do we discard this equipment so it is handled securely and so we receive any recycling/reuse value for it?
Arman Sadeghi, founder and CEO of All Green Electronics Recycling, Tustin, Calif., has a background in information technology (IT) and was familiar with computers and computer equipment before he started All Green.
Part of what prompted Sadeghi to get into the business, he says, was the 2008 60 Minutes report that exposed sub-standard electronics recycling practices involving the export of obsolete electronics to overseas destinations where unsafe disassembly practices occurred.
“I had never been in the recycling or security side until I saw a report on 60 Minutes,” says Sadeghi. “I wanted to see if it was something I could advance.” Four years later, Sadeghi leads a company with 145 employees, three facilities and several additional sales offices in different parts of the country.
Designing a Model
After the 60 Minutes report instilled the passion within Sadeghi to address electronics recycling practices, among his next steps was to create a business model that could help him distinguish his company from others.
“When I first looked into this business, I found the split model, where revenue is earned from the sale of items and commodities on the back end and customers also are charged up front to discard material,” says Sadeghi, who had a criticism of that model. “Charging for a service means companies are less likely to use it. Many would opt, if they could, to dump [obsolete electronics] in the trash,” he says.
As he created All Green, Sadeghi sought to eliminate that disincentive to recycle. “My model is free on the front end, and we’ll make what we make on the back end.”
When it comes to information security, however, Sadeghi says he determined that was a service that sometimes would have to come at a cost (to be done well) and that customers understood the value of paying for it. “We do charge for the data destruction and sanitization on site—that’s where there are upfront fees.
Once electronics are in hand, All Green has a number of decisions to make, says Sadeghi. “Our model is set up so that we follow the reduce, reuse, recycle method,” he comments. “If there are components that are able to be reused and our clients are OK with that, then we do that. But if they have requested product destruction, then we do not pursue that option.”
Sadeghi estimates that about 40 percent of the company’s inbound material stream (whether entire units or components) is reused while the remaining 60 percent enters All Green’s end-of-life recycling system.
Regarding its recycling methods, Sadeghi says, “Most of our process involves doing a very elaborate sort prior to any shredding; that allows us to not have to charge customers on the front end. When we do actually recycle, then we get cleaner commodities.”
He continues, “Many competitors may sort into five or six categories. We sort into 42 categories, everything ranging from remote controls to TVs that are 10 years old or older. We make a point to really separate.”
Sadeghi says the thorough separation process, while involving some work that other competitors may not undertake, provides the benefits of achieving maximum reuse levels and creating upgraded secondary commodities after shredding.
Prompted to create All Green by safety concerns for overseas workers, Sadeghi soon discovered that a different type of safety also was important to his business—the safety of sensitive information found on hard drives and other devices of which his company takes possession.
All Green Electronics Recycling at a Glance
Principals: Arman Sadeghi, founder and CEO
Locations: Tunstin, Calif. (headquarters and facility); two additional processing facilities in Sacramento, Calif., and Las Vegas; offices in New York, Boston, Washington, D.C., Dallas, St. Louis, Chicago, San Francisco, Denver, Orlando, Portland, Ore., and West Sacramento, Calif.
No. of Employees: 145
Services Provided: Full-service provider of electronics recycling, IT asset disposition and data destruction services, including digital data wiping of hard drives and mechanical shredding. Electronics obtained can be reused or recycled, depending on customer specifications.
Equipment: Shredders made by UNTHA and Kristu; custom-designed trucks from ShredSupply
Certifications: e-Stewards, Responsible Recycling Practices (R2) and ISO 14001
It is a risk that many institutions, government agencies and business owners are aware of, but not all of them, says Sadeghi. “In our research, we’re finding that business owners don’t have a really good sense of data security and how it works. You’d think IT managers would know, but most of them don’t even know exactly the risks that are out there with data security. Most people are under the false pretense that deleting the data from a hard drive or formatting the drive means you’ve wiped that hard drive. But as has been proven time and time again, that is not the case.”
Even while awareness of computer hard drive security may have increased, those discarding electronics are not always aware that other types of equipment contain sensitive data.
“The obvious one is cell phones,” says Sadeghi. “But copy machines, fax machines and printers these days are becoming more advanced and now have some sort of internal memory. Some copy machines now have full-sized hard drives that store all sorts of information. Some types of documents offices are scanning or faxing have delicate information on them.”
Regarding cell phones and their successor smart phones, Sadeghi notes, “Mobile devices now have not just phone numbers, but we’re browsing the Internet with them and we have e-mail on them. So they have a person’s contacts and often passwords to bank accounts and other sensitive information. It’s almost as if someone gets a hold of a cell phone, especially for a business, they have access to that business’s contact lists and can create a security problem.”
When such a device is in the wrong hands, it can provide access to credit card information, a Social Security number, a home and work address or even a mother’s maiden name, leading to access to credit lines. “All that information that credit card companies use to obtain identity,” says Sadeghi, “can be obtained from various devices.”
All Green’s data security services include a free assessment for companies to see if their data security standards are up to speed. “We can get an idea of what they’re currently doing,” says Sadeghi. “You find once in a while that some companies are doing it the right way, but we certainly find that many others are not.”
All Green offers hard drive degaussing services as well as hard drive shredding, which Sadeghi calls “by far the most secure way to destroy data.” All Green acquired a $500,000 truck “built to Department of Defense (DOD) standards,” according to Sadeghi. “We can send it out to any site, and customers can observe their hard drives being shredded.”
Recently, All Green has added a portable hard drive shredder that it rents or leases to clients. The company delivers this machine to its client’s facility, and the client can shred hard drives and other media using the simple infeed without the assistance of an All Green employee. This allows clients to destroy sensitive data in the security of their facilities without an outsider being present. All Green then picks up the shredder and the shredded material when the job has been completed.
For hard drives that can be sold to the reuse market, All Green offers “triple-pass and seven-pass hard drive wipes,” says Sadeghi. “Those are very secure and can be almost as secure as shredding. The drive is hooked up to a machine and it erases and rewipes the disk several times,” he explains. “The reason for the seven passes is that many years ago the DOD stated that that’s what they felt was necessary, and it has stuck.”
A Good Start
Since being created in 2008, All Green Electronics Recycling has grown to meet and exceed Sadeghi’s expectations for the company.
“I had some big goals and big dreams when I started,” he comments. “At this point, it’s interesting to look at where we thought we’d be. In some places we’re ahead, and in others we haven’t reached our goal.”
One goal that has been met, says Sadeghi, is the number of people put to work. “We thought we’d be at 100-plus employees at the start of 2012 and we were at 125.”
The company’s work force is engaged in many different endeavors and can be found in many different parts of the country.
As far as near-term goals and expansion opportunities, Sadeghi says, “For 2012, we’re continuing to pay attention to growing our client base. Our focus is going to be to have, by the end of 2012, 16 trucks in the fleet, which can help us cover the entire country. The second goal is to reach some new markets with new sorting or processing facilities, including Dallas and Washington, D.C. We’re also looking at the Midwest—possibly the St. Louis area.”
Sadeghi says the expertise the company has cultivated in data security has helped it offer services that are attractive to larger national customers and others with considerable volumes of equipment to be discarded.
“I think our focus on data security is something that has been a big part of what we’ve accomplished,” he says. “Because of my background as having been an IT director with several companies, I understand the value of the data.”
More than assurance, Sadeghi says All Green has created a system that allows customers to understand the status of their information’s security. “We’ve tried to make the process as streamlined as possible,” he remarks.
“One of the things we provide is to track the serial number, make and model of both the hard drive and the computer from which it is extracted, as well as the name of the employee who used it and the method of destruction,” says Sadeghi. “We provide that in an Excel spreadsheet to the customer along with a certificate of destruction and legal indemnification,” he adds.
Sadeghi is convinced the methodology has been appreciated by customers and has helped All Green’s business. “It sets the customers’ mind at ease,” he comments. “They can know exactly when a computer was destroyed and that it was done right.”
In just a few years, Arman Sadeghi and All Green Electronics Recycling have moved from a notion to enter a business to a national company with 145 employees and room to grow.
The author is editorial director of Recycling Today and can be contacted at firstname.lastname@example.org.
Editors’ Note: The following article is an edited excerpt of “Improving Aluminum Recycling: A Survey of Sorting and Impurity Removal Technologies,” which was published in Resources, Conservation and Recycling, www.elsevier.com/locate/resconrec, and is reprinted with permission of the Massachusetts Institute of Technology. The full paper includes melt technologies that assist in the removal of tramp elements as well as inclusion and hydrogen removal. To access the full document, click here.
Aluminum recycling has a number of key environmental and economic benefits. Compared with other high volume materials, aluminum production has one of the largest energy differences between primary and secondary production: 186 megajoules per kilogram for primary compared with 10 to 20 megajoules per kilogram for secondary. With energy and cost savings in mind, many producers now have targets of increasing their usage of secondary materials.
However, the accumulation of impurities in these recycled material streams provides a significant, long-term compositional barrier to these goals.
A growing number of studies suggest that accumulation of unwanted elements is a growing problem in recycled material streams. In the case of aluminum, the list of problematic impurities is quite large, including silicon, magnesium, nickel, zinc, lead, chromium, iron, copper, vanadium and manganese.
Metal recycling is a metallurgical process and is, therefore, governed by the laws of thermodynamics. The removal of unwanted elements in the scrap stream is dictated by the energy considerations of the melt process. Compared with many metals, aluminum presents a high degree of difficulty in the removal of tramp elements because of thermodynamic barriers. Therefore, with no simple thermodynamic solution, producers must identify strategies throughout the production process to mitigate this elemental accumulation.
There are a variety of solutions to deal with the negative impact on recycling because of accumulation of undesired elements; each presents a trade-off between cost and improvement in scrap utilization (or recycling) potential. Dilution with primary is the most common solution used today; this has a negative impact on recycling. “Down-cycling,” where materials are recycled into lower value products, is another common method of dealing with contaminated secondary materials; this enables higher usage of recycled materials but negatively affects recycling economics. A specific example of down-cycling is when wrought scrap is used in cast products because of their ability to accommodate higher silicon contamination.
As important as these operational strategies are to mitigating the negative effects of accumulation, there are far more technological strategies available to the producer when these operational strategies become ineffective.
While physical separation technologies can be applied to a wide range of scrap streams, they are typically used for scrap that has been shredded.
Magnetic Separation. Magnetic separation is a way to separate nonferrous and ferrous scrap components. Typically, scrap is transported on a conveyor belt equipped with neodymium magnets. As the scrap nears the magnet, the ferromagnetic portion (mainly steel and some iron) is attracted to the magnet and pulled onto a second conveyor, while the nonferrous portion falls into a collection bin. This technology is used extensively in the secondary aluminum industry. Its main limitations are that further separation of the nonferrous scrap stream is not possible and it may still contain many contaminating portions that are not magnetic, such as plastic, glass, rubber, stainless steel, copper, zinc and magnesium.
Air Separation. Technologies using air to separate scrap streams are known by many different names: windsifting, air-knives, elutriation, winnowing, air columns, etc. Their differing names refer to the slightly different mechanisms by which they work.
Conveyor belt systems often use suction to pull off lightweight materials present in shredded automobiles, such as plastic, rubber and foam. These lightweight components are often referred to as auto shredder residue and are commonly landfilled.
In a vertical air separation system, the scrap stream is fed through a column with air pushing upwards; the heavy metals are collected at the bottom, while other materials are pushed through various feeds farther up. Most secondary remelt facilities use some sort of air separation technique to create a mostly metallic scrap stream. The main drawback is the loss of lightweight metallic products, such as used beverage cans and smaller shredded pieces.
Eddy-Current Separation. Eddy-current separation takes advantage of the large range in conductivities of many of the mixed metals present in commingled automotive scrap. Eddy-current separation is similar to magnetic separation. A rotor is lined with neodymium magnets with alternating north and south poles. The rotor produces an external magnetic field that repels nonmagnetic electrically conductive metals. This results in their expulsion from the scrap stream, leaving the nonmetallic particles. The rotor’s speed controls the magnetic field.
Because this technology relies on the magnetic repulsion force generated within the material, some shapes such as wires and foils fail to be separated, as they do not produce a sufficient eddy current.
The extension of this technology takes advantage of the fact that metals with varying conductivity will produce varying eddy currents and will, therefore, be thrown different distances. By setting up collection bins at these varying distances from the rotor, it is possible to separate the scrap stream by base metal.
Sink-Float/Heavy Media Separation. Sink-float separation uses water-based slurries with known specific gravity to separate nonferrous materials with differing densities. To control the specific gravity of the bath, magnetite or ferrosilicon powder is added. For example, in the case of a shredded automotive scrap stream, many of the components have different densities, making it an excellent application of this technology. Fine particles are first screened out of the process; these are often landfilled or shipped to hand-sorting facilities.
For a typical three-step process, the resulting course fraction starts in a water bath (specific gravity of one), which enables separation of much of the nonmetallic fraction (plastics, foams, wood, etc.). Next, a 2.5-specific-gravity bath separates magnesium and higher density plastics. The third bath has specific gravity of 3.5, separating cast and wrought aluminum metals, leaving behind heavier metals, such as copper, zinc and lead.
Drawbacks of this technology include the high cost of maintaining the constant density slurries as well as the loss of hollow or boat-shaped metal components.
Fluidized bed sink float technology is a dry technique using a bed of sand and forced airflow through the bed. By changing the speed of the airflow, one controls the density of the sand, separating different density scrap without transferring them to different liquid baths.
Problems with lubricants on the scrap and difficulties in controlling convection currents have prevented commercialization of this technology.
Color Sorting. Color sorting takes advantage of the color difference between scrap to separate zinc, copper, brass and stainless steel from aluminum in a nonferrous scrap stream. The most basic application of color sorting is when metals are sorted by hand, a prevalent practice in countries with low labor costs. Because of distinctive surface characteristics, hand sorting is capable of sorting wrought and cast aluminum fractions.
Color sorting also can be automated. A computer analyzes images of each piece of scrap and, based on specified color ranges, directs them to different feeds. The technology is not affected by the particle size or shape of the scrap, so it has many capabilities lacking in heavy media and eddy-current separation.
To further separate nonferrous metallic fractions, chemical etching is often used in conjunction with color sorting. This technology has the capability to separate aluminum by alloy family. Two key barriers remain to widespread use of this method, however: (1) the environmental and economic impact of the etching chemicals and (2) surface roughness and the effect of heat treatments done in processing can greatly affect the resulting color of the scrap and final identification and separation.
Other Spectrographic Techniques. Spectroscopy has become more widely used for identification and sorting of aluminum and magnesium alloys in recent years. In this technology, various scrap pieces pass by an array of sensors that trigger one of three main activation methods: (1) X-rays, (2) neutron flux and (3) pulse laser. The relevant source hits the metal, which produces an emission: X-ray fluorescence by the X-rays, gamma ray fluorescence by the neutron flux and optical emission for the pulse laser. Varying types of detectors read these spectra, and a computer signal sends the piece of scrap to the appropriate bin.
Handheld X-ray fluorescence (XRF) units are currently in use. For XRF, the spectral ratios of scrap materials are determined according to their major alloying element, because aluminum has a very low characteristic radiation that cannot be read unless under vacuum. Studies on the commercial applicability of XRF in sorting have shown it to be capable of separating by major alloy family but it cannot determine specific alloys. Neutron activation requires long exposure times to the neutron flux because of its limited intensity.
One technology in particular, laser induced breakdown spectroscopy (LIBS), which uses a pulse laser and optical emission spectroscopy, has shown great promise for sorting wrought and cast aluminum. LIBS was first developed by Los Alamos National Laboratory. Its first application to composition identification of metallic scrap pieces was in 1990 in a joint project with Metallgesellschaft, formerly a large mining and engineering company based in Germany. In this method, a sensor detects a piece of scrap, which activates a pulse laser. The laser hits the surface of the metal and produces an atomic emission. The optical spectra are read by a polychromator and a photodiode detector, which send a signal to a computer system. The system then directs the scrap to an appropriate bin using a mechanical arm. Another system uses an air table, where the detector sends a signal that triggers a burst of air beneath the scrap metal, ejecting it into the correct container.
LIBS has many advantages over current separation technologies for automotive and aerospace applications, as it has the possibility for high speed and high volume. It has capabilities to separate wrought and cast alloys and to sort wrought alloys by alloy family.
However, drawbacks to commercial use remain. Pulse lasers can only penetrate a small distance into the surface of a metal, and, therefore, the scrap must be free of lubricants, paint and other coatings. Oxide formation on the surface also can cause erroneous readings.
Hot Crush. Hot crush is a thermal-mechanical separation method used to separate wrought and cast aluminum alloys. This process takes advantage of the low eutectic temperature of cast alloys, which are high in silicon. Because cast alloys have a lower melting temperature than wrought alloys, holding, or “soaking,” the mixed scrap at a temperature below the eutectic (about 550 degrees Celsius) will result in a weakening of the castings along their grain boundaries.
A subsequent mechanical crushing or grinding causes those alloys to break, and they can be separated from the wrought with various particle size screening. Studies have shown the technology to be 96 percent effective in separating a mixed wrought-cast stream. However, successful segregation requires that the initial scrap be fairly large in size, therefore, separation of shredded scrap streams or smaller products is not possible.
Often, particularly in the case of shredded automotive hulks, commingled scrap will be subjected to a variety of these physical separation technologies to achieve a relatively pure aluminum scrap stream for melting. The sorting technologies used and their sequence of use varies among different secondary producers and scrap processors.
G. Gaustad is with the Golisano Institute for Sustainability, Rochester Institute of Technology, Rochester, N.Y., while E. Olivetti and R. Kirchain are with the Materials Systems Lab at the Massachusetts Institute of Technology, Cambridge, Mass.
Recyclers processing light metals, such as aluminum used beverage containers (UBCs) or tin-plated steel cans, learn to value flexibility. It is a quality they say also is useful in the baling equipment they employ. This often means selecting a baler that is capable of processing more than one type of material. Matching input/output needs with a baler’s cycle time is one consideration, as is whether to use more than one baler because of different materials being baled.
Jeff Highiet, director of operations for Modesto Junk Co., a scrap recycling company based in Modesto, Calif., and Greg Maxwell, senior vice president, Resource Management, a Chicago Ridge, Ill.-based material recovery facility (MRF), process light metals like sheet metal, steel and aluminum cans, in addition to paper and plastics daily. Thanks in part to trial and error, recyclers like Highiet and Maxwell say they have learned how to process nonferrous metals effectively and efficiently throughout the years.
The sequence of material being fed to a baler can have a direct effect on the quality of bale produced. For example, feeding steel cans into a machine before completing a bale of aluminum cans can yield a contaminated bale of aluminum cans, and vice versa.
Maxwell suggests, “You have to make sure you properly sequence the materials that the baler is going to bale so that each bale is not contaminated with other materials.”
He adds that the baler operator and the employee feeding the baler can determine how smoothly the baling process goes.
Highiet also stresses how important it is that employees speak with each other about what they are doing throughout the baling process.
“If you have a good operator on both ends, and they communicate on the same page and understand the limits of the machine and/or the items we are baling, everything will be fine,” Highiet says. “If not, [there will be] problems.”
Additionally, the quantity of material to be baled should be taken into account. Maxwell comments, “Ensure that you have a sufficient quantity of uncontaminated material, so when you make a bale, you can make a complete bale that is ready for shipment to market.”
This step can eliminate the need to re-bale and will prevent rejection of material when it is delivered to the buyer.
When shopping for balers, Highiet says he prefers to take a direct approach. He suggests recyclers start by listening to what the employees using the equipment have to say. This will allow a recycler to start shopping with a strong grasp on what his or her facility needs to perform at its best.
To accommodate the increasingly varied material flow MRFs are seeing these days, Maxwell suggests investigating a baler’s actual performance on each type of material to be processed.
“Since the cost of a baler can be significant,” Maxwell says, “most MRFs are going to want to have a baler that can bale different types of materials.”
He continues, “If you’re handling different types of material from, for example, residential curbside programs, you may be baling steel cans, aluminum cans, plastic containers and different grades of paper. In that case, you may want a baler that has somewhat of a greater efficiency for a certain material. Rather than have a dedicated baler for each type of material, you may very well want to compromise for a baler that has different utilities to handle different types of materials.”
It is important to know exactly what a baler will be used for before purchasing, Maxwell adds.
Recyclers should look at all aspects of their operations to determine if they are baling light metals in an efficient manner.
Highiet says it is vital to understand a customer’s wants and needs to know if a facility is equipped to meet those demands. Recyclers also need to “maximize full freight and weight limits,” he says.
“Ultimately you need to understand where the materials are going,” Maxwell says. “In other words, what size and density of bale are they looking for? Does your baler meet that requirement or will your bale have to be rebaled or handled in a different way?”
The volume of material that is coming into a plant needs to match the output of the baler.
Maxwell says, “You have to look the size of your MRF and the cycle times of the material you are intending to bale and try to match the baler’s size and efficiency to what you are going to try to feed into that baler on any given day.”
A baler’s cycle times can be increased by adding additional power and improving the hydraulics on the machine, sources suggest.
Additional shifts also can improve an operation’s baling output. This spreads the baler’s costs over a greater number of bales being made each day, and some recyclers find that this is a highly economical solution to implement.
“Many of the MRFs are built like factories, and many factories are built to run more than one shift in order to better utilize the equipment,” Maxwell says.
Because baling metals means metal-to-metal contact, wear and tear is a daily concern for most recyclers. Maintaining balers, as with most equipment, requires daily visual inspection, Highiet says.
Baling light metals such as aluminum and steel cans usually does not cause jamming problems in a conventional baler because loose cans will surge into and out of the compression chamber during repeated compression cycles. Even so, metal cans gradually cause abrasion to the baler floor, side walls and shear points over time.
Highiet says that if baler wear plates are allowed to wear excessively, the structural components of the baler can start to wear and weaken as a result.
The shear knives of balers should be inspected and adjusted when necessary to make sure that specified clearances are maintained, he suggests. If the gap between the shear knives and the platen (face plate) of the ram becomes too large, this can cause jamming at the shear point and put undue stress on the structural components of the baler.
Unusual noises, vibrations or oil leaks should be inspected immediately, as they may be signs a component of the baler is out of adjustment or about to fail, which also could create safety concerns.
“Anything can be a safety issue, and any potential safety issue can be resolved —it just depends on how much anyone cares,” Highiet says.
The author is assistant editor of Recycling Today and can be reached at email@example.com.
The ferrous scrap market is governed by the forces of supply and demand. And judging by the relative stability exhibited by the No. 2 shredded scrap grade throughout the last year, these forces have been adequately balanced.
“Markets have normalized,” an auto shredder operator based in Georgia says. “They are not moving up or down much.”
He predicts that the market will remain level in the Southeast. However, he says he expects to see pricing for No. 2 shred in the Northeast to increase by $10 to $15 per ton, reaching parity with pricing in the Southeast.
“We are not going to see a downturn in the market any time soon,” the Georgia-based processor says. “In the worst case scenario, it will remain level. In the best case scenario, we’ll see a bit of a pop.”
An Ohio-based scrap processor says he expects pricing for No. 2 shred to move sideways in May.
He adds that more dramatic swings in pricing create more interesting times for scrap processors and also can prsent opportunities to adjust pricing to improve their margins. “When pricing is sideways, there is not much you can do,” he says.
Feeling the Squeeze
With more auto shredder yards competing for material, margins are on the minds of all operators.
“Processors are being squeezed because there are too many shredders online,” a shredder operator in Illinois says. “This is a cycle where you realize that if you are going to compete with your neighbor, you are not going to put in a baler or a shear; you are going to put in a shredder.”
A look at the number of auto shredders in the U.S. bears that out. As of the 2010 Recycling Today auto shredder list and map, 291 auto shredders were installed in the United States, 17 of which were idle as of October 2010. A number of new auto shredder installations have been announced since the last list was published in 2010.
While the Illinois-based processor says he’s uncertain how long this cycle will continue, he believes the amount of obsolete material available for processing and the number of auto shredders in operation will synchronize eventually.
In the meantime, competition for material is intense.
“We are finding it harder and harder to get the material to fill our contracts,” a shredder operator in Virginia says. “This past month, even with that, the mills tried hard to push prices down, which hurts yards trying to keep volumes up.”
The Georgia-based processor says, “Shredder feed is in short supply only because there are so many shredders.”
Competition for material has led auto shredder operators to sacrifice their margins, according to sources.
“We are probably doing a little better than breaking even,” the Georgia-based processor says of his operation. “If you can take 5 percent to the bottom line, you are doing very well. Right now, that’s not available.”
Current market conditions have some recyclers focused on improving their operational efficiencies. During the Institute of Scrap Recycling Industries Inc. (ISRI) 2012 Convention and Exposition, Rich Brady, executive vice president of OmniSource’s ferrous commercial group, spoke about how OmniSource has been focusing on this area.
“For a long time, companies were able to run their equipment at a 50 percent rate,” Brady said, adding that current market conditions are making this approach unwise.
“Buying aggressively and churning inventories” are important from an operational perspective, as is “using technology to heighten the quality of our overall product...for mill customers and foundry customers,” Brady said. “We’re finding that these customers are responding to the value-added products [and] very specific packages.”
Brady said these “engineered packages have become very important to us,” referring to this approach as preferable to the “commoditized approach” of selling scrap shipments on the spot market.
The Georgia-based processor says he sees signs that supply tightness is easing in his region. As of April, he says his company’s average daily buy had increased slightly. “We’ve seen a 10 percent increase in flow month on month since the beginning of the year,” he adds.
Recyclers in the East and Midwest are used to seeing an influx of material into their yards come April; but, the mild winter means scrap kept flowing.
Thawing Not Required
The Ohio-based processor says scrap continued to flow into his yard through the winter. “Normally we see an influx in spring, but [the flow] never stopped. The normal April rush never occurred,” he says.
The Georgia-based scrap processor says, apart from the February tornados in the Midwest, the mild winter weather also meant yards did not see an increase in the number of vehicles scrapped. “If we get hurricanes and ice storms, we see an increase in scrapped cars.”
OmniSource’s Brady told attendees of the Spotlight on Ferrous session at the ISRI convention that the mild winter weather would result in recyclers recording improved volumes in the first quarter. However, he said recyclers would not see the “spring thaw” they have come to expect in April and May as a result.
“We’ve actually seen some flows decreasing a bit in April,” Brady said, “which is not normal.”
The steady flow of scrap through the winter has been matched by consistant demand from domestic mill buyers. Offshore orders, however, have been somewhat soft.
* Average mill spot buying price for No. 2 shredded scrap, defined as containing 0.17 percent or greater copper content, calculated by MSA Inc.’s Raw Material Data Aggregation Service (RMDAS), http://rmdas.msa.com.
“Demand is good through the second quarter,” the processor based in Illinois says of the domestic market.
While he says export demand is “not robust,” there has been some activity. He adds that much of the material produced by coastal processors has been going to domestic mills.
The Georgia-based processor also characterizes domestic demand as good, citing a capacity utilization rate of 79 percent in the U.S. as of early April.
He says domestic prices for ferrous scrap have been so strong recently, overseas buyers have not been sourcing material from the Southeast, with the exception of Florida.
However, he says he has seen export activity, particularly to India, increase more recently. “I’ve seen a leveling of exports to Turkey,” he adds “And as far as Southeast Asia, nothing is going off the East Coast right now.”
Speaking at the Spotlight on Ferrous session at the ISRI convention, Pat McCormick of World Steel Exchange, Englewood Cliffs, N.J., said Turkish steel mills were affected by the Arab Spring uprisings of early and mid-2011 and pulled back on their scrap purchasing as a result. He added that buyers for Chinese mills tend to step in to buy additional scrap when prices decline because of global events such as these.
McCormick said he anticipated modest growth in world steel production in 2012. “We expect global steel growth of 1.6 percent in 2012—about one-third of the 2011 growth rate.”
Looking ahead to 2013, McCormick said World Steel Exchange and its sister company World Steel Dynamics predict a “bounce back” in the first half of 2013 that could result in steel production growing by 5 percent for the year. Steel and ferrous scrap prices are predicted to increase as a result, he added.
The growing number of auto shredders in operation in the U.S. means the amount of No. 2 shred available also has increased, as some operators decide to send some material that would normally be used to produce No. 1 heavy melting steel (HMS) to the shredder.
The Virginia-based processor says her company is even sending prime scrap through the shredder these days. “We are shredding more and more as the prime grades seem to have been flooded on the market.”
She continues, “Inside our company, we are very focused on buying and selling shred material. We do the prime grades, but we have to pay a premium for that material, and the prices when sold don’t always reflect that. Shred seems to be where we have more control on our margins.”
The growing number of auto shredders in operation is forcing steel mills to use more shredded scrap in their melt mix, the processor based in Illinois says. “They have to adjust their models,” he says, “The rule of thumb had been that they couldn’t use more than 50 percent shred. Now they will have to find a way to use more.”
He adds that demand for other ferrous grades remains strong largely because less supply is available. Plate and structural (P&S) material appears to be an exception, with the Illinois-based processor saying it is in oversupply because of the large number of demolition projects that were able to continue through the winter.
“There is almost no demand for P&S,” the processor based in Georgia adds.
While markets for some grades are softer than others, scrap recyclers generally have a positive outlook through the end of the year.
The processor based in Georgia says scrap markets have generally experienced an upturn in the third quarter. “That has historically always been the case,” he says.
“The third quarter is a good time period for the scrap business.”
He adds, “Overall, I expect to see a level market for the next few months.”
The Illinois-based processor also foresees a steady market for ferrous scrap in the next three to six months. He says he believes the election year has led to uncertainty and reluctance on the part of buyers of new steel to put in long-term orders for material. However, he says he expects scrap demand to remain strong and pricing to remain at current levels.
Offering a more skeptical view of the market through the end of 2012 is the processor based in Virginia. “I think it is going to be a possible roller coaster,” she says. “I think you will see some yards hold material because they don’t feel the market should have taken the downturn it did in April.
“A lot of yards I know have low stock right now,” she continues. “The more the mills push prices down, the worse it will get. I think we may see another drop and then possibly a spike to get the volume back where they need it.”
The writer is managing editor of Recycling Today and can be reached at firstname.lastname@example.org.