1999 ReMA Convention & Exposition Coverage—Power Through Professionalism
Jun 9, 2014, 08:39 AM
May/June 1999
Though ReMA held its 12th annual convention and exposition in Orlando—home of all things Disney—the event was no Mickey Mouse affair.
More than 2,400 scrap professionals gathered at Marriott’s Orlando World Center from April 13-17 to find “Power Through Professionalism” through the convention’s general sessions, workshops, commodity spotlights, and committee and division meetings.
And that doesn’t even count the networking and educational benefits of the convention’s social functions and exposition, which featured 150 companies in 205 booths and the biggest outdoor equipment display of any ReMA convention.
The convention was a grand-scale example of ISRI’s efforts to help scrap recyclers enhance their professionalism and achieve success. “ISRI regards your profitability as its starting point—and its ending point,” said ReMA President Shelley Padnos of Louis Padnos Iron & Metal Co. (Holland, Mich.) in her keynote address. “Every course, every product, and every service developed is designed to help you achieve that fundamental goal.”
Among its benefits, ReMA offers programs that can directly save members money, she noted. These include insurance programs (some with dividend features), travel discounts, membership in the Nasco-op buying organization, and a new computer-purchasing program. “When you take advantage of these group purchasing opportunities, you can recover your dues investment in ReMA in a very tangible manner,” Padnos said.
Other ReMA benefits offer less-tangible but equally important paybacks. Its education and training seminars, for instance, provide industry-specific information on topics from metals identification to equipment maintenance to financial management.
Also, ISRI’s communications products—encompassing Scrap, the Scrap and ReMA Web sites, ReMA Digest, and much more—are “packed with information tailored toward helping you and your company grow,” Padnos stated.
ISRI members can also benefit from the many networking opportunities the association offers at chapter meetings, national membership conferences, seminars, commodity roundtables, and—of course—the annual convention. There’s no substitute, Padnos said, for “knowledge gained directly from interaction with others.”
She also emphasized the opportunities—and critical need—for member involvement on the chapter, national, and grass-roots political levels within ISRI. “No business today can be successful without trying to influence the way government tries to regulate its business,” she said, encouraging members to contribute to ISRI’s PAC, contact their elected representatives, and work with the ReMA government affairs staff on important issues, especially Superfund reform. “We must maintain our focus on our ultimate goal, and we must take the position that failure is simply not an option,” she concluded.
Toward Better Business Management
Speaking of options, the ReMA convention gave attendees many choices in its slate of workshops, which addressed timely industry trends and important business management topics—from consolidation to safety to employment practices liability.
The Great Consolidation Crash. Despite the dramatic reversal of fortune of many scrap industry consolidators, “consolidation is here to stay” and will continue in 1999 and beyond, said Paul Higbee of BT Alex. Brown Inc. (New York City).
The consolidation train got derailed, in part, because the Asian economic crisis exacerbated already-poor market conditions by reducing steel demand even more, Higbee noted. Scrap exports were on a downswing, steel and scrap imports were on the upswing, and domestic capacity utilization rates were down. By the second half of 1998, U.S. mills found themselves with vast amounts of unused product and scrap inventory piling up.
“In the fourth quarter, when the dam broke, the industry needed to get rid of 18 million tons of scrap in annualized production,” said Higbee. “That level of imbalance had nowhere to go but to prices. Price reduction was the only valve available to deal with the inventory buildup.”
Higbee then offered summaries on some of the industry’s major consolidators:
Philip Services Corp. This firm’s tailspin “is a tragedy of Shakespearean proportions. To have gone from billions in earnings to bankruptcy that quickly is amazing.”
Recycling Industries Inc. “This patient didn’t make it,” with the company experiencing “a brutal downhill slide since the first half of 1998.”
Metal Management Inc. “If I were a physician, I’d say this patient’s heart has stopped beating but the patient will survive.” A key to the firm’s success will be whether it “can access capital and get their margins up by the use of synergies.”
Schnitzer Steel Products Co. “Although it’s one of the best-run companies in the world, the stock market didn’t treat it well.” As the markets come back, the firm “will have a higher degree of leverage.” IMCO Recycling Inc. “These people are someone to watch. Even though they’re the largest recyclers of aluminum and zinc in the world, they don’t get any respect from Wall Street.”
For the rest of this year, scrap exports will likely stay down, scrap and pig iron imports should drop dramatically, and steel imports should slow, Higbee said. Industrial production will remain high, which means continued high scrap generation. Even so, “this year, instead of having 18 million tons in surplus to get rid of, there will be nine million,” he said. “The trend is positive over the course of the year.”
And prospects look even better after 2000. “In the short term, obsolete scrap will feel the brunt of price changes, but in the long term DRI and scrap substitutes won’t be competitive at these lower prices,” Higbee said. Moreover, “the demand for and the prices of scrap will increase to 1997 levels.”
In sum, the worst of the consolidation crash is over and the trend will resume, though the valuations will be lower in the future. This time, he noted, the consolidations will come from “reorganizations carried out as the result of bankruptcy and different revenue environments.”
Breaking the Illiteracy Barrier. You repeatedly teach your employees how to work safely, but they’re still having accidents. Why? Perhaps because “you haven’t figured out yet how to get the message across,” said Mike Mattia, ISRI’s director of risk management.
Some of your employees could be “unconscious incompetents”—people who don’t intentionally disregard your safety rules but who ignore them by rote, Mattia said, noting that this is basic human nature taking over. People follow the path of greatest pleasure, comfort, and convenience. “And I can’t think of one safety policy or piece of safety equipment that’s comfortable, convenient, or pleasurable,” he said.
It’s also possible that your safety training is above the educational level of your employees, Mattia said. Most of these training programs are designed for college-educated people. But in industry, up to 60 percent of employees have trouble with basic reading, math, and reasoning skills and up to 40 percent cannot read at all.
The prudent approach is to “assume everyone in the room is illiterate,” Mattia advised. “You can’t depend on literacy skills to get your message across. If your employees don’t understand the message, it’s like it was never there at all.”
To combat this, boil down your safety message to its essence, one that’s “short, easy to understand, and gives your employees just enough information and motivation to change,” Mattia said. Recruit your employees to assist with the task. “When employees see their own message, you’ve gotten their attention and are communicating in a way that everyone understands,” he noted.
Pictures are one effective way to communicate your safety message. For instance, take a lot of slides of your facility to illustrate safety dos and don’ts, then post them for your employees and discuss them at a staff meeting, Mattia said.
(Editor’s note: ReMA offers free half-day seminars on the psychology of safety to chapters. For information, call Mike Mattia, 202/662-8515.)
Protecting Yourself From Employee Lawsuits. When it comes to employment practices liability, “understand that all industries are at risk—and not only large companies,” said Judi Kahn of CNA Commercial Insurance (Chicago).
The fact is that the number of charges of employment discrimination has risen dramatically. And while most cases are found not to have merit, they can still be costly, averaging $20,000 to $250,000, not including the cost to defend, Kahn noted. A settlement out of court can be equally expensive.
To protect your company, know the law regarding employment discrimination and be mindful of race, age, and gender in your hiring and employment practices, Kahn said. Another protective measure is to insure yourself and your company with employment practices liability (EPL) insurance. Such insurance could help a case against your company be dismissed. So, at a cost averaging $3,000 to $3,500 annually, you can get a lot of protection, she said.
When considering EPL insurance, insist on complete risk management and service from legal professionals who have expertise in the field of employment law, Kahn advised. Another form of employment protection is a professional employment organization (PEO), a contract under which employees have more than one employer—the provider of the PEO and the business operator, said Daniel Cacchione of CNA Unisource (Chicago).
Under PEO contracts, the recycler runs the company day-to-day, while the PEO provider handles the administrative details of employment, is responsible for contracted services, and becomes the employer of record. Among the services assumed by the PEO are payroll services, workers’ compensation coverage, and human resources management, with optional services including medical coverage and employee and family assistance programs.
Companies that use PEOs can glean many benefits, Cacchione explained, including less government reporting and paperwork; reduced employee liability; stabilized costs due to quantity purchases; an employee handbook and baseline assessment of employee practices; as well as advice and guidelines on employee discipline and termination.
Surviving Y2K. As many as 40 percent of the 14 million small businesses in the United States haven’t taken any action to address the Y2K issue, and even the federal government doesn’t know how severe the effects might be, said Mike Wendland, a Michigan-based high- tech reporter for NBC television and various radio and print news media outlets.
To address the problem, first make sure your computer systems are updated, including billing and accounting programs and office networks, he advised. Many of the fixes for these items are easy to check yourself, and guidance for particular programs may be available at the manufacturers’ Web sites.
Next, look to your second- and third-tier concerns, such as the preparedness of your suppliers and consumers, power providers, financial institutions, telecommunications, transportation, state and local governments, and overseas accounts, he said.
Finally, make sure you keep full documentation and paper backup of everything important in your computer system, especially invoicing, financial records, and insurance information, Wendland said.
Environmental Technologies to the Rescue. Properly managing storm water, hydraulic fluids, and other liquids at your scrap processing facility will do more than just keep you out of trouble with the EPA, noted Tracy Mattson, ISRI’s director of environmental compliance. Increasingly, good environmental management is being required by suppliers and consumers, financial institutions, and even citizen groups.
Processors can improve their environmental management through three key strategies—source control, best management practices, and structural controls.
Source control is the most cost-effective strategy because it’s designed to keep certain materials from ever entering your facility, said Fred Cornell of Camden Iron & Metal Inc. (Camden, N.J.). At his firm, nine items are never accepted, including radioactive material, explosives, pressurized or closed containers, and scrap containing residue from hazardous wastes or hazardous materials, he said.
Remember to train your drivers as the “first line of defense” to keep prohibited material out of your plant because “once it’s on your truck, it’s very difficult and expensive to send back,” Cornell said. And enforce your source control policies through pricing and downgrades because “people listen to money,” he concluded.
The benefits of on-site best management practices were touted by David Kendziorski of Kendziorski Environmental Services Inc. (Pewaukee, Wis.), who explored storage and handling issues, as well as preventing, cleaning up, and reporting spills. He stressed the need for preventive maintenance, proper labeling, and the fact that outside storage facilities need to have a method of releasing uncontaminated rainwater that gathers around the containment systems.
Place numerous spill kits in visible locations around your facility, including equipment and vehicle maintenance areas, fluid storage areas, loading and unloading docks, and oil scrap storage areas, Kendziorski said. These kits should include items such as commercial absorbents, drip pans, and a broom and shovel. And be sure to properly train the employees who might have to clean up a spill.
For spills that must be reported to federal or local authorities, be prepared to provide regulators with details on the quantity and characteristics of the spilled substance, as well as other information such as the actual or potential impact to the environment or human health, Kendziorski said.
Jay Diebold of MET/Envirogen Inc. (Pewaukee, Wis.) discussed structural best management practices for handling and treating liquids. The structural approach can involve installing source area control methods—such as curbing or containment walls, liners, and sumps—as well as wide area controls such as oil/water separators, sediment/oil trapping structures, and clarifiers with chemical pretreatments.
For cost reasons, it’s best to install such structural methods when a facility is being built, Diebold said. Sumps that cost $1,500 each to install during construction, for instance, can double in cost when you try to retrofit them to an existing site.
Structural mistakes to avoid include installing curbing in an area where dense scrap might fall and using an unlined detention pond at a facility with high pollutant loadings.
Getting Your Insurance Claims Covered. Getting your insurance company to pay for claims is no easy task, especially when those claims are environmental in nature.
But scrap companies can take steps to counteract claims of noncoverage, noted Sam Bearman, an attorney based in Pensacola, Fla., and Steven Dolmanisth, a partner with Anderson, Kill & Olick (Washington, D.C.).
Though “insurance companies love to say no when asked if you’re covered for something,” remember that “the insurance company has a fiduciary responsibility to you,” said Bearman. “It must not look out for its own best economic interest but for yours.”
Just because the insurance carrier says no coverage exists, that doesn’t mean it’s true, he said. For instance, you may be getting that response from a new representative “whose first instinct is to protect the company or who may genuinely believe there’s no coverage,” Bearman noted. “If you think there’s coverage, then don’t let it stop there. Go to an attorney, explain the situation, and tell him or her you want to know if coverage exists.”
Dolmanisth agreed, adding that “the idea behind insurance is to make you whole. If your contract provides coverage, then you should have coverage.”
When a claim is filed against your company, “the first thing to do is contact your insurance company,” said Dolmanisth. “If you wait too long, you may be subject to a late penalty notice.”
In all likelihood, your policy includes comprehensive general liability “which means that for all the liabilities included in the policy, the insurance company will provide you with a defense—such as an attorney—and pay for the costs involved. If you’re found liable, it’ll pay for that as well,” Bearman said, adding, “I don’t know of any policy that’s ever been issued without it.”
Once you’ve notified your insurer, you’ll receive a letter stating receipt of notice and requesting a “long laundry list of documents the company wants, going back maybe 20 or 30 years,” explained Dolmanisth. It’s the insurance company’s responsibility to notify you of coverage or denial within a certain time period, he said. If the insurer fails to do so, then it must provide coverage.
If there’s a question as to whether you’re covered, the insurer must provide you with a defense during the investigation. Insurers will often send claimants a letter stating up to 50 defenses as to why they won’t pay. “We advise companies to respond to every one of them and why they don’t apply,” Dolmanisth said. “A good majority of the defenses won’t apply to you, and there’s a good chance none of them do.” One defense favored by insurers is “known loss and risk,” which he said “doesn’t exist in your policy.”
Another point to consider is whether or not an agent has made a loss-control inspection of your site. “If they were on your site and didn’t tell you about potential problems, that could be a very important issue for you,” noted Dolmanisth. “If they noticed the risks and said nothing or if they implied you were covered for something and you weren’t, they should be responsible for the claim.”
The Importance of Incentives. How can you retain good employees through low-cost and nonmonetary incentives?
For starters, make sure the reward matches the employee’s personal needs and wants, adequately reflects the level of achievement, and is both timely and specific so that everyone knows exactly why the employee is being recognized, said ReMA First Vice President Sam Hummelstein of Hummelstein Iron & Metal Inc. (Jonesboro, Ark.).
Such incentives are necessary because of the current low unemployment rate and the need to compete with other employers to attract and keep the best workers, noted Bob Toth of Annaco Inc. (Akron) and Larry Adelman of Admetco Inc. (Fort Wayne, Ind.). Also, incentives can help you avoid the steep costs of hiring and training new employees to replace those who leave, Adelman said. In addition, recognition efforts help build loyalty between employees and the company, said David Caffee of Montgomery Scrap Corp. (Rockville, Md.).
Don’t overlook the value of informal recognition efforts, such as handwritten thank-you notes to employees, Caffee said. Other recognition efforts include company-sponsored lunches to celebrate all employee birthdays in a particular month, as well as programs that give employees free uniforms after five years with the company, Adelman noted. When giving gifts, Adelman said he prefers to give employees gift certificates so they can choose their own reward.
Nontraditional incentives include offering literacy courses, English as a second language, flex-time, even prepaid telephone calling cards.
Make sure incentives are available to everyone and that the rules for winning a particular prize are clear, Toth advised. Also, avoid giving rewards to the same person or group every time. And remember that recognizing and rewarding an employee aren’t the same thing. While a pat on the back is good, he said, some financial benefit may be more appreciated. You must constantly monitor and adapt your recognition program to keep it effective, Caffee said. Also, be enthusiastic about recognizing employees without overselling the program, and don’t undercut your efforts by hiding them in the middle of a dozen other announcements or activities, he warned.
Turning to more formal incentive efforts, Toth explained how Annaco offers an attendance plan that can boost an employee’s wage 25 cents an hour, as well as a productivity program that can add an extra $1 an hour.
Other methods of retaining good employees include promoting from within and sending them to trade shows or educational seminars.
Tracking Market Trends
As always, the ReMA convention offered an array of spotlights that illuminated the trends in the primary and secondary commodity markets.
Aluminum—Betting on Automotive. Look for Western World surpluses of primary aluminum this year, ranging from 700,000 to more than 900,000 mt, speakers at the aluminum spotlight predicted. Smaller surpluses will follow in 2000 and 2001, totaling about 470,000 and 325,000 mt, respectively, said Parks Dodd of Aluminomics L.L.C. (Atlanta). The market will then shift to a small deficit in 2002 and a “fairly steep” shortfall by 2003.
New facilities in Iceland, Iran, Nigeria, Australia, and Argentina, among others, should result in capacity increases of some 267,000 mt this year and 361,000 mt in 2000, matched against only a 3-percent increase in world consumption of primary aluminum, Dodd noted.
At first, prices will remain steady, with the LME three-month average staying below $1,300 a mt throughout 1999 and 2000, Dodd said. But by 2001, the industry can expect an LME three-month average of $1,382 a mt, climbing to $1,544 in 2002 and $1,753 in 2003, he forecast.
Price recovery will likely be driven by the transportation sector, where overall aluminum consumption is growing worldwide an average of 4 percent a year (6 percent in the United States alone). But don’t look for any cutbacks in production. Prices would have to fall below $1,000 a mt before enough producers would find it advantageous to trim production, Dodd said.
Explaining the drop in aluminum prices that began in August 1997, Dodd pointed not only to the Asian financial crisis but also to the growing influence of commodity investment funds. The drop of 584,000 mt in Asian consumption throughout 1996 and 1997 was enough to push the market from deficit to surplus, he noted. But the funds also played a role. Whereas market fundamentals used to move LME aluminum prices $5 to $10 a day, the current market sees price swings of $100 to $150 a day, he said.
The spotlight also explored the dominance of the global aluminum market by upstream-oriented producers. These upstream producers are increasingly focused on “shareholder value” concerns, which in turn leads to longer-term hedging on the LME and places the downstream segment of the market “under severe margin restraints,” noted Michael Newman of Alusuisse Aluminum USA Inc. (Fair Lawn, N.J.).
Newman also pointed out that secondary aluminum production grew at an “over-proportional” rate of 5.5 percent a year from 1993 to 1997, while primary aluminum only expanded 2.5 percent a year from 1994 to 1998. These diverging growth rates are “a clear sign of shifting importance” of secondary aluminum, especially in the transportation industry, where he predicted secondary aluminum will find greater opportunities than primary aluminum. He was equally pessimistic about primary aluminum’s outlook for packaging, but expressed optimism for its prospects in the electrical and machinery markets.
Low Prices, Surplus Plague Copper. Copper has been laboring under prices at 1987 levels in nominal terms, the result of an increase in mining investment, lower levels of copper usage, and production and refining efficiencies that have decreased the amount of copper used per unit, said James Steel of Refco Inc. (New York City).
Though world production of refined copper rose 2.7 percent to 13.65 million mt last year, consumption rose only 1.1 percent to 13.13 million mt, creating a surplus. In the first quarter of 1999, in fact, world copper production was up 6.5 percent, while demand was up only 1.1 percent, resulting in a surplus of 180,000 mt, Steel said. Without radical cutbacks, the year could end with a surplus of 300,000 to 400,000 mt.
Announced cutbacks are insufficient to rebalance the market, though they’re helping prevent an extreme surplus. Combined exchange stocks were around 839,000 mt in April—531,000 mt above the midyear level in 1998, said Joseph Robertson Jr. of MG Metal & Commodity Corp. (New York City).
While the U.S. economy is still strong, predictions about copper demand may be “overly optimistic,” Steel said, adding that it may be difficult for consumption to rise even 1 percent this year.
In Europe, Germany and Italy—which represent 50 percent of European copper demand—are on the verge of recession. Copper demand there could grow less than 2 percent, with only the consumer goods and automotive sectors showing strong growth, Steel said.
In Asia, copper demand is improving, especially among Southeast Asian nations and South Korea, but there’s no sign of recovery in Japanese consumption. Though China has been buying copper this year, it isn’t likely to exceed last year’s levels, Robertson said. The rest of Asia, like much of Europe, is purchasing less copper on contract and more on a spot basis.
While hopes remain high that producers will cut back further, the reality may be different. As Robertson noted, one way for producers to achieve needed cost cuts is to increase production and, in all likelihood, such cost cutting will come before production cutbacks.
A price rally isn’t expected unless producers take more action. According to Steel, copper could fall to around 60 cents a pound before cuts come to the rescue. “It shouldn’t surprise anyone if the market hasn’t yet hit bottom,” Robertson said, stating, “Serious cuts are necessary.” But even if more cuts are made, it’ll be difficult for copper to move beyond 72 cents, Steel maintained.
Ferrous Bottoms Out. U.S. steel consumption hit a record 140 million net tons in 1998, noted Jamie Held of Metal Management Inc. (Houston). Even with imports, there was a statistical shortage of flat-rolled steel—“until the bottom fell out.”
Problems around the world and the strong domestic economy made the United States a target for steel imports, which rose from 30 million tons in 1997 to 41 million tons in 1998. “By the time the steel industry saw the avalanche of imports, it was too late,” Held said. By the fourth quarter, mills had basically stopped buying scrap and cut production drastically. Operating rates dipped below 75 percent from September to December and ferrous scrap lost 50 percent of its value from January to December, he noted.
Though imports are slowing, prices are still low. However, Robert Winters of Bear Stearns & Co. Inc. (New York City) maintained that “prices have bottomed out, and now some well-publicized price increases have been announced.”
A major factor behind the slowing of imports is the growing number of antidumping cases. While the cases may be helping the domestic market, other countries are imposing their own antidumping rules. “I think this is a worrisome trend globally for the industry and the global economy,” Winters said. If the world economic situation is going to improve, it’s in the best interest of all countries for borders not to be closed.
Turning to the ferrous scrap market, Winters noted that prices remain depressed despite a rally at the end of 1998. “The collapse of the export markets has been the key negative driver of this price trend,” he said. Other factors include competition from alternative iron units, which will continue to be a factor.
Among the developments to monitor, Winters advised, are possible strikes in the auto and steel industries, economic developments in major overseas markets, ITC decisions on steel dumping cases, strategic consolidation in the steel industry, and more joint venture projects to spread risk.
For the balance of 1999, the outlook is relatively good, with this year’s forecast for U.S. steel consumption at approximately 136 million tons, Held said. Also, steel imports are expected to decrease to 30 million tons. Plus, mill operating rates are at 83 percent and scrap prices are starting to rebound, he said, asserting that “the market has bottomed and the third and fourth quarter will show moderate growth.”
Lead Slips Into Surplus. On the plus side, world lead consumption was 5.2 million mt in 1998—the third straight year that consumption topped 5 million mt, reported Steve Brown of U.S. Zinc Corp. (Houston).
On the downside, lead’s deficit in 1997 became a 34,000-mt surplus in 1998. While Western World demand exceeded production, exports from Eastern European countries—especially the former Soviet Union—more than filled that gap, Brown said.
In the United States, strong domestic demand for automotive replacement batteries helped push up apparent lead consumption 1.7 percent, he noted. U.S. primary lead production fell about 1 percent last year, while the amount of lead recovered from scrap remained virtually unchanged.
Regarding prices, lead showed little volatility in 1998 compared with other base metals, with LME lead trading in the mid-20s-cents-a-pound range most of the year, Brown said.
Recycled lead accounted for nearly 67 percent of worldwide production, but only 51 percent of European production, said Jost-Hinrich Stachow of Metallhandel GmbH (Goslar, Germany). While the global lead recycling rate increased 4 percent over the past five years, the European rate rose only half as much, he said. Basel Convention restrictions are a chief cause of Europe’s lagging lead recovery, Stachow explained, noting that even some trade within European Union countries is hindered. These rules have “turned a metallic raw material into a waste like garbage.”
Zinc’s Year of Stability. While Western World zinc consumption was stable in 1998, increasing marginally to 6.4 million mt, supply decreased slightly to 5.7 million mt due primarily to lower zinc exports from China, Brown said. Zinc prices—which hovered in the mid-40s-cents-a-pound range last year—showed little volatility, though the annual average was lower than in 1997, he reported.
In the United States, apparent zinc consumption enjoyed a positive year, rising 3.3 percent over 1997’s 1.4 million tons. This consumption increase was driven by strong demand from the galvanizing sector as well as increased shipments to brass mills and zinc die casters, Brown said.
Secondary zinc accounted for 1.9 million mt, or roughly 30 percent, of zinc consumed in 1998, said Stachow. In Europe, recycled zinc totaled 840,000 mt, or nearly 32 percent of the 2.7 million mt of production in 1998 and 2.6 million mt of consumption. As usual, most zinc was used in galvanized steel, with that sector accounting for 48 percent of European consumption, he noted. The brass and bronze industry consumed 18.5 percent, zinc-based alloys used 13.4 percent, and the remainder was divided among numerous uses, Stachow reported.
Basel Convention restrictions on exporting zinc have essentially eliminated previous markets such as India, leading Stachow to describe European secondary zinc as only a “partial market.” And even this partial market will shrink further in the near future, he predicted.
Nickel Will Shine Again. Though nickel prices dropped 31 percent in 1998 to an 11-year low, the metal seems to be reviving and its long-term outlook is “much brighter than conventional wisdom would have us believe,” said John Smillie of Falconbridge Ltd. (Toronto). Nickel’s decline was largely due to the Asian economic crisis. Not only was Asia the world’s largest nickel consumer, but most of the metal’s anticipated growth lay in Asia, so the ripple effects of the crisis there were felt most heavily in nickel prices, Smillie noted.
Though 1999 is shaping up to be “a second year of below-trend growth,” the “underlying demand for nickel is strong,” he said, predicting that “2000 will be a strong year for nickel demand,” potentially growing 8 percent over 1999. As for the anticipated growth of pressure acid leach (PAL) technology, which will supposedly cut claimed cash costs in half, the jury is still out on whether these savings will be realized, said Smillie and Doug Upton of HSBC Securities (London).
“The technology is viable,” Upton said, “but its final cost structure won’t be an enormous improvement on that of existing producers, whose costs continue to fall.” Currently, only three mines—all in Australia—are using the technology.
One advantage of the PAL technology is that it reportedly cuts the time to get a traditional mine up and running from 10 years to five, he said. Capital costs on current PAL projects, however, “are generally higher than original estimates” and “delays and problems in commissioning point to risks in achieving targeted throughput levels,” Upton noted.
While PAL technology is becoming the technology of choice, “these operations won’t prove the industry revolution originally anticipated,” he said. “The industry can’t be supported by a nickel price consistency below $2.50 a pound.”
Nonmetallics Take Center Stage
For the first time, one day of the ReMA convention was devoted to the interests of paper and other nonmetallic recyclers, with workshops and events geared to their commodity issues.
Paper Ponders a Rebound. Paper mills are currently showing “reasonable demand,” with the move toward electronic commerce creating more demand for packing materials and boxes to ship goods purchased over the Internet, noted Phil Alpert of National Fiber Supply Co. (Chicago). Supply and demand are in balance, he said, adding that he sees “nothing on the horizon that could dramatically change supply and demand in the coming year.”
While industry participants may complain of low prices in the current market, today’s prices are similar in all grades to the prices in 1993 and early 1994—before the price spike of 1995, noted John Ockenfels of City Carton Co. Inc. (Iowa City, Iowa).While prices may not be ideal, material is moving—and that’s most important, he said. Mills are reporting strong demand, with many taking only scheduled or required downtime this year, which spells good news for the continued movement of scrap paper.
In addition to keeping the current low prices in perspective, recyclers should focus on the management of their companies, examine how they run their businesses, and find ways to work smarter in any market conditions. “We must provide quality to our customers and continue to focus on service,” Ockenfels said.
After the turn of the millennium, paper processors can expect prices to fluctuate more rapidly, more dramatically, and more often, Alpert predicted. One reason will be the reduced number of players in the industry, so that the actions of one will have a more pronounced effect on the market. Even so, “we’re in a mature industry and have shown the ability to cope. We will survive,” Alpert said.
A Recyclable Coating. Fortifiber Corp. (Hanahan, S.C.) has developed a new aqueous-based barrier coating for both virgin and recycled paper that protects the paper against moisture and condensation, water, grease, oils, and gases such as oxygen, said Gilbert Copeland.
The coating is being used on corrugated boxes, cartons, fiber drums, multi-wall bags, paper cups, other food-contact applications, and more, he noted.
While the material looks similar to PE-coated papers that have largely been disposed of in landfills, paper with this new coating is totally recyclable and easily repulpable when subjected to warm water and agitation—the conditions of a hydrapulper, Copeland said.
Achieving the Paper Grade. Teamwork is the key to achieving the grade in scrap paper, said Ralph Simon of Southeast Paper Recycling Co. (Marietta, Ga.), Tom Squires of Jefferson Smurfit Corp. (Jacksonville, Fla.), and Roy Geigel of Fox River Fiber Co. (De Pere, Wis.).
Together, they addressed topics such as mill requirements for paper and paperboard, material quality and contaminant controls, and the importance of ongoing communication between mills, packers, and brokers.
For Southeast Paper, a recycled newsprint producer, the key element to achieving a cohesive quality management program was the decision to become ISO 9002-certified. A company operating according to ISO 9002 “will know how to manage its business better” in part because of the standard’s requirement for consistent written policies, Simon said.
Commitment is a mainstay for Southeast Paper, he noted. This pledge has allowed for enhanced teamwork between departments and company divisions as well as with its scrap paper suppliers. To emphasize the strength of the mill-supplier bond, he noted that the company installed a $6-million sort center in its warehouse. “Every once in a while, suppliers will make a mistake, but because we’re a team we’ll resort that paper for them,” he said.
The company sets a 2.5-percent limit on contaminants and keeps its suppliers up-to-date on how they’re faring through a daily fax report “identifying every item, the overall level of contamination, and so forth because by giving them feedback we can fix the problems together,” Simon said.
Squires also emphasized the need for a partnership between mills and their suppliers, especially on the issues of contaminants (particularly medical waste and wax-coated paperboard), moisture, and flexible plastics. Scrap suppliers, he said, would start seeing more charge-backs for moisture contamination as new technologies make it easier to test for it.
Processors should also learn where their paper is going. “If it’s being diverted to another mill, then you’ll want to know that as well so you can meet that mill’s specs,” Squires said.
For Fox River Fiber, a sorted office paper processor, the mill-supplier alliance is a three-part relationship involving the office building from which the paper comes, the processor, and the consumer, Geigel notes. Simplicity is essential to keeping the team running smoothly, he said, advising processors to stick to about three grades and boil down the sorting process into three levels: what it ideally will be, what contaminants it can have a little bit of, and what contaminants can’t be present at all.
Promoting Plastic Recycling. “We’re very concerned about the mixing bowl of plastics in plastic bottles and what this could mean for the recycling process,” said Robin Cotchan of the Association of Postconsumer Plastic Recyclers (APR) (Washington, D.C.).
APR members, who recycle whole plastic bottles, are especially concerned about the new PET beer bottles that reportedly feature barriers and coatings made of some unusual polymers. To help ensure that these and other plastic bottles are recyclable in the long term, APR has established a Design for Recyclability program that includes specific guidelines for bottle manufacturers. For each resin, Cotchan said, the association has established guidelines that cover the type of bottle closure, color, labels and adhesives, decoration, and multilayers and coatings.
Another APR program, Champions for Change, invites manufacturers to test the recyclability of new containers in APR member recycling facilities. This enables manufacturers to create recyclable packages and the recycling facility to learn precisely how to deal with the package.
Fowler Honored For ‘Outstanding’ Career
Jim Fowler, publisher and editorial director of Scrap, received a standing ovation and a plaque at the keynote breakfast in honor of his 30 years of service to ReMA and the Institute of Scrap Iron and Steel (ISIS), one of its predecessors.
Fowler, who plans to retire at the end of 1999, began his career with ISIS in 1969 as director of public relations, later also serving as its assistant executive director. When ISIS merged with the National Association of Recycling Industries in 1987, they appointed Fowler as publisher and editorial director of Scrap.
“Jim’s accomplishments in this position have been outstanding and deserve our commendation and our appreciation because Scrap has enhanced the overall regard in which our association and industry are held, while at the same time becoming a journalistic leader,” said ReMA President Shelley Padnos.
In his 10 years with Scrap, Fowler has doubled its annual ad revenue from $600,000 to $1.25 million. Under his leadership, Scrap has also won numerous awards for its editorial content, graphics, media kit, direct mail pieces, editorial calendar, and overall excellence.
In her dedication, Padnos emphasized Fowler’s integrity, noting that “when he gives you his word, you know he’s giving you the truth and he’ll stand by his promises.”
Though ReMA will surely miss his “reliable and steady hand at the helm of Scrap in the future,” she spoke for all ReMA members in wishing him a well-deserved retirement, spending time with his wife Carolyn, their four daughters, and eight grandchildren.
A Call to Get Involved
Bob Dole can attest to the benefits of grass-roots lobbying. After all, in his decades-long political career, he saw grass-roots lobbying firsthand while serving as Senate majority leader, a representative and senator from Kansas, and 1996 presidential contender.
“Politics is not a spectator sport,” he said at ISRI’s keynote breakfast. “The one way to change whatever you don’t like is to get involved. You can’t complain about the government and your elected representatives unless you’re involved.”
One telephone call, one letter, one personal visit with your elected representatives in Congress can make a difference, Dole stated. “Most of the men and women in Congress, regardless of their party, will listen to their constituents,” he said, adding that “the more contact I had with the people in my state of Kansas, the better representative and senator I was.” Also, he said, most members of Congress are especially sympathetic to the concerns and problems of small-to-medium-sized businesses such as those in the scrap industry.
And don’t be disappointed if you don’t talk directly to the representative, Dole said. Sometimes talking with his or her staff can be even better because they may have more in-depth knowledge of bills and issues.
Tipping his hat to ISRI, Dole pointed to the “Operation Breakout” strategy from last year as “an outstanding grass roots effort.” Though that effort ultimately fell short, he encouraged processors to take heart and “start over.” This time, however, “make sure that the people who opposed your efforts last time are surrounded by supporters of your bill so it doesn’t happen again,” he suggested.
Understanding the Futures Market
The futures market is a valuable tool for predicting where commodity prices are heading, said Tony Wolfskill of Merrill Lynch & Co. (New York City).
If you want to know whether the cash price for aluminum or copper will be heading up or down, watch their futures prices. “Where the futures market goes, the cash market follows,” he said.
Increasingly, the futures market is a managed industry characterized by large funds that trade electronically rather than in the traditional “pits” of the exchange trading floors, Wolfskill said. In 1988, managed funds controlled less than $5 billion. By 1997, these funds managed roughly $35 billion—and the actual amount could be as much as $350 billion given that investors have to put down only 10 percent of the total value of their futures contract, he noted.
As the players grow in size, the chance grows that “one person’s decision to buy or sell will make a huge ripple in the market,” Wolfskill observed. And that’s only going to intensify now that traditionally stock-oriented mutual funds and pension funds are beginning to consider commodity futures as an asset class along with equities and debt, he said.
As much as 95 percent of the trading done by managed futures funds is based on technical analysis, which primarily involves price-based charts, said Wolfskill. Risk management is the key reason for this technical preference. “Fundamentals analysis is so slow about changing its mind from bullish to bearish that it gets killed trading futures,” he said. But technical analysis is ideal for the rapidly changing prices of the futures market.
He warned potential players, however, that the futures market is essentially a “zero-sum” game in which every dollar made by one person is lost by another. This is another reason why the big funds are gaining influence, since a cash-rich fund can afford to ride out the choppy ups-and-downs of the futures market.
Large as these funds are, they don’t create trends in the marketplace, Wolfskill asserted. The fundamentals of supply and demand create the trends, which the funds then simply follow and try to perpetuate. That helps make the funds’ decisions predictable and useful.
Wolfskill pointed to the “moving averages” as a key technical tool used by funds to decide whether to buy or sell. These averages, which record the average price of a commodity for a set period of time that keeps moving forward day by day, help identify the market’s trends. The funds usually attempt to “defend” the moving averages by buying when the current price starts to drop below the average and selling when it rises above. Knowing this, a wise person can follow the averages, predict what the funds will do, and then make a better decision on buying and selling, as well as how to do either aggressively, Wolfskill concluded.
Lessons of a Survivor
In June 1995, Air Force pilot Scott O’Grady was flying over the northwest corner of Bosnia, enforcing the no-fly zone. Suddenly, a surface-to-air missile shattered his F-16, forcing him to eject and parachute into hostile territory.
Thus began his six-day “survival grind” during which he was “hunted like an animal,” O’Grady said. He had no food, only a few packets of water, and 15 hours of battery life in his radio.
Faced with this life-threatening situation, he recalled advice he’d once received: When in trouble, take a deep breath and think—use common sense. He also decided that negative thinking wouldn’t get him home. Only a positive attitude would keep him alive.
Throughout the next six days, he evaded the enemy by traveling at night and resting in the day. His hunger drove him to eat ants. He lost 25 pounds. And he prayed 24 hours a day.
Finally, he made radio contact with a search plane. Within 5 ½ hours, a Marine helicopter rescue squad swooped in under enemy fire and saved him.
Ironically, O’Grady said this ordeal was “one of the most positive experiences I’ve ever had in my life.” It taught him who he was inside and helped him clarify what’s important in his life. “I learned that the three greatest points of inspiration for me are the three greatest priorities I have in my life”—faith, love of family, and love of country.
The experience also taught him that:
- life is a precious gift and it’s critical to seize the day and enjoy it for what it has to offer. “You have to be happy right now,” he said;
- you have to maintain a sense of humor no matter what;
- you should tell people how much you care about them because you may not get another chance; and
- “a hero is somebody who helps somebody else,” O’Grady said. While the media glorified him as a hero, he said the real heroes were the Marines who risked their lives to rescue him. However, “there are so many heroes in everyday life,” he said, pointing to teachers, police, and parents.
Overcoming the Six ‘False Dichotomies’
Stepping behind the podium once again, Mike McCurry—former White House press secretary and assistant to President Clinton—discussed six juxtapositions that provide “some context for understanding life in Washington and our political culture.” Then he reviewed how we can transcend these “false dichotomies.”
Republican vs. Democrat. Though 30 percent of voters say they’re conservatives and 19 percent say they’re liberals, more than half consider themselves moderates. “Our politics in America are defined by that group in the middle and that gives us some ways to solve problems,” McCurry said. “The danger is that so often our politics don’t find their way to that middle of the road.”
Information vs. Entertainment. Today’s news organizations are too obsessed with entertaining and making a profit before informing, McCurry said. In this era of too much information and too little understanding, the media needs to put information in context to promote enlightenment.
Internationalism vs. Isolationism. Though some Americans would like the United States to withdraw from the world, “the truth is that this world has collapsed in on itself and is totally interdependent,” McCurry said. “There’s no division anymore between foreign and domestic.” Instead of retreating, America needs to be a leader in shaping the new world economy, he stated.
Pessimism vs. Optimism. In politics and the media, issues are usually portrayed as black or white, even though “the truth lies somewhere in between,” McCurry said. “Our politics need to come to a place where we’re more comfortable being in the middle.”
Government Control vs. Free Markets. Government regulation and private enterprise aren’t an either/or proposition and they aren’t mutually exclusive. “We’re going to have both,” McCurry said, asserting that the era of big government is over.
Opinion vs. Fact. “There’s a difference between public information and spin,” McCurry said, maintaining that people need the facts to be able to make up their minds. “It’s important for us to live in a world in which there’s credibility, candor, truth, accuracy, and reliability. It’s a way for us to shine a spotlight on events and have a greater understanding so that this world, which is already complicated enough, can be easier to handle.”
—Kent Kiser, Robert L. Reid, Kristina Rundquist, and Eileen Zagone
Though ReMA held its 12th annual convention and exposition in Orlando—home of all things Disney—the event was no Mickey Mouse affair.