California Dreamin'

Last October, when the Bureau of International Recycling (BIR) (Brussels) met in Prague, global scrap markets were rebounding and millennium fever—as well as Y2K phobia—was in the air.
   As it turned out, Y2K was a big bust. Fortunately, world scrap markets didn’t go bust with it. The momentum of 1999 carried into 2000, bringing healthy demand to virtually all scrap sectors. This positive scenario shone through in the market reports at BIR’s San Francisco convention in May.
   As always, there were a few dark clouds on the horizon—such as rising export freight rates and fuel costs, supply concerns, currency discrepancies, legislative directives, and other worries. Plus, scrap traders sounded off about the potential effects of e-commerce on their markets.
   What will happen? The following reports offer some clues.

Nonferrous Rolls Along
World nonferrous markets are stronger than last fall thanks to generally higher prices, which have “increased the flow of metal as well as margins,” said Robert Stein of Louis Padnos Iron & Metal Co. (Holland, Mich.).
   Big news in the United States is the pending closure of Southwire Co., the last domestic consumer of smelter grades of copper scrap. The ramifications of this closure “are significant in American and international markets,” he said. In general, though, “copper scrap supply in the country is appropriate to current demand.”
   The U.S. aluminum market has been focused, in part, on the merger of Alcoa Inc. and Reynolds Metals Co., which is being challenged in the courts, Stein said. On the scrap side, primary consumers have been notable buyers, while secondaries have been tentative in an effort to prevent their product inventories from building. This has resulted in “a sideways movement in scrap prices,” he noted.
   The Pacific Rim and Asia “continue to see steady demand for all secondary metals in the face of the gradual improvement in their economies,” Stein stated. Though copper, copper alloy, and aluminum scrap have been in good demand, there’s been a noted increase in the supply of aluminum scrap and ingot from the C.I.S. despite lower prices, he said. In the lead and zinc markets, increased primary production in the region has depressed scrap prices, he said.
   U.K. secondaries continue to consolidate and rationalize, somewhat limiting markets for scrap and trimming the number of merchants, Stein said. The pound’s strength has made exports difficult, though excess nonferrous scrap is finding its way overseas, primarily to the Far Eastern dollar-based markets.
   On continental Europe, the low value and volatility of the euro against the dollar has been a dominant factor in nonferrous trade, Stein said. The virtual cessation of imports of Russian copper and brass scrap is hurting some European countries, though Russian aluminum ingot and scrap continue to flow.
   In France, the bankruptcy of a secondary aluminum smelter, continued pressure on ingot prices, and strong overseas influences on scrap values are of concern. Germany, meanwhile, enjoys solid demand in the automotive and export markets, though there are worries over potential environmental and national taxes, as well as some guidelines from the European Parliament, Stein said.

Nickel, Stainless Have a Heyday
The nickel market ended 1999 with a 50,000-mt deficit, and it could come up short this year by 20,000 mt, even with a projected 5-percent increase in nickel consumption and 9-percent increase in supply, said Jim Lennon of Macquarie Bank Group (London).
   Booming stainless steel production has been driving nickel demand, while record-low inventories and supply concerns have been bolstering nickel prices, he noted. Consumption of nickel-bearing scrap could rise 13 percent this year, while use of primary nickel could grow 6 percent, Lennon said.
   Despite this good news, the mid-term market outlook is bearish, he said. If there’s no strike at Falconbridge’s Sudbury, Ontario, plant, nickel could face severe selling pressure later this year. Also, stainless steel production has peaked and will grow slower going forward. Plus, there’s been an acceleration in primary nickel production. These market dynamics could push nickel toward $3 a pound, probably in first half of next year, Lennon forecast.
   “We’re in the stratosphere of the nickel market as far as price is concerned, and we have the lowest inventories virtually ever,” he said. “I think the only way the price can really go from here is downwards.”
   In 2001, nickel consumption is forecast to grow about 3 percent while primary production could rise more than 6 percent, pushing the market into a 13,000-mt surplus, Lennon reported. Consumption of nickel-bearing scrap could grow only 3 percent while use of primary nickel could rise 4 percent, he said.
   In the longer term, however, “the outlook is extremely attractive for the nickel market,” Lennon asserted.
   In the United States, stainless steel production reached 2.2 million mt in 1999, with austenitic stainless accounting for 1.3 million mt, said BIR President Barry Hunter of Keywell L.L.C. (Elizabeth, N.J.). The secondary nickel share of that production was about 65 percent.
   In first-quarter 2000, U.S. stainless production was about 6 percent higher—or 34,000 mt—than the same period last year, with austenitic alone increasing 17 percent, Hunter said.
   U.S. demand has been able to absorb both domestic stainless production as well as high imports of stainless bars, he noted, asserting that “reports from long products producers are very bullish.”
   Exports of U.S. stainless scrap in the first quarter totaled 95,000 mt—25 percent more than first-quarter 1999 exports—with Asia purchasing 74,000 mt and Europe buying 6,000 mt, Hunter said. This tepid demand from Europe has made scrap more available to U.S. mills on the East Coast.
   In the longer term, though, continued aggressive stainless scrap exports to Asia from the United States and Europe could affect global prices and scrap availability.
   In Europe, stainless steel production has been at “top levels,” said Walter Riedweg of Leila A.G. (Zurich). In turn, scrap demand has increased, with mills using 40 to 70 percent scrap in their melts. Despite substantial exports of stainless scrap to Asia, Europe has enough scrap to meet its domestic demand thanks to greater scrap generation and increased imports from Eastern European countries, he noted. The scrap supply could become tight, however, if those countries impose export licenses on scrap or if there are supply disruptions in primary nickel, Riedweg said.
   Japan’s stainless steel production declined to 2.64 million mt in 1999—a low for the 1990s, according to a report by Sadao Taya of Shinsei Co. Ltd. (Osaka, Japan). On the scrap side, Japan imported 183,000 mt of stainless scrap in 1999 and 59,000 mt in the first quarter of 2000. After hitting bottom in May 1999, scrap prices climbed steadily through this April, only to fall back in May, though 400 Series scrap has remained stable, Taya reported.

Supply Issues Hamper Ferrous
World steel production is increasing again after the crisis of 1998, and the proportion of steel produced in electric-arc furnaces is rising, said Mark Priestman of Mayer Parry Recycling Ltd. (Kent, England).
   European steel production is also increasing, except in the United Kingdom, which is hampered by the strength of the pound, Priestman said. European mills consumed 80 million mt of ferrous scrap in 1999, and this year they’ll consume closer to their capacity of 88 million mt.
   But why haven’t scrap prices been stronger? “The answer rests with the supply of scrap,” Priestman stated. The supply of scrap in Europe has caught up with domestic demand, and prices have subsequently leveled out. While there could be a “minor fallback in prices” this summer, “any fallback can only be short term,” he asserted, concluding that the European scrap industry “is set for a good trading period over the next six months, with healthy volumes and margins.”
   Similarly, despite high U.S. steel production, U.S. ferrous scrap prices haven’t increased, noted Robert Philip of Schnitzer Steel Industries Inc. (Portland, Ore.). Why? Several reasons.
   For one, there’s abundant scrap in the United States due to a marked increase in ferrous scrap imports, Philip said. Plus, there’s been a drop in U.S. ferrous exports, with the United States—historically the world’s largest scrap exporter—falling to second or third place, he noted. Also, steel mills have plentiful feedstock options, including DRI, HBI, and pig iron.
   The U.S. market will see the construction sector remain strong, bar mills increase their production, and ferrous scrap prices recover slowly, Philip said. Also, there’ll be a softening in export scrap prices, with Europe, Russia, the Ukraine, South Africa, and Australia remaining tough competitors to U.S. ferrous scrap. South Korea will stay a major market, while construction projects in China could boost demand there. And although mills will continue to use DRI, HBI, and pig iron, lower ferrous scrap prices will reduce the long-term interest in investing in facilities that manufacture such scrap complements, Philip said.
   Asian economies have been gradually returning to their pre-crisis levels, with more countries registering positive growth rates, said Kumar Radhakrishnan of Simsmetal Ltd. (Sydney, Australia). The Japanese steel industry has rebounded strongly, thanks to revived demand both at home and in neighboring Asian countries. This demand has reduced Japan’s exports of ferrous scrap and made it a net importer of pig iron.
   South Korea’s demand for scrap and pig iron has been at “expected levels,” Radhakrishnan noted. While its gross domestic product is forecast to grow 8 percent this year, there are concerns it could suffer an economic setback due to its widening current account deficit and dwindling trade surplus.
   Southeast Asian countries have returned as regular importers, and “this trend is expected to continue as production increases in line with demand for finished products,” he reported.
   China has begun a major rationalization of its steel industry, modernizing mills and producing higher-value products to compete in the World Trade Organization, Radhakrishnan said. As part of this, the country’s steel output through electric-arc furnaces is rapidly increasing.
   But ferrous scrap prices in Asia have been trading sideways due to higher generation and collection of scrap in traditional exporting countries, Radhakrishnan said.
   Russia, meanwhile, collected 16.9 million mt of ferrous scrap in 1999, with 9 million mt consumed domestically and 7.9 million mt exported, said Igor Kuzmin of MAIR (Moscow). In first-quarter 2000, Russia’s scrap collections totaled 3 million mt, with 1.8 million mt consumed internally and 1.2 million mt exported. For the year, ferrous scrap recovery could reach 16 million mt, with about 6 million mt exported, he said.
   The Ukraine recovered 8.2 million mt in 1999, exporting 4.9 million mt, with forecasts calling for collections of 8.5 million mt in 2000 but exports possibly limited to 2.7 million mt, Kuzmin noted.

Feeding Asia’s Paper Appetite
In 2000, global paper recovery will reach 147 million mt, with North America and Asia/Australia each collecting about 49 million mt, followed by Europe, Latin America, and Africa, said Joseph Merante of Linden Trading Co. Inc. (Holmdel, N.J.).
   Global consumption of scrap paper will also total 147 million mt, with Asia/Australia using 58 million mt, North America and Europe each consuming 41 million mt, followed by Latin America and Africa, he reported.
   The United States exports more than 4 million mt of recovered paper to Asia annually, while Europe ships about 3 million mt to that region. In all, Asia/Australia consumes about 39 percent of global recovered paper, though it will claim 44 percent by 2005, Merante noted.
   In the future, North America and Europe will continue to export larger quantities of scrap paper to Asia. The question is where new supplies of recovered fiber will come from and at what cost? Merante asked.
   Turning to country reports, U.S. scrap paper exports through March were, at 2.3 million tons, 13 percent ahead of last year, said Steve Vento of Recycled Fibers International (Sunrise, Fla.). Since May, however, the market has faced a severe shortage of containers at East Coast ports, as well as freight rate increases and additional fuel charges on container shipments, he said.
   Until recently, both U.S. and export demand had been stable for ONP, OCC, and mixed paper, Vento reported. Though many domestic containerboard mills took downtime in April, “it hardly affected corrugated prices because of export orders,” he said. Additional downtime in June, however, could weaken OCC prices, especially if the container shortage continues and export orders soften.
   Prices of wood-free deinking grades decreased dramatically in April and May, with another price drop expected in June, Vento said. Lower generation of these grades in July and August could help stabilize this market. Demand for pulp subs, meanwhile, continues to be strong.
   As for Europe, one speaker called it an “exceptionally good market situation for recovered paper.” In general, the continent is seeing strong exports to Asia, solid domestic demand for virtually all grades, some shortages of fiber, plus low mill inventories.
   In the United Kingdom, there has been sustained demand for all grades on both domestic and export markets, said Paper Division President Gerry West of Severnside Waste Paper Ltd. (Cardiff, Wales). U.K. paper production was 1.5 percent higher in the first quarter, and mill order books remain solid. On the scrap side, “mill stocks are at their lowest levels and many are importing tonnage from near Europe at prices much higher than domestic levels”—an effort to limit domestic prices, he noted. In response, U.K. packers have turned to exports, which could set “an all-time record level in 2000,” West said. Though freight rates to Asia have increased, a minor price adjustment will keep deep-sea exports continuing “at a volume that will keep European mills short of stock,” he said. This shortage could kick-start collection of “uneconomic tonnage where some of the costs may be covered by a reasonable market value,” West stated.

Solving Plastic Recycling Puzzles
Though engineering plastics are one of the most valuable and expensive materials in durable goods such as automobiles, computers, electronics, and appliances, only a fraction of them are recycled.
   Why? For one, engineering plastics are relatively new commodities, so they lack the recycling momentum of other materials. Also, recovering them is difficult because there are numerous types and grades of such plastics, and separating the plastics from con-taminants can be challenging, said Mike Biddle of MBA Polymers Inc. (Richmond, Calif.), which has developed a mechanical system to recover engineering plastics.
   In MBA Polymers’ proprietary process, incoming plastics pass through at least three size-reduction steps. The processed material is then run through magnets, eddy-current separators, and other equipment to remove ferrous and nonferrous metals. An air system extracts light contaminants such as fluff, foam, fabric, and labels. The remaining mixed stream of plastic and rubber is sorted into different types of plastic, then conveyed for final blending, polishing, and color separation. The sorted material is then melt-processed into pellets, which MBA Polymers sells at 50 to 80 percent the price of virgin resin.
   Cyntech Technologies Inc. (Roswell, Ga.) has developed a different type of technology to transform tires, unsegregated plastics (including automobile shredder residue), and used carpet into petrochemical feedstocks, fuels, electric power, and other products, explained Isaiah Yancy. The firm’s ThermReTec plants are designed to operate in three phases, with phase one focusing on scrap tires, phase-two handling unsegregated plastics, and phase three recycling used carpet.
   The typical output of a phase-one plant would be methanol, 50 percent; gas oil, 35 percent; liquid petroleum gas mix, 10 percent; and process gas, 5 percent, Yancy noted. All carbon black generated would be processed into methanol. The plants can produce electrical power at each phase in varying amounts from 30 to 90 megawatts.
   The plants earn income by charging tipping fees to accept the raw materials and selling their end products, Yancy said.
   Cyntech plans to break ground on its first plant this fall in Chambers County, Texas. Its second plant could be sited in Eisenhuttenstadt, Germany.

Tire Recycling In the U.S.A.
Of the 270 million scrap tires generated in the United States in 1998, about 178 million, or 66 percent, were reused or recycled, said John Serumgard of the Scrap Tire Management Council (Washington, D.C.).
   The majority of U.S. scrap tires—114 million—were consumed as tire-derived fuel. Civil engineering applications used 20 million scrap tires in such niches as subgrade fill and insulation, backfill for walls and bridge abutments, breakwaters and artificial reefs, and septic system drain fields, Serumgard explained.
   Another 15 million scrap tires were processed into ground rubber for use in rubber-modified asphalt, new tires, automotive parts, and other products. Cut, stamped, and punched rubber products reused 8 million tires, he noted. Agricultural and other applications consumed another 5.5 million tires, while 15 million were exported, Serumgard said.
   In the future, fuel will continue to be the largest market for scrap tires, though civil engineering and ground rubber markets will expand more rapidly, he forecast. •

Global Industry, Global Problems
Recycling is a global business in which “the movement of scrap anywhere on the globe directly impacts markets all over the globe,” asserted ReMA Chairperson Sam Hummelstein of Hummelstein Iron & Metal Inc. (Jonesboro, Ark.) at the general assembly. The scrap industry, in short, has “entered a whole new era of global commerce, global issues, and global challenges.”
   The challenge for associations such as ReMA and BIR, therefore, is to provide global leadership, he stated.
One international problem being addressed by ReMA and BIR is the “worldwide lack of understanding of the difference between scrap and waste,” Hummelstein said. ReMA has won victories in this area, most notably securing passage of the Superfund Recycling Equity Act, which gives scrap recyclers relief from Superfund liability for legitimate recycling transactions.
   ReMA is also fighting the scrap-versus-waste issue on the international front in the Basel Convention and the waste management policy of the Organization for Economic Cooperation and Development, he noted.
   Other global issues for the associations include addressing the threat of radioactive scrap and ensuring the use of commonly accepted scrap specifications, Hummelstein said.

Covering the Nonferrous Spectrum
The nonferrous division meeting featured talks by three nonferrous executives, who covered business survival strategies, the zinc market, and scrap concerns for brass mills.
   Drawing from his experiences as a U.S. pilot in Vietnam, Joseph Byers of Wabash Alloys L.L.C. (Wabash, Ind.) offered advice on how scrap companies can survive in the future. In his view, the most important requirements are: continuously recruit, train, and develop your employees; give your employees the tools to succeed; allow failure; stick to your company’s core competencies; change the rules and think outside the box to gain a competitive edge; always have an in-depth understanding of the rules and regulations that govern your industry; and don’t operate your company by the seat of your pants.
   The Western World zinc market had an 864,000-mt annual deficit from 1995 to 1999, with consumption expected to keep rising 160,000 mt a year, reported Steve Brown of U.S. Zinc Corp. (Houston). The United States alone had an annual deficit of 914,000 mt from 1995 to 1999, and its consumption could grow an additional 35,600 mt annually in the next 10 years, he noted. In contrast, socialist countries such as Russia and China have steadily increased their exports, which could reach 764,000 mt this year.
   Taking into account Western World production, consumption, net imports, and stockpile sales, the zinc market could post deficits of 343,000 mt in 2000, 523,000 mt in 2001, and 746,000 mt in 2002, Brown said. Planned production increases, however, could reduce these deficits to 10,000 mt in 2000, 11,000 mt in 2001, and 26,000 mt in 2002.
   Price forecasts for 2000, meanwhile, call for an average of about 54 cents a pound, Brown noted.
   For brass mills, “quality of scrap and the need for strict adherence to quality processing has remained a constant requirement,” asserted David Lang of Olin Corp. (East Alton, Ill.). With the introduction of new alloys in the scrap stream, it’s critical for scrap generators to diligently segregate their scrap, he said, urging processors to help generators identify problem areas in their scrap operations and suggest corrective actions, if necessary.
   While brass mill-grade scrap, which is at the high end of the scrap spectrum, tends not to move from the United States to Europe, it is exported to Asia. “The major players like China, Japan, and South Korea can make major changes in flow, with China being the big swing player,” Lang said. When overseas freight costs are reasonable, “the cost to ship to Asia becomes less expensive than going from Los Angeles to St. Louis,” he noted.
   If enough scrap is exported, U.S. consumers of lower grades start buying the next-highest grade. “This chain of events eventually squeezes the brass mill to pay high prices for high-quality copper scrap or use refined copper instead,” Lang stated.

Tighter Times Ahead for Steel Scrap
The long U.S. economic expansion and the addition of more than 16 million tons of electric-arc furnace capacity in the United States boosted demand for scrap and alternative metallics to record levels from 1993 through 1998. But U.S. scrap prices held within a narrow band and remain modest today.
   Why? The answer lies in “adequacy of supply—the development of an impressive amount of supply choices and volumes for melters,” answered Stephen Wulff of David J. Joseph Co. (Cincinnati).
   As he explained, U.S. ferrous scrap exports have declined sharply, while U.S. scrap imports have increased tenfold since 1992. Supplies of DRI and HBI have also grown. All told, there’s been a 14-million-ton-a-year swing in the U.S. trade balance for metallic raw materials, Wulff noted.
   This supply picture could turn around, however. Though the supply of obsolete scrap will remain high for the next three to five years, there could be a 7-million-ton dropoff in availability beginning in 2004 or 2005, Wulff said. In short, the extended downturn in steel usage in the 1980s could create a decrease in the pool of obsolete scrap. The market won’t return to current levels of obsolete scrap generation until late in the second decade, he said.
   While this situation could boost scrap prices, processors won’t necessarily enjoy wider margins, Wulff said. They’ll have to compete fiercely for the diminished supply of scrap. The industry will continue to suffer from chronic excess processing capacity. And the information gap between scrap sellers and buyers is narrowing, so processors will find it harder to buy scrap cheaply.
   Another concern is that tighter scrap supplies and higher prices, plus the fact that the United States is now a net importer of metallics, could usher in the next growth opportunity for DRI plants, Wulff stated.

A Worrisome ONP Scenario
The quality and quantity of ONP in the future is a concern for SP Newsprint Co., noted R. Ralph Simon of SP Recycling Corp. (Atlanta), the mill’s scrap-buying arm.
   One reason is that curbside collection programs are moving from source-separated to single-stream systems, which could yield ONP with more contaminants. Other concerns are the loss of ONP in mixed paper streams, coupled with the “acknowledged increasing export demand for clean mixed paper,” Simon said. Also, European newsprint mills have been consuming more deinking news fiber, so less recovered tonnage is being exported to the Far East, “which has had a direct impact on the U.S. supplies and prices” of ONP, he noted.
   His prediction is that “both domestic and export demand for quality deink news will remain high, as will its sales price.” The challenge for all recycled-content newsprint producers like SP Newsprint will be to adapt, he said, concluding, “If a company can’t adapt, it will reach its own limits.”

BIR Honors Recycling Journalists
At a special award ceremony, BIR recognized three journalists for dedicating their careers to promoting recycling worldwide: Alfred Arnold “Fred” Nijkerk, founder and former editor-in-chief of Magazine Recycling Benelux—which covers Belgium, the Netherlands, and Luxembourg—and author of the Handbook of Recycling Techniques; Ian Cooper, former editor and publisher of U.K.-based Materials Reclamation Weekly; and Jim Fowler, former publisher and editorial director of Scrap. BIR gave each a certificate “in recognition of his outstanding contribution towards promoting the benefits of recycling and of his lifetime achievements in trade journalism.” Each also received a personalized Montblanc pen/classical CD set. 

Recycling Cars, Avoiding Directives
In the United States, there are no federal auto recycling mandates in terms of minimum recycling rates, recycled-content requirements, or take-back laws, noted Scott Horne, ISRI’s counsel/managing director of government relations, at a workshop on end-of-life vehicles (ELVs).
   The Big Three U.S. automakers are concerned, however, that the enactment of a mandate like the recent European Union (EU) ELV directive in this country would be “terribly burdensome,” Horne said.
   In the early 1990s, ReMA joined forces with the Big Three automakers and other associations to form the Vehicle Recycling Partnership to address auto recycling issues. In that group, ReMA has promoted its concept of Design for Recycling, which suggests that when designing new products, manufacturers should:
•  strive to minimize the use of hazardous materials by using nonhazardous substitutes. If hazardous materials must be used, manufacturers should clearly identify and document their location so they can be easily removed prior to recycling; and
•  consider how the product will be recycled by, for example, reducing the number of different materials used and by not bonding incompatible materials.
For U.S. automakers, Design for Recycling may be “their basic hope for avoiding any kind of EU directive here in the United States,” Horne said.
   The United States does have limited state laws regarding auto recycling, though most of these are positive for the scrap industry in that they bring “more cars into the recycling stream for scrap processors,” he noted.
There are state and federal laws, however, on the wastes generated in the car recycling process, especially automobile shredder residue (ASR). But on the positive side, some states allow the use of ASR as a daily landfill cover, Horne said.

The E-Commerce Revolution
“The Internet is here today, and the Internet is here to stay.”
T   hat was the conclusion of David Maland of ScrapSite.Net (Pittsburgh), Umaesh Khaitan of Pyramid Cyberway Ltd. (Calcutta, India), and Doug Bradham of Aluminium.com Inc. (New York City) at the e-commerce workshop.
   Among its benefits, e-commerce can expand your market reach and penetration; reduce your transaction processing time and cost; enhance your existing relationships by enabling you to serve customers from anywhere at anytime; reduce communication costs by trimming the use of fax, e-mail, phone, mail, and personal visits; and trim your “back office” costs, said Khaitan, whose firm launched CopperNet.com.
   E-commerce portals can also increase your sales volume and sales prices, expand your product mix, and save you from having to develop your own e-commerce system, Bradham said, adding, “E-commerce will provide you with the ability to operate efficiently in the global economy.”
   Is e-commerce a threat to scrap traders? “If you’re not adding value, look out,” Bradham warned. But Maland stressed, “The Internet is not here to eliminate jobs, it’s not here to inflate prices, and it’s not here to disintermediate the middlemen.” And he added that “it’s very important that you get in early so you can learn along with your customers how to do e-commerce.”
   At the least, e-commerce will require you to “change the way you do your business today,” Khaitan said. The payoff is that “it’s faster, efficient, cost-effective, and will allow you to give better customer service.”