CARI's Road Trip

Deep in the heart of Ontario’s Muskoka wilderness, where towering pines and pristine lake waters evoke an earlier, less industrial age, members of the Canadian Association of Recycling Industries (CARI) (Ajax, Ontario) gathered at the Deerhurst Resort in June to explore the various market and technology-related changes facing their industry on the eve of the new millennium.

The resort is roughly two hours north of Toronto by car. Even after the long drive, CARI attendees couldn’t completely escape their vehicles—the opening nonferrous session was dominated by discussions of the automotive industry’s importance to secondary aluminum. Marcel Attardi, metal buyer for Wabash Alloys Ontario (Mississauga, Ontario), put it bluntly: With the automotive industry consuming 75 percent of secondary aluminum production, “there simply is no other market.”

The use of aluminum in automobile parts stretches back to the 1930s when the first aluminum pistons were introduced, Attardi noted. In the past six decades, an oil crisis and government pressure pushed automakers toward greater fuel efficiency while, at the same time, consumer demand focused on options that added weight to vehicles. The only solution, Attardi said, was to reduce vehicle weight by replacing steel parts with ones made of aluminum. Today, he noted, engine blocks, transmission cases, cylinder heads, and intake manifolds are made regularly from secondary aluminum, while even more parts are made out of primary aluminum. And it’s a trend that only seems to be accelerating.

In 1991, Attardi noted, the average North American vehicle included 183 pounds of aluminum parts. By 1996, that figure had reached 228 pounds. Today, it’s 248 pounds, with a projected 410 pounds per vehicle by 2006, Attardi said. The amount of aluminum in light trucks has grown by a particularly dramatic amount. In 1991, light trucks lagged the industry average with just 168 pounds per vehicle. They now beat that average with 256 pounds, Attardi reported.

With the North American automotive market expected to produce nearly 16 million vehicles this year, the transportation sector will need roughly 4 billion pounds of aluminum, Attardi said. And even if the auto industry remained at 16 million vehicles per year, the increasing importance of aluminum would boost consumption to more than 6 billion pounds by 2006, he predicted.

General Motors Corp. (GM) and Ford Motor Co. currently lead the industry in aluminum usage. GM’s 1999 models in particular now include 27 percent more aluminum than its 1998 models, said Hy Ackerman, president and CEO of Metro Recycling (Mississauga). Ackerman also pointed to GM’s recent agreement with IMCO Recycling Inc. (Irving, Texas) to purchase some 2 billion pounds of recycled specification aluminum alloys over the next 13 years, most of which will be used at the automaker’s Saginaw Metal casting operation. GM’s aluminum usage should rise 7 percent or more per year for the foreseeable future, Ackerman said.

Recognizing this automotive trend five years ago, Bon L Canada Inc. (Pickering, Ontario), an independent extruder that uses both scrap and primary aluminum to produce extrusion ingots, converted its facility in Aurora, Ontario, into a mill finish plant producing fuel rails for Honda Civics and Accords, noted Frank Cicchino, metal coordinator. Previously, Cicchino explained, the Aurora plant had turned out products strictly for the building and construction industry. Other aluminum extruders have built new plants exclusively for automotive work, he added.

Meanwhile the overall increase in automotive-related demand has also spurred the use of nontraditional alloys that “look similar to what you’ve processed in the past, but their chemistries are much different,” Cicchino noted. For instance, 6005, 6105, and 6082 alloys contain high enough levels of manganese to create problems if accidentally mixed with more traditional alloys such as 6063 or 6061. And while some extrusions such as bumpers were typically produced in 7000 series alloy, today they’re also extruded in 6082.

As the aluminum extrusion industry grows—1998 shipments in the United States exceeded 3.8 billion pounds, up from 2.5 billion pounds in 1991—these specialty alloys will increasingly enter the scrap stream. Thus, the ability to properly identify and segregate that material “will definitely increase the value for both you and us,” Cicchino said. In the future, he told scrap processors, “your best friend will be a spectrometer.”

Prices and Partners

In other aluminum news, Hy Ackerman cited a broker’s estimate that aluminum will fall into deficit this year and next, with the average price per pound rising from a predicted 65 cents (U.S.) this year to 75 cents in 2000. But rather than holding on to aluminum for that price jump, Ackerman said he prefers a zero-based inventory policy that involves staying in the market, selling material every month, and relying on brokers to pool resources when “mate-rial quantities aren’t sufficient to attract superior valuations.” Such measures enable Metro Recycling to do without a full-blown trading department, he noted.

Ackerman’s support for brokers must clearly have pleased Walt Drosdick, vice president of American Iron & Metal Co. (USA) Inc. (Verona, N.J.), who defended the role of aluminum brokers and traders in the new millennium. Noting the difficult metal markets today, Drosdick bluntly asked: “As a broker, am I a leech who sucks away your margin and your life-blood? Or am I a strategic partner who can contribute to the profitability of your business—and possibly to your survival?”

Though scrap processors might think they can save money by eliminating the middleman—that is, their broker—Drosdick argued just the opposite. Brokers sometimes must buy a processor’s scrap at a loss, he explained. Take away the broker and a processor could actually get a lower price for his material. Also, eliminating the broker doesn’t automatically mean the processor will regain the broker’s commission—it could end up in the consumer’s pocket instead, Drosdick warned.

Meanwhile, the processor will have lost all the services the broker provides. For instance, a good broker will keep the processor updated on current market conditions and will steer the processor’s scrap away from difficult consumers and toward better prospects. Suppose a consumer charges that your scrap was contaminated and thus blew their heat. “You could hire a lawyer to represent you,” Drosdick noted, but he doubted that the lawyer would be able to read a furnace charge report like a broker could. Likewise, he wondered how many processors can prepare their own documents for an export letter of credit to someplace like Hong Kong. “Let your broker handle those headaches,” he stressed. “It’s worth his commission for the tuition you’ll save at the school of hard knocks.”

But having defended the many benefits of the broker, Drosdick also noted that there are too many of his kind out there. “The market simply isn’t big enough to support all of us,” he stated.

The future, he predicted, belongs to companies like his own, which have combined scrap processing with trading to create a win-win synergy.

Transportation Tips

The road remained the focus of CARI attendees during the transportation and safety session, where Blair Gough, president of Gough & Assocs. (Carlisle, Ontario) discussed truck inspection and regulation issues. Though focused primarily on Ontario’s registration and audit system, Gough’s presentation also underscored certain universal principles.

For instance, he advised processors who move material by truck to regularly check the records that the government (whether in Canada or the United States) maintains whenever a truck is involved in an accident or pulled over for a possible safety defect. Watch for trends in citations your drivers receive or other problem areas that can be identified and corrected. He pointed to one U.S. company that saved more than $100,000 by analyzing the numerous small but avoidable accidents its drivers were experiencing at rest stops.

Familiarize yourself with the inspection criteria of the Commercial Vehicle Safety Alliance (CVSA) (Bethesda, Md.), a nonprofit organization of government transportation officials and private industry groups from the United States, Canada, and Mexico. The CVSA standards form the basis of many roadside inspections.

Likewise, it pays to closely examine and even challenge the government’s accident reports and any charges filed. As many as one in 10 citations will have some kind of problem that you can use to get the charge thrown out, Gough noted.

But beware of hurting your case with incomplete records on your part, he added. Make sure your drivers actually inspect their vehicles before beginning each trip and that they fill out their driver logs accurately. If they are pulled over, have the driver submit a copy of the CVSA inspection for you to review and compare against his driver log. If any vehicle defects are noted in the CVSA inspection, make sure your maintenance department receives a copy.

The key to minimizing problems, Gough stressed, is his own version of the three Rs—record all vehicle defects, repair those defects, and retain the records that show you repaired the defects.

The U.K. Scrap-vs.-Waste Battle

Peter Mathews, president of the British Metals Federation (Cambridgeshire, England) and Black Country Metals Ltd. (West Midlands, England), reviewed a recent ruling in the United Kingdom on the familiar issue of whether scrap should be considered waste.

As a member of the European Union, the United Kingdom was subject to longstanding European waste industry laws that do list scrap as waste, Mathews explained. The issue came to a head in 1995 when the U.K.’s Department of the Environment produced a “guidance” that fell short of declaring that scrap is not waste.

As a result, Mayer Parry Recycling Ltd. (Kent, England), a ferrous and nonferrous processor owned by Co-Steel Inc. (Toronto), filed a lawsuit challenging the guidance. With financial support from the British Metals Federation, the nonferrous-focused British Secondary Metals Association (Cheshire, England), and especially from the Bureau of International Recycling (Brussels), the Mayer Parry suit reached the U.K.’s High Court, which late last year ruled in the recycler’s favor.

The court held that “fully processed secondary metal was to be classified as a product,” not as waste, Mathews noted. In effect, this ruling covers 98 percent of nonferrous metal and “most” ferrous material, with glass, paper, and textile recyclers also looking to apply the Mayer Parry ruling to their commodities, he added. Only end-of-life vehicles and intact white and brown goods will still be considered waste in the United Kingdom.

Though the European Union must still agree with the U.K. decision before it can cross the English Channel, other industry groups on the continent “are in a much stronger position to persuade their governments to adopt changes” now that the U.K. ruling is on record, Mathews said.

Technological Solutions

A new approach to dezincing led off the environmental and research and development session. Bill Morgan, chairman of Process Research Ortech (Mississauga), explained how the growth of galvanized steel for both automobiles and construction materials means that roughly half the world’s total zinc production of 7 million mt now ends up on the surface of steel.

But this zinc causes environmental and production problems when the resulting steel scrap is used in integrated steel mills and foundries. Zinc contaminates furnace dust, reduces yields by carrying off iron oxide, and attacks furnace linings, Morgan noted.

The obvious solution, of course, is to remove the zinc from the steel. Morgan discussed a pilot plant operation that has produced dezinced steel for selected U.S. foundries. Not only did the dezinced steel prove popular with the test companies, but the recovery process also created a premium zinc metal powder that has sold for 25 cents above the LME zinc price.

Working exclusively with prompt scrap—busheling and clips—the pilot plant first shreds the material, then sends it through a bath of hot sodium hydroxide. Churning around in this solution, the zinc dissolves while the steel moves on to a series of washing tanks. The scrap comes out warm and wet, gets drained, then shipped, Morgan noted.

Meanwhile, the zinc solution passes through a purifier that removes copper, tin, cadmium, and other contaminants, then passes into an electrowinning cell that plates out the zinc as a fine particle. The sodium hydroxide is reused in the initial dezincing tank.

With a commercial plant under way, the operation will next look into dezincing obsolete auto scrap, Morgan said. Though the goal is to establish stand-alone dezincing facilities to serve the scrap and foundry industries, the technology might also be licensed to other users. At present, the process costs roughly $20 a ton to dezinc 150,000 tons of scrap annually (the price includes money recovered from selling zinc powder). That figure drops to $12 a ton when production reaches 250,000 tons, he said.

Rounding out the conference was a talk on practical environmental compliance by Bill Baumgartner Jr., president of consulting firm W.Z. Baumgartner & Assocs. Inc. (Franklin, Tenn.). Baumgartner, a former state regulator, explored the shifting emphasis of environmental regulation.

In the 1950s and 1960s, he noted, environmental policy was set by government agencies with names like Air Pollution Control or Water Pollution Control. Focusing on pollution had a certain logic to it because pollution was recognizable and quantifiable—you could see the dirty air or count the number of dead fish in polluted water, he said.

But starting in the 1970s, the emphasis changed, with many of the programs being renamed to focus on air or water “quality.” Unlike pollution, quality is difficult to quantify, Baumgartner explained. The standards seemed to shift from determining what levels of contaminants would hurt people to basing regulations on state-of-the-art detection technology.

“Practical environmental compliance no longer focuses on whether or not there’s visible pollution,” he stressed. “The thrust now is to minimize the possibility of having a problem with a regulatory agency.”

To do just that, Baumgartner presented numerous examples of approaches he has recommended at various scrap facilities, as well as approaches he has warned against. For instance, he noted how one company tried to avoid complying with aboveground storage tank rules by claiming its tank was actually mobile and thus not covered by the regulation. But Baumgartner presented a slide of the supposedly mobile tank that clearly showed plants growing up around the unit—anyone could see that the tank never had and never would be moved.

Likewise, he explained that just putting a concrete pad under an aboveground tank won’t necessarily prevent a spill from getting into the ground since rain will wash the material off the pad. To minimize that risk, add a canopy over the pad, Baumgartner suggested.

And make sure your solution matches your problem. One company installed a roughly $60,000 oil/water separator but still ended up with oil in its discharge. Why? Because it was trying to capture soluble oil from turnings in the separator. Use a separator only for insoluble oils from items such as engine blocks or transmissions, he explained. Use a sump pump to capture soluble oils from turnings and busheling.

Putting a concrete pad under your maintenance area will help reduce oily runoff, Baumgartner advised. But remember that if you steam-clean your equipment, the process can emulsify insoluble oils, leading to the same problem as with the oil/water separator. •