May/June 1995
Skid-steer loaders are essential in many scrap recycling facilities, yet they can pose safety hazards when not properly maintained or operated. Here’s some advice on how to use this equipment safely.
-Jeff Borsecnik, Robert J. Garino, Elise Browne Hughes, Kent Kiser, and Si Wakesberg
On a world where change is the only constant, scrap recyclers must be able to adapt to the changes they face and strive to control change rather than letting change control them.
Those ideas sum up the theme of ReMA's eighth annual convention, "Catching the Winds of Change," held in Las Vegas in March. They also capture the key message ReMA President Cap Grossman of Grossman Iron & Steel Co. (St. Louis) delivered at the convention.
"We don't have to sit passively and allow forces to manipulate or dictate to us," Grossman said in his president's breakfast address. "Clearly, we are responsible for our own future." In particular, he stressed that recyclers must make safety and risk management a priority not only to protect their employees but also to reduce their operating costs, and they must invest in education and training to improve their businesses.
Turning to the political arena, Grossman discussed ReMA's battle to secure a recycling exemption/clarification in Superfund. Though time ran out in the 103rd Congress before Superfund could be reauthorized, the issue is being revisited by the 104th Congress, and "once again we must begin from scratch, again facing our moment of truth," Grossman said. "We have to convince decision makers that the unintended consequences of Superfund could well mean the end of traditional recycling as we know it."
In all of these areas, Grossman asserted, ReMA's goal is to advance members' interests and deliver valuable services, including the annual convention. "ISRI is charting the course that will help shape an economic, legislative, regulatory, and customer environment in which your business can prosper and grow safely," he said.
Keeping with that promise, the convention program featured a variety of specialized workshops, commodity spotlights, and general sessions aimed at delivering value. Here's an overview of these programs.
Keeping Operations Safe and in Compliance
Safety Fist-and Foremost. There are two huge reasons for having a safety and loss prevention program: to ensure the well-being of employees and save money.
Perhaps no recycler knows this better than George Ginsburg of Jacobson Metal Co. (Chesapeake, Va.). In 1991, his firm suffered 63 accidents and had an annual workers' compensation premium of $225,000, he reported at a convention session on safety programs at smaller scrap companies. By implementing a safety program, however, the company has cut its premium to $125,000 and pulled itself out of the assigned risk insurance pool, he noted. "Safety should be the most important priority in any company," Ginsburg said.
To develop an effective safety program, recyclers should keep the following points in mind, workshop speakers advised.
- Make sure that top management commits sufficient time and money to the task. "If you don't have management commitment, you have nothing," said Sandy Shadrow of SOS Metals Inc. (Pico Rivera, Calif.).
- Get employees involved in the program by soliciting their safety ideas, having regular safety meetings, and asking them to help enforce the rules. "Safety can't be just a priority, goal, mission, or objective," said Michael Mattia, ReMA's director of risk management. "It has to become a culture, an attitude in the workplace."
- Provide interactive and repetitive training, especially for new employees, who represent "probably the biggest hazard you've got," Mattia said.
- Reinforce your safety message through signs, verbal support, payroll stuffers, and other gimmicks.
- Offer incentives and rewards for good safety. "If you save money, you should reward your employees," Shadrow said.
- Implement an employee assistance program, as stress, relationship problems, and substance abuse can cause accidents on the job.
- Manage injury claims aggressively and sensitively, keeping in touch with injured employees to make them feel connected and encourage them to return to work, even in a light-duty capacity. If you don't take care of your employees, "they'll have someone else take care of them—namely lawyers or unions," Shadrow warned.
- Investigate accidents to identify the factors that caused the incident and enable you to take steps to prevent similar accidents in the future.
A Clean Air Headache? The Clean Air Act amendments of 1990 require all "major sources" of air pollution to be covered by an operating permit issued under state programs that will begin to kick in this summer, speakers at a compliance workshop reported.
Explaining title V of these amendments, the speakers noted that all "emission units"—such as a shredder, sweat furnace, boiler, and so forth—on contiguous property under common control must be considered together as one "source." If this cumulative source has what is called the "potential to emit" at least 100 tons of controlled pollutants annually, the source must be covered by a permit. Lower thresholds apply to certain hazardous air pollutants, as well as in regions classified as ozone nonattainment areas.
"We expect particulates to be the most prevalent problem in scrap recycling," said Jay E. Norco of Versar Inc. (Oak Brook, Ill.), an environmental risk management consulting firm that specializes in the scrap recycling industry.
The term "potential to emit" is a controversial and confusing portion of the law that requires the operator of a pollution source to calculate the amount of emissions the unit would generate if it ran around the clock, 365 days a year, in a worst-case scenario, Norco said. Hence, even low actual emissions may not excuse a facility from compliance obligations.
Facilities that do not emit pollutants at the potential emission thresholds may not be required to comply with the full permit program obligations, Norco stated. Instead, they may be allowed to select from some less onerous options, including a federally enforceable state operating permit, under which the facility faces a lesser monitoring and record-keeping burden in exchange for accepting certain restrictions on emissions.
Another possibility, which may be offered by individual states, is a blanket general permit, an option that is "still fuzzy," but is likely to be similar to the group—not the general—permit under the storm water runoff rules, said Robin K. Wiener, ReMA's director of environmental compliance/assistant counsel.
Note: ReMA has hired Versar to guide the scrap industry in complying with the Clean Air Act amendments. For more information, contact Robin Wiener, 202/662-8512.
Building Successful Business Relationships
The Quality Question. Quality continues to be a hot topic in scrap recycling and consuming circles, and it was just that—the topic—of an open-mike forum at the convention. One main point that emerged at the session was that consumers need quality feedstocks to minimize their production costs and compete effectively. "We're in a global market and quality is what's going to make the United States a leader," said one steelmaker. This means that scrap consumers can't and won't tolerate inferior raw materials. "All specifications are getting tighter, and downgrades are disappearing in favor of rejections," observed one processor.
Scrap processing firms should therefore "forget the price and give us the quality," another consumer stated, noting that processors will increasingly find themselves competing more on quality than price.
As for how to best achieve quality, the forum attendees offered the following suggestions, among others.
- Frequent communication with both suppliers and consumers is integral to quality improvement and healthier business relationships.
- Make a serious corporate commitment to quality assurance and implement control procedures that are followed religiously by employees.
- Strive to make your scrap quality consistent. "The quality of your scrap should be the same regardless of the state of the market," said Cap Grossman, who moderated the forum. "Our product must meet customer specifications no matter what."
A frequent comment was that scrap recyclers should strive for IS0 9000 certification or else risk losing markets to those that do. "It's going to be forced down on us, and we're going to have to do it," said one recycler at the session.
The Scrap "Sell" Challenge. As an adjunct to quality requirements, to effectively and profitably market scrap, you must first know your material in detail—its density, copper content, total tonnage, and so forth, according to David Hochberg of Reserve Iron & Metal (Chicago), one of three presenters on a program exploring scrap marketing success. But you must also know your consumers' product lines, and what material each consumer is certain to take and might consider. You should also get to know the inspector at the consuming operation because he's in charge of downgrades and rejections, Hochberg suggested.
From a consumer's perspective, what makes a good supplier isn't necessarily the best quality scrap, said Dave Neufeld of U.S. Reduction Co. (Munster, Ind.), noting, "As long as we know what it is, it's OK that scrap isn't pristine clean." Thus, he said, what consumers are really looking for is integrity, honesty, reliability, and knowledge, and suppliers that demonstrate these characteristics will be rewarded. "At the point when there's more than enough metal to go around, we'll remember which suppliers did right by us."
Echoing Neufeld, Greg Marceaux of Sims-LMC Recyclers (Seattle) asserted that the importance of building trust in the supplier-consumer relationship can't be overstated. More and more consumers are looking to build long-term relationships with suppliers who are able to not only meet their scrap requirements, but also provide value-added services, he said, observing, "No longer does price alone make the deal work for you."
In fact, he said, consumers are becoming increasingly conscious of their suppliers' internal practices and styles in an effort to understand their approach to business and seek compatibility in areas like management style and ethics.
Spreading the Scrap Story. Though scrap recyclers tout themselves as the original recyclers and have the broadest knowledge of the business, they are frequently overlooked when the media does stories on recycling.
Why is this and what can scrap recyclers do to rectify the problem? A panel of media experts speaking at a public relations workshop offered the following suggestions.
Develop the story. The media is in the information business, it needs stories and information, and recyclers can take advantage of this. According to Richard S. Kahlenberg of the Los Angeles Times, scrap recyclers have "one of the greatest stories in the world," but they need to learn how to "craft what they do so it plays, how to put a spin on things. There has to be a story."
The media, for instance, tend to focus on the economics of recycling more than its environmental benefits, so scrap recyclers should show how their operations create jobs and contribute to the local economy. "The media need to localize stories in many cases," said Evelyn Haught, ReMA's director of communications.
In general, the media want stories focused on today or the future rather than the past, and they need stories that are focused. "If you don't have a succinct message, you won't be able to get it across," said Kathleen Meade of Goddard Claussen (Washington, D.C.), an international public relations firm.
Build media relationships. "Just as you broker your commodities, you can broker the information you have if you're willing to share it," Meade said. This, of course, means getting in touch with the media and building relationships with media players, same as establishing rapport with scrap suppliers and consumers.
A first step toward relationship-building is to "start becoming a news source for the media," Haught said. This could mean calling reporters with information, sending press releases, even meeting with media staff members.
Be persistent. Don't give up if your first experiences with the media don't work out. "It will take a lot of work and a lot of time, but you have to be in it for the long term," Meade suggested.
The Surviving Family Business. Adding family to business—a common element in scrap recycling firms—can create many complications, which were the focus of two convention workshops.
Federal estate tax is the "most insidious" tax in the country, and it's a key reason only 41 percent of family business owners are able to pass on their companies intact to their children, said Al Woodward of the Woodward Financial Group Inc. (Denver) at one of the programs.
To protect personal assets stored in a family company from estate tax and other depredations, such as gift and capital gains taxes, recyclers can use estate management tools including wills, living trusts, family trusts, family partnerships, offshore trusts, wealth replacement trusts, super trusts, and dynasty—also known as generation-skipping—trusts. Various combinations of these tools can protect family business assets while allowing the business owner to retain varying levels of control over the assets and the company.
But financial matters don't tell the whole story in family businesses. There are also social conflicts, which can complicate financial planning, as Woodward demonstrated through several case studies.
These "soft" family issues often go unresolved when family businesses rely exclusively on "hard data consultants" such as lawyers and tax planners to solve problems, noted Lee Hausner of Doud Hausner and Associates (Burbank, Calif.) at the convention's second family business session.
Addressing such issues, she noted that families and businesses have different characteristics and values, which can raise conflicts that those involved must be able to resolve. For example, "membership" in a business is earned by hard work, while in a family it's automatic, she pointed out. And in today's business world, there's no room for workers who don't pull their own weight, so how do you deny "membership" in the company to a family member who isn't doing his or her job?
The lack of separation between work and home life is another unique attribute of the family business, Hausner said, noting that "you can't go home and complain about the boss if he's your spouse's father."
Critical issues for family businesses, she said, are communication, conflict resolution, preparation of heirs, and the rights of nonworking shareholders. Those that are successful have strong family and business values, enjoy "quality time" together, support individuality, and respect personal boundaries, she observed.
Despite the minefields, family businesses enjoy some advantages, including deep employee personal commitment and knowledge of the business, a stable culture, flexibility and ability to make quick decisions, a warm atmosphere, and a long-term perspective, said Peter Davis of the University of Pennsylvania 's Wharton School Division of Family Business Studies (Philadelphia), who shared the presentation spotlight with Hausner.
Managing the family business for success requires being willing to seize the day--"Fire your kid if you have to," said Davis—and working within and accepting certain inherent limitations of the situation, such as limited autonomy.
Pursuing New Recycling Opportunities
Finding Profits in Paper. Scrap processors who don't currently handle paper should consider adding this commodity to their capabilities because paper recycling is "one of the hottest businesses in the world today," asserted Stan Litman of Texas Recycling/Surplus Inc. (Dallas) at a workshop on getting into the paper business. And five other paper recyclers who joined him on the session's panel supported his assertion.
With demand for paper products strong, and paper mills adding tons of new deinking capacity, "the time to get in is now," said A1 Kublin of Simco Recycling Corp (Miami). "The market has never been more acceptable, and all indications are that the world is set for a supply deficit." Also, in the future, government mandates could require more recycled paper in new paper products as well as a potential ban on the disposal of paper.
For non-paper recyclers, it's an easy step to enter the paper recycling business, the speakers agreed. Martin Davis of Midland Iron & Steel Corp. (Moline, Ill.), for one, whose metal recycling company diversified into paper during down years in the metal trade, suggested that "everyone in the scrap metal business is probably prepared to go into the paper business." Most recyclers, in fact, have "the basics in place" such as trailers and balers, as well as a familiarity with fluctuating scrap markets, he noted. For the skeptical, Litman said that "you don't have to do big volume to be profitable," asserting that it's possible to recycle paper exclusively and "make an awfully nice living on 800 tons a month."
To enter the market, the panel suggested starting out recycling bulk grades such as corrugated, newspaper, and mixed paper. Recyclers can source these grades first from their existing suppliers, especially industrial accounts. "It won't cost you anything extra to pick up their paper because you're already there," Davis said. This service also allows you to become a "one-stop shop" for the supplier's recycling needs, he and other speakers pointed out.
Other paper sources include printers, manufacturers that use paper products, churches, groups such as the Boy Scouts, and offices, which Phil Alpert of National Fiber Supply Co. (Chicago) called "the biggest growth area."
When it comes to processing paper, "you don't have to be a rocket scientist," Kublin said. "You get it, package it, and sell it." Litman concurred, stating, "If you've got a baler, you're in the paper business." The only real restriction is that most material must be stored and processed inside, the panel noted.
As with processing other scrap materials, paper recyclers must know how to prepare a package that meets consumer specifications. A generally acceptable package of office paper, for instance, can include computer printout, carbonless paper, white or pastel paper, manila or light color folders, slick glossy paper, and envelopes with or without windows, noted Ray Petermeyer of E-Z Recycling (Portland, Ore.). But such a package cannot include deep color paper, self-adhesive stickers, groundwood computer printout, magazines, construction paper, or newspaper.
While such material specifications are important, demand for secondary fiber is becoming so great that mills are "downgrading—that is, using lesser grades of paper to produce some products. "It won't be long before any kind of package you put together will be acceptable to some mill," Kublin noted. Alpert agreed, noting, "Even if you want to bale together everything, there's a market for it, though the price may not be as substantial."
The Growing Glass Market. While the recycling rate of glass containers has been steadily increasing, more can be recovered and glass manufacturers want more high- quality postconsumer glass, according to a group of glass container manufacturing representatives who spoke at a session designed to familiarize metal and paper recyclers with the glass recycling market. "You can supply something that we demand," said Kathy Richter of Anchor Glass (Tampa, Ha.)—and therein lies an opportunity for recyclers of other scrap commodities.
For those interested in entering this niche, the most promising sources of glass "may be right under your nose," meaning your existing scrap suppliers, Richter said. Other significant generators of container glass are bars, restaurants, and especially municipalities.
As with other types of scrap, material quality is a big issue in glass recycling, and it all comes down to four words--"color-sorted, contaminant-free" container glass, said Clifford Klotz of American National Can Co. (Chicago). In particular, recovered glass must be free of ceramics, crystal, lab glass, cookware, lightbulbs, and metal, the panel said, suggesting processors store recovered glass on concrete pads to help prevent contamination in general.
Other quality concerns focus on food contamination and moisture content, which can cause foam and other problems in glass furnaces. "Most of our specs allow a maximum of 0.2 percent moisture by weight," said Paul Hummel of Ball Glass (Muncie, Ind.).
To produce high-quality processed glass, or cullet, containers must be beneficiated, Klotz said. In this process, containers are first run under magnets that remove ferrous contaminants, then proceed through a picking station, where employees pull out nonmagnetic contaminants The material is then run through a crusher for size reduction, then through a secondary cleaning system, which removes nonferrous metals. The result is clean, color-sorted cullet, which can be used to produce new containers.
Mixed cullet, on the other hand, often must go into secondary markets such as road bed, fiberglass, and landfill cover. On the sell side, Klotz said, recyclers can send their material to some of the 69 glass container manufacturing plants in the United States , though some of the glass makers have exclusive cullet-processors. Such processors are beneficial to container makers “because they do a better job of processing and allow us to concentrate on what we know best—making containers,” said Jerald Bannister of Owens-Brockway Glass (Godfrey, Ill.).
Examining the Specialized Issues of Specialized Business
Packaging Batteries. Scrap lead-acid batteries must be packed with care for shopping to meet stringent U.S. Department of Transportation regulations, which were the focus of a convention workshop.
According to Carl Fischer of RSR Corp. (Dallas), there are three acceptable ways to prepare batteries for shipment. First, batteries can be stacked upright on a pallet with absorbent double-layered corrugated beneath, above, and between layers, then shrink-wrapped or strapped to the pallet. The second method is similar, but the batteries are placed inside a lined Gaylord box attached to the pallet. The third method—which, Fischer warned, some smelters will not accept—is hand-stacking the batteries in a trailer, again using corrugated under and between layers and with scrap wood wedged in where necessary to prevent the batteries from shifting during transit.
Regardless of which method is used, batteries shouldn't be stacked to a height that exceeds the width of the package, and three layers is the practical limit for either of the pallet-based packaging methods. In addition, odd-sized batteries should be on top, Fischer advised.
Fischer also suggested double or triple shrink-wrapping, though it's not required. "No matter what, make it look right," even if that means going beyond the rules in case a state trooper takes a close look, he stated. All packaging should be accompanied by a bill of lading that includes the description "batteries, wet, filled with acid," (Hazard Class) 8, (I.D. Number) UN2794, (packaging Group) III, as well as the notation “loaded per 49 CFR 173.159(e).” The document must also include the shipper's emergency response telephone number.
Finally, Fischer warned against shipping broken batteries, which are considered a hazardous waste in most states, requiring transport in drums under a hazardous waste manifest.
The Changing Government Scrap Niche. The Defense Reutilization and Marketing Service (DRMS) (Battle Creek, Mich.), the agency responsible for selling surplus Department of Defense property, including scrap, has instituted a temporary moratorium on sales of Navy vessels for scrapping, William Lovejoy of the DRMS's recycling branch (Memphis, Tenn.) announced at a workshop on buying government scrap.
The hold, expected to last "at least" 60 to 90 days, is the result of proposed changes to regulations covering the handling of polychlorinated biphenyls—a common component of insulated cables in military ships—under the Toxic Substances Control Act.
Of longer-term concern to the scrap industry is that the policy restricting “the scrapping of combatant ships to domestic waters only is under evaluation,” according to a DRMS memo Lovejoy distributed.
Completed policy changes at the DRMS include acceptance of credit card payments for scrap purchases; creation of a sales bulletin board with Internet access; a new policy requirement for payment within seven days of winning a bid; and elimination of a requirement for bid deposits, which rankled most session attendees.
The session also looked at demilitarization requirements for munitions headed for scrapping. These rules are item-specific and may demand that the material be processed using specific techniques like cutting or crushing, said Col. Charles Masters of the Defense Logistics Agency (Alexandria, Va.). Smelting generally satisfies all “demil” requirements, he noted.
Performing “demilling” is a condition of sale, and government officials must observe the process, which sometimes must be carried out before the scrap is removed from the government site. In light of these processing requirements, potential buyers of government scrap should never “bid it blind,” advised workshop moderator Eugene Wallens of Midwest Steel & Alloy Corp. (Cleveland). “Inspect the material and know what the demilling specs are before you bid.”
Note: To get on the list to receive DRMS bid invitations, call 800/222-3767 or 901/775-4976 (fax). To comment on DRMS scrap sales policy, contract William Lovejoy, 901/775-6915 (fax).
Taking on the Dezincing Challenge. Galvanized steel has been claiming a larger share of the sheet and strip markets, thanks to its growing use in such major areas as the automotive sector.
While this is good news for the zinc industry, galvanized steel can present problems for integrated steel mills, minimills, and foundries in the recycling process, noted speakers at a workshop on this challenge. “It’s a growing problem, and it’s going to get worse in the future,” said Derek S. Harold, a former executive of Luria Brothers (Cleveland), now retired.
Hence the need for a dezincing process. Until recently, technologies for dezincing galvanized scrap had achieved only 70-percent removal, which was “nowhere near enough,” said Peter J. Koros of LTV Steel Co. (Independence, Ohio). “You have to achieve 90 to 95 percent removal to make dezincing fly as a commercial process.
Fortunately, Argonne National Laboratory (Argonne, Ill.) and Metal Recovery Industries Inc. (Hamilton, Ontario) have developed a process that they claim removes 97 percent of zinc from coated scrap. This process could help alleviate the coated-scrap problem for steelmakers as well as “open up a huge supply of zinc,” Koros asserted.
Reviewing Nonferrous Markets
Volatility in Store for Aluminum? The world aluminum industry had a dramatic year in 1994, asserted George T. Haymaker Jr. of Kaiser Aluminum Corp. (Dallas) and Robin Adams of Resource Strategies Inc. (Exton, Pa.) at the convention’s aluminum spotlight.
Improved demand, strong investment buying, and production cuts doubled aluminum prices between November 1993—when values were at an all-time low—and the end of 1994, Haymaker noted. The “real story” behind this “spectacular” recovery, Adams said, was actual consumption, which grew more than 10 percent compared with 1993. This heightened demand converted the 1993 world market surplus into a 1994 deficit, thus triggering a “significant” downtrend in inventories, he reported.
Looking ahead, Western World aluminum demand will grow 3.5 percent this year, 2.8 percent in 1996, and 2 percent in 1997, Haymaker forecast. To meet this demand, he said, primary producers will have to reactivate idled Adams agreed but predicted that the world market wouldn’t match the growth recorded in 1994 and that world production would show a fairly sharp recovery. As a result, he said, “sometime in the next year to 18 months, the rate of decline in inventories will level off for awhile.” Consequently, traders who were long may decide to sell, causing an “overcorrection in reverse prices.”
Offering a price forecast range, Adams ventured that this year's baseline aluminum price on the London Metal Exchange (LME) will be between $1,400 and $1,500 a metric ton, stating that price volatility will be the message for 1995.
Copper Faces Long-Term Fears. Copper fundamentals look promising for 1995 and into 1996, though production increases in the next two years will likely trim what is today a significant supply deficit, said James J. Kerr of Asarco Inc. (New York City) at the spotlight on copper.
Growth in U.S. copper consumption last year paced world demand at 10.8 percent, with European consumption growing 6 percent, followed by Southeast Asia at 3.5 percent, Kerr reported. Japan, in contrast, showed "anemic" growth of about 1 percent.
U.S. demand is likely to slow in 1995, especially in the second half, resulting in only 2.2-percent growth for the year, Kerr projected, adding that he expects Europe to show 5-percent growth and Southeast Asia 5.9 percent, thus increasing Western World consumption 3.9 percent, to reach 11.3 million tons for the year. And 1996 should see further growth of about 3.6 percent, he predicted.
Refined production, meanwhile, will grow 6.3 percent in 1995 and 6.5 percent in 1996, Kerr stated. Most of this growth will come in the form of expanded solvent-extraction/electrowinning (SX/EW) production in the United States and South America, he added, which should jump 24 percent this year. By comparison, production of concentrates—which actually slipped half a percent in 1994—will increase 4.1 percent in 1995, he forecast.
Consumption has outpaced refined production every year since 1989, according to Asarco's figures, but imports from the East have added "significant" supplies to the Western World market. In 1994, for example, Eastern shipments of 468,000 tons limited the supply deficit to 383,000 tons, Kerr estimated, and net Western imports should total about 441,000 tons this year, with a resulting deficit of 203,000 tons. And by 1996, imports plus production increases—mostly via SX/EW growth—should cut the deficit to only 34,000 tons, he predicted.
Drawdowns of stocks on the LME and Commodity Exchange Inc. (Comex) started at the end of 1993 and have kept the supply deficit in check, said Kerr, predicting they would continue but slow in the second half of 1995. He noted that Comex has been running at a premium to the LME since September due to strong U.S. Copper demand and lower stocks, which, he noted, had fallen below the 10,000-ton mark, a level that provides “little support to the market.”
The key unknowns lying ahead, said kerr, are the health of the U.S. economy, the role of investment funds, and the levels of Chinese imports and Mexican exports of copper.
While 1994 seemed to be a good year for everyone in the copper market, “it was a stressful year,” said the spotlight’s other speaker, William R. Burson of Halstead Metal Products (Greenville, N.C.), who added ominously, “This may be the bellwether of things to come.” Though optimistic about copper fundamentals through 1995 and into 1996, Burson raised the following questions about the future of the U.S. copper industry in general and copper scrap in particular.
- What will be the impact on scrap of a boom in SX/EW production, which may cost only 30 to 40 cents a pound, once the economic cycle again turns downward? What happens if we have to compete with 60-to-70-cent cathode?
- What will be the effect of LME warehouses being established in the United States?
- What will happen to the copper market when the commodity funds finally get badly burned? What risk does increased dependence on copper exports-and, hence, on foreign economies-mean to the U.S. industry?
- Will the domestic copper industry be relegated offshore one segment at a time?
A More-Balanced Nickel Market. The nickel market could grow 8 percent in 1995—principally due to pressing demand for stainless steel—and at the more modest but steady pace of 2.5 percent a year through 2000, according to Francois G. Sauvage of Eramet-SLN (Paris), speaking at the spotlight on nickel, stainless, and molybdenum.
Western production is close to its maximum capacity, yet "we do not forecast any market increase of Western capacity over the next few years," Sauvage remarked. He also noted that the situation is similar in Russia.
As demand increases and production continues to be low, the focus will remain on Russia, where total exports are expected to be "significantly lower" this year, Sauvage said. As a result, the nickel market will be in closer balance this year, "with only a marginal surplus, essentially in the form of a moderate stock increase on the LME," he indicated.
Despite this balanced scenario, the nickel industry faces some thorny problems, Sauvage asserted, noting in particular uncertainty regarding Russian nickel exports and the fact that there is little pending capital investment and few economically viable projects planned for the near future. He also noted that the LME recently "has attracted powerful financial institutions that basically use metal to swap it with other risks," which increases the volatility and unprofitability of prices.
Stainless Shows Strength. Complementing Sauvage's remarks at the spotlight, Jim Lennon of Macquarie Bank Group (London) agreed there is a worldwide boom in stainless steel demand, noting that apparent consumption rose between 12 and 15 percent last year in Europe; 16 percent in the United States; 16 percent in Taiwan, Korea, China, and other "Asian tigers"; and 2.5 percent in Japan.
World output of stainless steel came to 12,952,000 metric tons of cast products in 1994-11.9 percent more than in 1993, he noted. Europe showed the greatest leap in output, registering 17.3-percent higher, while output in Japan increased 7.3 percent, U.S. production grew 3.1 percent, and other countries’ rose 13.5 percent, Lennon reported.
U.S. demand was fed in large part by imports, he said, which accounted for around 38 percent of the country's demand. In 1995, however, " U.S. producers are likely to fight back," and large increases in domestic output are planned, he asserted. Moreover, the weak dollar "is likely to further discourage imports in 1995," according to Lennon.
Looking ahead, Lennon forecast 8-percent growth in Western World stainless steel output in 1995, which would bring the total to 14 million metric tons. With much new stainless capacity slated to come on-line in the coming years, however, "producers may be tempted to overproduce," which would negatively affect the level of 1996 and 1997 production and prices, he noted.
Moderation for Moly? Looking at the molybdenum market, Julie H. Smith of International Business Strategies (Golden, Colo.) noted that the metal's prices have touched a 14-year peak in 1995, charging from around $2.95 a pound in late 1994 to $16.50 a pound earlier this year.
An estimated 195 million pounds of moly was produced worldwide in 1994, with three countries—the United States, Canada, and Chile leading in output.
Smith noted that primary producers provide 28 percent of the supply, while 9 percent comes from imports and 3 percent from catalyst recycling, she said. The moly supply from byproduct and coproduct producers, which was 30 percent of the total in 1960, has risen to 70 percent, and she emphasized that these producers “march to the beat of copper, not moly.”
Smith forecast a lower price drift through 1996, offering estimates of $8 to $9 a pound for 1995 and $4.50 to $6 a pound for 1996. Moly demand, meanwhile, is expected to grow 4 to 5 percent annually through 1996, she said, adding that demand will be high but supplies will increase with the reopening of a Climax mine in Colorado and as byproduct producers restart idled moly circuits.
Precious Metals to Shine. Despite probable bouts of short-selling—and sharp sell-offs—in 1995, silver is poised to rise "sharply" by the fourth quarter and move in a range of $5.80 to $6 per troy ounce (t.o.) in that period, said Joe Rosta of the CPM Group (New York City), speaking at the precious metal spotlight.
Gold, meanwhile, could very well trade between $385 and $405 per t.o. after April, with higher prices forecast by CPM in the second half of the year, he stated.
Underpinning silver's positive outlook is world fabrication demand, which rose 3.9 percent in 1994 to 665.5 million t.o. and continues to exceed new silver supply, according to CPM research. "A very good performance," Rosta called it, but he said last year's rate "pales in comparison" to the more than 13-percent increase in 1993.
Turning to silver supply, he noted that rising demand and falling supply caused a statistical shortfall of 195.7 million t.o. relative to industrial silver use in 1994. As a result, Rosta said, inventories were drawn down last year, with most declines occurring in unreported inventories held in Europe and North America .
As for gold, the metal's direction in 1995 will ultimately be determined by actions by the world's central banks and the investment community, not fabrication demand, Rosta asserted. CPM, he said, expects increased instability in the currency markets throughout this year, thus attracting more investors to gold as the year progresses.
The Changing Precious Refining Sector. "Technological advancements and environmental regulation" are changing the face of the precious metal refining industry, said Steven Helm of Sabin Metal Corp. (Scottsville, N.Y.), who also spoke at the spotlight.
Advances in plating technology, substitution for gold by other metals, downsizing of electronic components, and other manufacturing efficiencies have not only reduced the generation of precious metal-bearing scrap, but also lowered the amount of precious metals per item plated, Helm observed. While these trends—and seemingly endless regulations—are bad news for precious metal refiners, the good news is that both the use and recycling of precious-metal bearing electronic components is growing, he said.
The Steel Theories
U.S. Steel Demand on a Roll. Steel trends in 1994 were encouraging, with overall shipments rising 7.3 percent to 95 million tons, noted Francis P. Mangano of LTV Steel Co. (Cleveland), one of two presenters at the ferrous spotlight. Flat-rolled steel shipments, which increased 7.4 percent in 1994, were "the best since 1973, and records were set in nearly all products," he said.
Steel’s success can be credited, to a large degree, to the growing automotive market—especially the steel-intensive truck sector—as well as the expanding use of steel in residential construction. This latter market, Mangano observed, is expected to grow from about 300,000 tons of steel in 1994 to 1 million tons in 1997, giving steel a 13-percent share of the market
Thanks to this recent strong demand, “steel prices are recovering, and profits are returning,” Mangano said, adding that many economic signs argue for continued optimism about steel's future prospects. For instance, he pointed out, the United States has experienced 15 quarters of economic growth, consumers are spending again, corporations are enjoying strong profits and investing heavily, inflation is under control, interest rates are moderate, and inventories of finished goods remain low. Based on these and other factors, the United States is expected to see 2.9-percent growth in its gross domestic product in 1995, and the steel industry could ship around 94 million tons this year, Mangano projected.
As a final point, Mangano debunked the "myth of overcapacity" in the steel industry, asserting that there was, in reality, a 22-million-ton deficit in production capacity relative to demand in 1994. By 2000, however, this deficit will be brought into "reasonable balance," with perhaps a 6- million-ton surplus developing, he said.
A Global Scrap View. Turning to the steel scrap market, Philip Tomlinson of CRU International Ltd. (London) examined global trends that will affect the supply-demand picture for ferrous scrap at the spotlight.
Most notable is the expected growth in electric-arc-furnace (EAF) steelmaking around the world, with EAFs expected to increase their share of world crude steel output from 3 1 percent in 1993 to 39 percent by 2005, he said.
This growth raises a serious concern: “Will enough scrap or scrap substitutes be forthcoming to meet this expected demand?” Tomlinson asked.
To answer this question, he first looked at obsolete scrap, noting that obsolete scrap arisings increased more than 50 percent in the 1983-to-1993 period. Yet, while the supply of obsolete scrap has traditionally increased as prices have risen, "there may come a point when supply does not respond to further price rises," he asserted.
Tomlinson also raised doubts about the potential for Russian scrap to meet the growing EAF scrap demand. "Theoretically, the former U.S.S.R. has the potential to export sufficient quantities of scrap to meet any conceivable scrap shortage," he said. But, in reality, this isn't likely to happen, he noted, offering a few reasons why. For one, Russia's scrap recovery rate has declined from 60 to 70 percent in 1989 to less than 30 percent in 1993 due to internal problems, he said. Also, the country faces insufficient transport facilities, high transporting costs, and potential radioactive contamination of material. So, he summed up, "Although there may well be a scrap mountain in the former U.S.S.R., much of it will take a long time to be recovered for use."
Scrap substitutes such as direct-reduced iron (DM), hot-briquetted iron (HBI), and iron carbide also won't be able to fill minimill scrap needs due to "the lead time needed to get projects planned, financed, and built, and the modest scale of the technology,” Tomlinson stated.
What does all this mean for ferrous scrap? Mainly that there will be strong demand and tight supplies for the foreseeable future, Tomlinson indicated. As a result, steel scrap prices are "likely to strengthen further over the next few months, but then ease back later this year-but not by much," he said.
In the longer term, scrap prices will need to be above past trend levels, perhaps around "$10 a metric ton higher than the historically high levels experienced in 1993," he predicted.
The Scrap Shortage Theory. Picking up where Tomlinson left off, a panel of three steel executives and one steel analyst further examined the scrap shortage theory, the market prospects for steel scrap substitutes, and the future of the U.S. steel industry at one of the convention's general sessions.
Arguing for the likelihood of a ferrous scrap shortage was Peter F. Marcus of PaineWebber Inc. (New York City), who predicted there will be a 115-million-ton shortfall of obsolete scrap by 2010.
On the other side were the three steel executives—John D. Correnti of Nucor Corp. (Charlotte, N.C.), Keith Busse of Steel Dynamics Inc. (Butler, Ind.), and Robert J. Pasquarelli of New Jersey Steel Corp. (Sayreville, N.J.)—who countered that prediction to varying degrees.
"There's been no scrap shortage in the past and there'll be none in the future," Correnti stated, arguing that there's a "vast reservoir" of obsolete steel products to recycle as well as new scrap streams opening up countries such as Russia .
The market could, however, see short-term supply tightness as the handful of new minimills come on-line, Busse asserted. More important is that "there may well be a shortage of low-residual scrap for more demanding steelmaking applications," he said. If true, this dearth of low low-res scrap "means that residual-free scrap substitutes or virgin iron units will have to be added to the mix in order to keep residuals within limits."
Consumption of steel scrap substitutes in the United States, in fact, is expected to grow 5 million to 8 million tons a year in the next decade, Busse reported. This trend dovetails with Marcus's prediction that there will soon be a "frenzy" among steelmakers to construct steel scrap substitute facilities, as Nucor has done with its iron carbide venture in Trinidad.
Despite the growing use of scrap substitutes, however, they will only claim a small portion of the market, by tonnage, compared with steel scrap, Correnti predicted.
Aside from scrap substitutes, steelmakers are exploring new steelmaking technologies that are more efficient than current methods—technologies such as direct steelmaking using pellets, lumps, and iron ore fines which allows producers to go from ore to liquid steel in one step.
New Jersey Steel, for instance, a rebar minimill, invested $50 million to shift its facility to the Consteel process, which enables it to continuously charge scrap into its furnace and use off-gases to preheat the scrap. This process, which requires less-dense scrap, has enabled the mill to reduce its energy demand 30 percent, according to Pasquarelli.
Looking ahead for steel, Marcus said steel demand could dip in 1997, creating a "death spiral" among new and old steelmakers. "During this time," he asserted, "only the high-quality, low-cost producers will survive."
Aside from that black cloud, however, the steel industry should enjoy good times in 15 of the next 20 years, Marcus forecast, adding that scrap prices should remain relatively high in the future, with the potential for premium scrap to see price spikes of $40 to $50 a ton above other grades.
Busse urged recyclers to strive to control the cost of their scrap because "steel can only remain competitive against other materials if scrap costs remain stable and competitive." High scrap costs could force steelmakers to look more seriously at alternative feedstocks and pursue non-scrapbased steelmaking technologies.
"On the other hand," Busse said, "if the cost of scrap remains competitive, many of the contemplated alternatives may never successfully emerge as a potential future threat to the recycling industry."
Skid-steer loaders are essential in many scrap recycling facilities, yet they can pose safety hazards when not properly maintained or operated. Here’s some advice on how to use this equipment safely.