July/August 1995
The Canadian recycling industry’s annual convention provided a brief but dense examination of commodity trends, environmental developments, and association projects.
Jeff Borsecnik
Jeff Borsecnik is an Associate Editor of Scrap Processing and recycling
The range of topics affecting recyclers is ever-broadening, according to speakers at the annual convention of the Canadian Association of Recycling Industries (CARI) (Don Mills, Ontario), held in June in Ottawa. Among the issues of importance to Canadian recyclers are dramatic shifts in steel production—especially new minimill capacity—and the expected privatization of CN rail, CARI President Maxwell S. Zalev of Zalev Brothers Ltd. (Windsor, Ontario), told the group. And CARI’s newfound “excellent” financial situation puts the association in a good position to help its members deal with these and other issues, such as problems with the federal goods and services value-added tax, use of shredder fluff as daily landfill cover, chlorofluorocarbon (CFC) regulations, and the shortage of railroad gondolas for scrap transport, Zalev reported.
CARI is working to expand its visibility and membership, Zalev noted, thanks in part to a government grant that is that is funding a few association projects, namely a public relations video on the role of Canadian recyclers, a paper evaluating the benefits of scrap metal recycling in Canada, and environmental operating guidelines for the industry.
CARI is also benefiting from a government-industry exchange program that will provide public funds to help the association expand its membership and government relations efforts. Len G. Shaw, former director of the resource processing industries branch of the federal Metals & Minerals Directorate (Ottawa), has been hired to take on this project.
A 40-Year Fallacy
The convention’s commodity-specific sessions included a ferrous meeting led by James W. Brown of J.W.B. Associates (Wilton, Conn.), who noted that there’s always been fear of an “imminent” scrap shortage during his 40 years in the business. But in reality, “there isn’t a shortage of high-quality scrap—that doesn’t even compute,” he said, relying on a historical review of steel and scrap trends.
Brown did predict that the electrical furnace (EAF) segment of the steel industry’s share of world production will grow to 357 million metric tons (mt) by 2005—a jump from the 225 million mt recorded in 1993—and it will win at least 10 percent of the market for finished (flat) products. But even if all steel were produced in electric furnaces, overall scrap use would not change much—iron ore in some form must always be used, he said. As evidence, he noted that scrap consumption has been relatively flat, with only periodic fluctuations, worldwide since at least 1980, despite the fact that EAF production grew during the period from 2 percent to 30 percent of the world production, which itself has been flat on a per capita basis. “If it’s going to change, there has to be real reason,” said Brown. “Otherwise, you have to except the past as the wave of the future.”
To be sure, growth in continuous casting has cut availability of production scrap drastically, increasing pressure on obsolete material, Brown noted. Yet, worldwide trade scrap has increased, and scrap prices have been flat overall since 1980. All of these factors suggest there is no imminent shortage, he said.
Since flat products represent the real growth market for EAF steel and manufacturers of such quality products demand virgin ore units, scrap “substitutes” are absolutely necessary--and vital from the scrap supplier's perspective, according to Brown. "This is heresy, probably, for a scrap guy to say 'use more pig iron,"' he said, "but down the road it doesn't look so bad" if it means the consumer can use more lower grades of scrap.
The real issue, said Brown, is overall value--which may include prizes like lower energy, refractory, labor, or other costs resulting from different material choices. "I want to leave that message: Everything has a value--but isn't necessarily sold or bought that way."
Nonferrous Focus
The nonferrous meeting also featured analyses from industry experts, with four nonferrous commodities sharing the spotlight.
Aluminum. "If Detroit sneezes, we get pneumonia," said Joseph S. Viland of Wabash Alloys (Wabash, Ind.), describing secondary aluminum smelters and their dependence on automobile manufacturing. The good news, of course, is that aluminum use in cars is growing--it's 210 pounds today and should hit 350 pounds by 2000, he predicted.
Another positive for U.S. secondaries is great potential for consumption growth in Mexico, he noted.
On the primary metal side, Viland said that the London Metal Exchange (LME) is "a big sump for metal" that keeps production going as long as the producers can recoup their cash costs. As evidence, he pointed to the period between 1990 and 1993, when, though Western World production growth was weak, C.I.S. exports exploded, leading to major surpluses on the exchange. This resulted in the so-called memorandum of understanding among world aluminum producers, which cut production but failed to provide much of the promised Western investment in environmental modernization of C.I.S. aluminum production.
Growth in demand--more so than production cuts--has trimmed LME inventories to the point that they could hit zero by Oct. 31, said Viland. This has helped raise prices, he said, noting that, although values have moderated since last year, they are still much higher than during 1991 and 1992.
A cloud in the form of "near-panic selling" materialized in February, noted Viland, as investment funds, which had pushed prices to nearly double their late- 1993 level by January 1995, began to opt out.
On the brighter side, Viland projected that demand growth should continue at a rate of 2.8 percent.
Copper. The LME/Comex (Commodity Exchange Inc.) arbitrage, which generally favors the LME, was at about 4 cents a pound in favor of Comex as of the CAR 1 meeting, down from its 1995 high of 8 1/2 cents, reported Ivan Betcherman of Ingot Metal Co. Ltd. (Toronto)--a reflection of softening U.S. consumption and growing demand in Europe and Asia.
Copper prices rose from 80 cents to about $1.36 a pound last year as stocks fell, Betcherman reported, noting a subsequent price dip. He also pointed out that investment funds have "wreaked havoc" on prices simply because of the sheer strength of their purchasing power.
Looking ahead, Betcherman predicted world demand growth of only 1.5 to 1.9 percent annually through 1997, while supply is expected to grow "significantly," with refined production projected to rise 5.1,7.7, and 6.4 percent in 1995,1996, and 1997, respectively. Most of the growth will come from solvent extraction/electrowinning production growth in Chile and Arizona , he said.
As a result, supply should exceed demand in 1996 and 1997, Betcherman predicted, identifying Chinese consumption and Eastern European exports as the wildcards. He pegged prices to remain fm in the near term but soften to 80 to 85 cents a pound by 1997. On the scrap side, Betcherman commented on the increasing globalization of the industry, pointing out that "industrial demand in a country like Taiwan can affect the price of scrap faucets in a city like Winnipeg ."
Nickel and Stainless Steel. Canada absorbed nearly 50,000 mt of U.S. stainless scrap last year--or about 16 percent of the total--a figure double what it was five years ago, according to Barry Hunter of Keywell Corp. (Port Elizabeth, N.J.). He also noted that most Canadian stainless scrap, which used to come to the United States, is now staying at home.
U.S. exports were up last year, reflecting growing world demand, Hunter said. "The supply for 8-80 is under tremendous pressure, to say the least," he said. U.S. production capacity is running "flat out" and expansion is coming, while the weak dollar is inhibiting import of finished products.
Nickel units in stainless scrap are selling at a premium to the LME today, he reported. But consumers are resisting, and some are turning to the cheaper lower grades of scrap, boosting recycling of these materials.
Worldwide, stainless production should grow 7 percent per annum through 1997, according to Hunter, leaving the scrap industry "hard-pressed" to meet demand.
Hunter closed by noting that Russian nickel production is expected to continue to decline this year.
Lead. Canadian lead-acid battery recyclers face challenges similar to their U.S. counterparts--and then some--according to Brian McIver of Nova Pb Inc. (Ville Ste.- Catherine,Quebec ). For one, the greater distance between population centers in Canada makes collection more difficult, he said. Also, batteries last significantly longer in colder climates due to slowed electrolyte evaporation and chemical degradation.
But perhaps more significant is a greater regulatory burden: "I'm very embarrassed to admit that to import one load of recyclable lead scrap into Canada from the U.S., it now requires 43 pages of non-Nova documents," he said. McIver encouraged CARI members to review and protest such government regulations, which result in an unlevel playing field, especially with regard to the United States .
McIver noted that the equivalent of 7.7 million starting, lighting, and ignition batteries were sold in Canada last year, representing more than 61,000 mt of lead. Looking at other stats, he pointed out that the Canadian battery recycling rate was at more than 93 percent in 1991. In this regard, the country is experiencing the same trend toward vertical integration into recycling by battery makers as in the States, he said, citing the fact that Exide Canada has instituted a collection program that includes about 350 Canadian Tire Corp. stores and is expected to recover more than 800,000 spent batteries during 1995.
Environmental Duties and Costs
In addition to commodity sessions, the CARI convention offered presentations on environmental topics important to the country’s scrap recyclers.
Attacking Problems. “You can’t sit back and ignore environmental obligations Jay N. Rosenblatt of the law firm Simpson, Wigle (Hamilton, Ontario) warned CARI members. “What you don’t know can hurt you.”
Rosenblatt offered a review of Canadian environmental rules and enforcement trends. He noted, for example, that fines are now crossing the old $200,000 ceiling—and these costs don’t include cleanups, jail terms, and other court-imposed penalties.
Ontario ’s Environmental Protection Act imposes retroactive liability, so the government “can go after past and present owners—and this is just the beginning,” said Rosenblatt. The province is also considering legislation that would classify recycling operations as waste management sites, and he counseled the group to make sure they are heard on the issue. He also warned that company environmental problems can spill into a recycling executive's personal life through such avenues as loans made to one's business.
Generally, Rosenblatt encouraged recyclers to understand environmental statutes and liabilities and document compliance activities. And, if troubles arise, "don't ignore the problem, deal with it, and deal with it now”--or face much more serious consequences later.
Evaluating Compliance. Noting that banks, shareholders, customers, and the public have joined the government in pressuring businesses to do right by the environment, Donald M. Gorber of Senes Consultants Ltd. (Richmond Hill, Ontario) encouraged recyclers to get a grasp of their environmental liabilities. The first step is performing an environmental audit, which is a systematic review of environmental compliance, he said. Then, to determine if property is contaminated, a detailed site assessment is performed, followed by remediation if necessary.
An important legal tool to back up these efforts is the due-diligence audit, Gorber noted, explaining that this is a carefully documented evaluation of an operation against the yardsticks of regulations and best industry practices.
Cost Assessment. Traditional accounting practices have not accurately portrayed environmental control costs, according to Bruce Reid of General Motors of Canada Ltd. (Oshawa, Ontario). He noted that costs may be hidden, citing as one example overtime labor rates paid for additional maintenance on pollution control equipment.
But the way costs are perceived is changing, said Reid, who identified a number of trends with true-cost ramifications:
- moves beyond compliance, such as establishment of corporate environmental policies, dedicated environmental staffs, audit programs, and community advisory groups;
- recognition of costs like those related to land transactions and record-keeping;
- emphasis on prevention rather than control;
- increasing government involvement, including regulations, but also data collection and various voluntary initiatives--even while government is shrinking, leaving more responsibility on industry;
- product redesigns to cut waste and improve recyclability; and
- use of life cycle analysis, including evaluation of resource consumption, green gas generation, and so forth.
The Canadian recycling industry’s annual convention provided a brief but dense examination of commodity trends, environmental developments, and association projects.