November/December 2012
Though small and medium-sized shredders can help smaller scrap companies recoup more value from the material they handle, some worry the proliferation of shredders could increase the competition for available scrap.
Bigger isn’t always better—just ask Goldilocks, Mama Bear, and Baby Bear. Sometimes small or medium is just right. Such is the case with shredders, according to several equipment manufacturers and scrap processors Scrap interviewed. Though large shredders were the trend in the early- to mid-2000s, and though they certainly can process more tonnage and more types of material with less preparation, it’s inefficient to have more shredding capacity than material to shred—a situation in which many operators find themselves today, one equipment manufacturer says. ScrapÂyards without enough volume for a large shredder might find a small or midsized unit the perfect fit, he says. “Ninety percent of what you could shred in a big shredder you could shred in a small shredder. It just does it in a smaller and less expensive way.”
Shredder manufacturers say they’ve seen interest in smaller machines grow over the past decade, but a major shift “began about five years ago, and within the past couple of years it’s really become evident,” one says. Another agrees. “There are fewer inquiries into large shredders and more inquiries into small shredders,” this vendor says, to the point where it developed a new, smaller machine to meet market demand. The company reports selling 10 of the smaller machines in the past two years with little to no marketing. Another company says it began building 60-inch machines in 2001 and now offers up to eight models in the 60- to 85-inch range in hammer swing diameter. It has sold about 40 shredders in that size range in the past 10 years.
Even a smaller shredder isn’t for everyone, but operations with consistent volumes of end-of-life vehicles and light iron from 2,000 to 5,000 tons a month might find that this equipment can help them get more value out of their material, these vendors say.
Making the Leap
Higher profits are on the minds of some small and midsized scrap processors, who began asking manufacturers to design a smaller shredder so they could shred material they’d been selling loose, crushed, or baled to large shredding operations, one vendor says. “Their feeling is, ‘Why should I send my cars to [shredder operators who] are making $80 a ton profit when they’re done? I’m going to go out and buy a smaller shredder and stop making these other guys rich,’” he says. These facilities see shredding as a way to improve their profit margins and recoup more money from the material they accept, another vendor says. “Profit margins are shrinking for those who just handle the material” without shredding, a manufacturer says. “In order to make a profit, [recyclers] have to do more … and a small shredder is the answer.”
Market share is another concern. “Everyone is looking for a way to capture more of the market because material is so hard to get. Controlling material is the key,” one company representative says, and there’s nothing to stop shredder yards from bypassing feeder yards to purchase scrap directly from peddlers. Sure enough, one scrap recycling company saw itself losing ferrous customers to a larger operation. “We were still buying [the customers’] nonferrous, but we couldn’t compete on autos and white goods until we put in the shredder.”
Further, with industry consolidation, the relationships between feeder yards and shredder yards are not what they once were. “We were tired of getting pushed around by one of the larger shredder entities,” says a processor who recently installed a small shredder. “We were tired of four-hour waits to leave our material at their yard, so we ran the numbers and decided to make the investment” in a shredder. “We felt we had enough material to justify it—2,500 to 3,000 tons a month, of which about 15 percent is car bodies.”
Is that the right volume to justify a shredder purchase? Opinions on that point vary. Several manufacturers say 2,000 to 2,500 tons of unprocessed material a month is the starting point; for another, “the sweet spot would be around 3,000 to 5,000 tons.” Yet another vendor aims squarely at the center of that range, recommending a minimum of 4,000 tons a month. One scrap processor who has been running a 60-inch shredder for nearly two years calculated that just 1,000 tons a month is his break-even point, though the deciding factor for him was not the tonnage. “It depends on your markets and your margins. It all depends on what you can get for your scrap if you sell it to a shredder compared to what you can get for your frag if you shred the material yourself.” This processor might be atypical in that he shreds few automobiles, however. “We bought the shredder to do white goods,” he says.
Auto dismantlers also are part of the market for smaller shredders. One self-service auto dismantling yard installed an 80/104 shredder with a 4,600-hp motor to process 8,000 tons of ferrous and 650,000 pounds of nonferrous a month. “We’re doing well, making money, and it’s all my own material,” a company representative says. He doesn’t purchase additional material for shredding currently, “but I’m thinking about it,” he says. “I’m getting a lot of inquiries from potential customers who are disgruntled with the big shredders they’re selling to.” He reports shredding 115 to 120 tons an hour. “I run the shredder two to three days a week about eight hours a day,” he says, saying of the shredder purchase, “I should have done it years ago.”
Design and Installation
The two numbers used to denote a shredder’s size are, first, its hammer swing diameter in inches; second, the “effective width” or “width of the interior” in inches, which manufacturers measure differently. To shred automobiles, a shredder must have at least a 60-inch hammer swing, one vendor says. Small shredders typically have rotor diameters or hammer swings from 60 to 74 inches; medium-sized shredders generally range from 80 to 90 inches, these manufacturers say. The infeed openings range from 60 to 85 inches on small shredders and 90 to 115 inches on midsized ones. One company representative points out that two different manufacturers might use identical model numbers even if the actual equipment sizes differ. “It depends on where they’re measuring from.” For that reason, he urges processors to confirm the exact size of the components of the shredder they’re considering and not just go by the model number.
Makers of smaller shredders point out that scrapyards might be able to spend less on installation for these machines compared with larger models. One shredder claims its modular design doesn’t require a concrete foundation, thus its installation costs about half of what a traditional installation with site preparation would cost, that vendor says. “The investment is in equipment—not installation.” Another manufacturer says foundations for all shredders have been reduced by up to 66 percent based on new skid-and-spring designs. Further, some say infeed conveyors are optional. One manufacturer estimates that half of the small shredders operating today don’t have them. “You don’t need an infeed conveyor when you’re shredding 30 to 40 tons an hour,” he says. Another salesperson highly recommends the conveyor, however, noting that “some customers did not install them initially but added them later.” A conveyor system can increase productivity under certain conditions by allowing the operator to feed the shredder more consistently and possibly inspect incoming material for unshreddables they don’t want to go into the mill.”
These sources agree that scrapyards should not cut corners in their downstream nonferrous recovery systems, however, as such systems are essential for realizing maximum profit. “Downstream is the key to running a profitable shredder today, regardless of its size,” one manufacturer says. “The buyer of a small shredder who doesn’t put in a downstream system or who puts in an insufficient system is shortchanging himself because he’s not getting the recovery he needs to meet his business model.” The auto dismantler who installed a shredder agrees. “We spent a lot of money on the downstream system, and I’m very happy with it. We’re only leaving about one-half of 1 percent of nonferrous and steel combined in the fluff.” Before the company installed a shredder, it would strip the vehicles and sell the car hulks to a local shredder. With that process, “we thought we had pulled all the nonferrous out,” he says, but the company ran some of the stripped cars through a new shredder and downstream separation system as a test. “I recovered 35 pounds of nonferrous from each of those cars. We’re not missing that anymore,” he says. Another shredder operator, with a nonferrous system that recovers aluminum, zinc, bare copper, and brass as well as a picking line for insulated wire and stainless steel, says “we are definitely making money and have no regrets about installing the shredder.”
That said, “for a lot of people new to shredding, there is obvious sticker shock in the cost of these systems,” one manufacturer says. Some customers who can’t afford to add downstream processing equipment at the same time as the shredder add pieces as they can afford them, one vendor notes. “They understand they are losing profit potential, but they want the shredder so badly they can calculate the increase in value of their scrap—just on the basis of the shredded ferrous—makes it worth the investment. They wait until they have the money from the ferrous operation to pay for a complete nonferrous downstream [system].” Another manufacturer says he sees companies buying smaller shredders and using the money they would have spent on a larger mill for a downstream recovery system. “The key for any shredder installation today is getting everything you can out of the material,” he says.
Powering Up
Manufacturers estimate the output range for small shredders is roughly from 15 to 50 tons of ferrous an hour and for medium shredders, 50 to 120 tons an hour. “Shredder throughput is a function primarily of horsepower,” one manufacturer explains. Most small and some medium shredders have direct-current electric motors that range from 1,000 to 4,000 hp, the manufacturers say. DC motors better control the power surges that can occur when shredding difficult material, one manufacturer says. “With a DC motor, when you lose rpm, you don’t lose torque like you do with an alternating-current motor.”
Another company rep says “the drive on the DC motor is the key.” He explains that the drive “has its own control that allows you to ramp up the motor when you start so you don’t see an in-rush.” Operators also can set the motor so it will never use more than its full-load amperage. “It flat-lines, which eliminates the peaks and demand-type issues you see with an AC motor on some of these machines,” he adds. Operators also can change speeds and stop the machine quickly, if needed. “It’s just very flexible.” As another vendor puts it, “DC motors offer a wide range of variability for different types of scrap and [for controlling] the power factor and incoming line current.”
Even though DC motors have many fans, some shredders use AC motors or diesel or natural gas engines. Traction or locomotive-type motors rebuilt to shredder standard can be cost-effective, one vendor says. Though he acknowledges that DC motors are best for smaller shredders, one manufacturer says he has used natural gas engines on several installations. “They are reliable, clean, and efficient—they work great. When the engine gets pulled down by the scrap, the torque curve gets back up to speed quickly.” The cost can be 25 percent or more than comparable DC motors, but “there are a lot of places where you can’t find enough electricity or it’s so expensive to run [an electric] line,” he says. “You can run a natural gas engine from a 3- or 4-inch [gas] line.” Further, he points out, “the electric utilities are just terrible to work with, while the natural gas utilities are the exact opposite—they crave demand.”
Choosing a Size
Even a smaller shredder is a big investment, so processors should be sure to purchase the size that’s right for them, sellers say. A midsized shredder, with a hammer in the 400-pound range, can process 90 percent of the available material, one vendor says, but “the small shredder limits what an operator can purchase and process.” A 60-inch machine can’t handle heavier grades, such as skeleton or demolition scrap, another says. “I think the argument for a bigger shredder is the wider variety—the expanded range—of materials you can shred,” he states. “A 1,000-pound hammer swinging at a 120-inch radius is a hell of a lot more powerful than a 200-pound hammer swinging at a 60-inch radius.” One manufacturer says he has customers who looked at the smallest shredders but eventually picked a medium-sized mill, which he recommends. “Scrap is changing,” he says. Yards are shredding heavier material today than 10 years ago. Further, “it’s hard to go out and chase cars with the big guys today, given all of the shredder capacity in the [United States].”
Do scrapyards that buy small shredders ever regret not going bigger? Thinking about the first wave of smaller shredder buyers, one vendor puts it like this: “In good markets, when material was flowing, I think a lot of them would have liked to have had bigger machines. In today’s market, because of the abundance of shredders, I don’t think the majority of customers would be looking for a bigger machine.” And smaller machines have certain operational advantages, some of these companies say. “With a smaller machine, you have the opportunity to pick and choose a little bit” what you purchase, one manufacturer says. “You’re not forced to keep the thing fed on a regular basis. Your margins give you a little more room—you don’t have to worry about not running it for a day or two. With a bigger machine, you have to keep it producing. Bigger was definitely better when material was plentiful and margins were good. They’re not so good anymore.”
It comes down to what volume of scrap a company controls, these sources say. With 50,000 tons of scrap to run a month, bigger is better, according to one manufacturer. “It costs the operator less for every ton processed, other things being equal. You have an economy of scale. But,” he adds, “if you have a big shredder and you don’t have the tonnage, it could wind up costing you more per ton.” Another vendor agrees that “the break-even point on the operating costs associated with a big shredder is much higher.” In terms of flexibility and maintaining margins, “it’s more attractive to customers to have a lower break-even point, and the smaller shredders have that,” he says. “There’s an overabundance of large shredders, and they can’t buy enough feedstock to keep busy.” If you hear someone in the scrap industry gripe about too many shredders, it’s most likely an operator of a large shredder feeling the effects of companies with small shredders, he notes.
The Bottom Line
It’s difficult to put a price tag on small- and midsized shredders because of the many variables: mill size, motor, drive system, infeed system, controls, conveyors, ferrous cleaning system, site preparation, installation, power type and availability, and more, the manufacturers say. In general terms, they say a small shredder, at a minimum, could cost $1 million for the shredding unit alone and $3 million to $4 million for a complete system; a midsized shredder might be about double that or more. Those prices are still nowhere near the $10 million to $15 million price tag—and up—for a large shredding system. “One of the big key points when looking at a smaller shredder is that the recycler can put more money into nonferrous recovery equipment where all the profits are,” one manufacturer notes. “Save money on the shredder; invest it where it pays off.”
Though small and midsized shredders have been around for years, they’re enjoying newfound popularity and now are available in more models than in the past. Large shredders won’t disappear from the landscape, but “their numbers are probably not going to grow,” one vendor says. How long will this new trend last? “The new shredders will increasingly be small to medium-sized machines,” one manufacturer predicts. “I see that for the indefinite future. There is a push all over the world for the smaller shredders.”
Smaller shredders have changed the playing field, another company representative says. Some scrapyards that install them find that companies they previously supplied now treat them as competitors. “They want to steal our peddler accounts,” one processor says, though it doesn’t consider its industrial accounts at risk. Still, with the competition, the company sometimes finds itself paying more for material. It’s all about control of material, one vendor says. If your company has control of at least 2,000 tons a month—you don’t have to buy it on the open market from another dealer—a small to medium-sized shredder is probably on your mind, or in your yard.
Though small and medium-sized shredders can help smaller scrap companies recoup more value from the material they handle, some worry the proliferation of shredders could increase the competition for available scrap.