Imagine: ReMA 2004 Convention Highlights

ISRI invited recyclers to imagine their future success at its 2004 convention, which ended up being the best-attended ReMA show in the new millennium.

ISRI’s 2004 convention, held in late April in Las Vegas, had the theme “Imagine,” yet even ReMA couldn’t have imagined the success of this year’s event. In the end, the gathering attracted 3,102 attendees, making it the fourth largest of ISRI’s 17 annual conventions. Improved economic conditions and record scrap prices were two factors behind the higher attendance, but scrap professionals from around the world came for other reasons as well—namely, the convention’s networking, educational, and social opportunities, not to mention the largest scrap recycling exposition in the world.
   Beyond its impressive attendance, the 2004 ReMA convention was notable for the election of new national ReMA officers and the end of Cricket Williams’ two-year term as ReMA chair. In his farewell address, Williams summed up his tenure with the phrase “success and continuing challenges.” Among the successes, he noted, ReMA has:
• stopped draining its invested funds to pay for operational expenses;
• reversed the slow but steady decline in membership, with 2004 shaping up to be ISRI’s second consecutive year of membership growth and strong member retention;
• improved the RecycleGuardsm program by selecting a new insurance partner—ACE/Cigna Group;
• renewed its commitment to members who operate small businesses by establishing the Small Business Council;
• made progress on the mercury-switch issue, the SCRAP3 certification program, and Design for Recycling® efforts;
• held focus groups at virtually all ReMA chapters to gauge member needs and improve communications; and
• defended the industry on free and fair trade issues ranging from foreign tariffs and subsidies to export controls.
   Looking ahead, Williams said ReMA will continue improving its communications to all levels of members and will renew its commitment to safety and loss-prevention programs, which “will truly make a difference for our member companies.”
   Overall, Williams expressed confidence that ISRI’s new leaders will “pick up where we’ve left off and will make our organization even more successful.” Those new leaders—elected for the 2004-2006 term—include Chair Joel Denbo of Tennessee Valley Recycling L.L.C. (Decatur, Ala.); Chair-Elect Frank Cozzi of Cozzi Enterprises Inc. (Chicago); Vice Chair George Adams of Adams Steel (Anaheim, Calif.); and Secretary/Treasurer John Sacco of Sierra International Machinery L.L.C. (Bakersfield, Calif.). 
   The election of new ReMA officers was the climax of the convention’s five days, which were packed with governance meetings, workshops, general sessions, commodity spotlights, spouse programs, social events, and the exposition. Here, we offer some highlights of the convention in words and pictures.

Commodities in the Spotlight
‘China Inc.’ and Aluminum. “Sovereign lending” and various unfair trade practices by a Chinese government that acts like “China Inc.” are the main causes of America’s manufacturing difficulties, though outsourcing, U.S. productivity gains, higher U.S. labor costs, and other factors also play a role, said John Lapides of United Aluminum Corp. (North Haven, Conn.) at the aluminum spotlight.
   Noting that loans from Chinese banks to Chinese manufacturers are often not repaid, Lapides concluded that “capital is free” in China. As a result, Chinese manufacturers are “building capacity far in excess of demand.” Meanwhile, China raises barriers to U.S. goods, manipulates its currency to make U.S. products uncompetitive, condones intellectual property theft, and subsidizes its manufacturers through its value-added tax (VAT) system, Lapides asserted.
   When the Chinese do buy U.S. products, they’re mainly interested in machine tools and other capital goods that can help them bridge technical gaps. “They’re not buying our manufactured goods,” Lapides noted.
   China is buying America’s aluminum scrap, which has created a temporary windfall for sellers, he said. Long term, however, Chinese buying will reduce the generation of new scrap in America because U.S. factories will make fewer manufactured goods, creating “ripples up and down the supply chain,” he warned. In the worst-case scenario, he worried that China’s overcapacity in aluminum could lead to plunging commodity prices if some 6 million mt of Chinese aluminum ends up being used for something other than its own infrastructure.
New Bull Cycle. James Southwood of Commodity Metals Management Co. (Wexford, Pa.) offered a more upbeat look at the scrap aluminum world. Comparing data on aluminum prices since 1978, Southwood observed that there have been five bull and five bear markets in that 26-year period (when prices were higher or lower, respectively, than the long-term LME average aluminum price of $1,500 a mt, or 68 cents a pound).
   The most recent bear market ended last October, he said, which means that the industry has recently entered its sixth bull market of rising prices. With the average bull market running 27 months, the current runup in prices could easily last until at least December 2005.
   This new bull cycle, however, is “strictly a U.S. phenomenon,” Southwood added, noting that the price of aluminum globally is not above the long-term average. Instead, U.S. scrap dealers are enjoying good times largely because of the weakness of the U.S. dollar.
   Southwood forecast an increase in industrial production in the United States, with aluminum orders for both extrusions and sheet/plate up roughly 20 percent, as well as a strong year ahead for domestic carmakers. On the negative side, inventories are also rising, he pointed out. Globally, aluminum consumption will likely rise this year in most regions—with China/Hong Kong being a notable exception. There, Southwood sees consumption growth declining from 32.3 percent last year to 17.2 percent this year, followed by further declines in the next two years. Western World aluminum consumption, meanwhile, should rise from 4.3 percent in 2003 to 5.8 percent in 2004, he said.
   While China’s growth in aluminum consumption may slow, its demand for aluminum scrap is likely to keep rising—from 50,000 mt a month last year to nearly 60,000 mt a month projected this year and as much as 75,000 mt a month in 2005, Southwood stated. 
   If the dollar remains weak and the U.S. economy doesn’t reverse itself after the November elections, aluminum prices should reach at least $2,000 a mt before the current bull cycle ends, Southwood offered.
A Copper Boom—and Bust? The copper market, which touched an 81/2-year price high earlier this year, “is not done yet—it has not blown its top,” said David Hightower of The Hightower Report (Chicago) at the copper spotlight.
In his view, production cutbacks by copper producers set the market up for the recent high prices, though “the supply tightness will reach its zenith in September of this year.” As such, Hightower stated, “I do see a runup to $1.48 to $1.54 in September through October”—and even those prices could be understated if the copper market encounters any problems in production, labor, or energy.
   Hightower warned, however, that “the period we’re about to enter is going to be a period of boom and bust,” observing that “this is the boom.” He advised scrap recyclers to “figure out a way to make a large profit when a large profit is offered because there may be periods of time when you’re going to
be seeing prices that you really didn’t think could happen.”
   In the face of escalating health care, fuel, and environmental costs, it will be tougher to be profitable in the future, Hightower said. “So when you see higher prices, you had better make sure you are taking advantage of that,” he suggested, adding that “the ability to use some kind of cross hedge and to protect yourself and try to add anything to your bottom line is going to be critical. It’s important to let the volatility benefit you instead of run you over because I think that’s what you can bet on. The volatility in the marketplace is something that will not wane.”
   Despite his overall positive forecast for copper, Hightower cautioned that next spring he could have “a completely different picture—and don’t be surprised if we’re looking at something closer to $1.”
Saving Western Copper Recycling. The secondary copper smelting business has been steadily shifting from the United States and Western Europe to the Far East, marking a shift from high-tech to low-tech operators, noted Hans-Gerhard Hoffmann of Norddeutsche Affinerie AG (Lünen, Germany).
   The export of copper recycling to markets with low labor and environmental standards may be attractive in the short term, he said, but is it responsible recycling for Western businesses as well as Western nations? For those businesses, this trend has already resulted in job losses, lost recycling know-how, and inadequate scrap supplies, Hoffmann said. Also, many of today’s complex copper-bearing scrap materials require high-tech, environmentally sound recycling, which isn’t necessarily available in the importing countries. This is becoming more important as producer-responsibility laws take effect in Europe and elsewhere, requiring manufacturers to ensure the environmentally sound handling of their end-of-life products, Hoffmann said.
   Another problem is that the copper scrap trade is not being conducted in a free and fair manner, he stated. Chinese buyers, in particular, can pay top prices for scrap because they receive “top protection” in the way of government subsidies, interest-free loans for the recycling industry, tax-free import quotas for copper raw materials, and a protected domestic copper price. “Free trade isn’t possible unless it is also fair,” said Hoffmann, adding that “recycling must be and can be economical on its own without subsidies and government trade interventions.” Such subsidies in China and other markets “do not represent a basis for the future—and they will not last for too long.”
   Already, costs are rising in China, energy is becoming tight, freight rates have gone up, and there’s a lot of catch-up work to do regarding environmental protection, Hoffmann noted. Also, China likely won’t subsidize scrap imports forever, and its domestic scrap generation will make it less dependent on imports by 2010. 
   In sum, Hoffmann said that “politicians and society need to understand that countries with a strong modern manufacturing base need a strong modern recycling base. There needs to be an exchange of goods on a high technological level. Exports to subsidized markets with low recycling standards are not the solution for future recycling.”
Survival Through Partnering. Last year, the “highly competitive” brass and bronze ingotmaking industry got even more competitive due to tighter scrap supplies and scrap prices that “soared beyond anyone’s predictions or expectations,” said Mark Weintraub of The Federal Metal Co. (Bedford, Ohio).
   Thus far in 2004, “there are hopeful signs that our industry will pull out of this deep manufacturing recession,” he noted. Ingot sales to North American red-metal foundries, for instance, are projected to reach 155,000 tons this year, up from the 140,000 to 150,000 tons sold in 2003. Still, he said, “severe capacity pressures” and other factors are preventing the industry from earning the same return on investment as in the past when the terminal copper markets reached the same high levels.
   Scrap prices have certainly been “hit the hardest of all of the components in our cost structure,” Weintraub said. Competition for scrap has put a premium on many traditional grades, adding “a further erosion of gross margin on ingot sales as we have been unable to pass these increases on to foundries.”
   In these challenging markets, Federal Metal decided it could best ensure its future survival and profitability by differentiating itself from its competition in the following three critical areas:
• Foundry Customers: The firm attempted to differentiate itself through unique products and services, further developing its lead-free alloys and creating a product called Fingot, Weintraub noted;
• Manufacturing Sector: The company redefined itself as a manufacturing operation, which meant following manufacturing principles and adopting tighter inventory controls, quality measurements, statistical process controls, and just-in-time delivery; and
• Suppliers: Federal Metal sought to establish “partner” relationships with its suppliers. First, it clearly defined and communicated its material requirements, including which metals are most cost-effective in its furnaces and which are most cost-effective to handle and process. As part of this process, the company invited suppliers to tour its plant to “see and better understand our requirements.”
   Thanks to these partnership efforts, Federal Metal has seen the quality of its scrap supplies improve “exceedingly,” enabling it to continue to reach new production levels. This partnering also gave the company added supply security in times of tight competition. Even when scrap was in short supply, the firm’s suppliers suggested substitutions or helped brainstorm whether other scrap grades could work in its furnaces, Weintraub said.
A ‘Perfect Storm’ for Ferrous. Steel markets are in the midst of a “perfect storm” of pricing in which demand for steel as well as ferrous scrap is up while supplies for both are down, said John Ferriola of Nucor Corp. (Charlotte, N.C.) at the ferrous spotlight. As a result, prices for steel and scrap have been rising independently, while pricing pressure is compounded by the interdependence of the two commodities.
   Examining long-term issues, Ferriola cited three “megatrends” in steel pricing: China’s expansion, currency exchange rates, and consolidation of the steel industry.
   China has a $1.4-trillion economy, which has grown sevenfold since 1977, with Chinese steel production growing from 100 million tons in 2000 to 250 million tons last year, Ferriola noted. China’s automobile production should more than double by 2010, he added, while so much of that country’s economy is focused on construction that he joked the national bird in China is the construction crane.
   On the currency front, steel imports tend to follow the value of the U.S. dollar, so when the dollar is rising, so are steel imports, Ferriola said. When the dollar is weak—as it is now—steel imports decline. That, in turn, limits the supply of steel available and contributes to today’s strong prices. By contrast, the historically strong dollar over the past decade depressed steel prices, leading to a lack of investment in the steel industry and contributing to numerous steel company bankruptcies, he observed.
   Consolidation of the steel industry has led to a paradigm shift in domestic steel market dynamics, Ferriola noted. The merger of numerous steelmakers has removed more than 6 million tons of capacity from the industry and produced a much healthier situation for producers, he said. In 2001, for instance, the three largest producers of flat-rolled steel held 38 percent of the market, while more than 40 percent of U.S. steel firms were either in bankruptcy or facing serious financial difficulty. By 2004, the current Big Three—Nucor, ISG, and USX—control more than 60 percent of the market, while only two firms, representing just 6 percent of the market, are in financial trouble, he said.
   Noting that ferrous scrap had soared from $115 a ton in early 2001 to $270 a ton by February 2004, Ferriola asserted that the “standard prediction methods that worked for 10 years no longer work today” for scrap pricing. 
 Beware the Late ’90s. Analyst Michelle Applebaum of Michelle Applebaum Research (Highland Park, Ill.) warned scrap dealers that conditions today remind her of the latter half of the 1990s, when ferrous scrap prices tumbled after a big rise. The reasons then—and potentially now—included competition from various “scrap substitutes,” she noted. While this competition involved DRI and HBI in the 1990s, today the new substitute could be the Mesabi nugget, a coal-based product that doesn’t depend on using natural gas or iron pellets. This product shows promise but still must prove itself economically, Applebaum said. 
   She described the potential impact of this and other scrap substitutes as “unnerving” for the scrap industry since such projects are quite capital-intensive. Thus, while they are slow to start up, they are also slow to stop once they get going, creating “a permanent level of competition ... that creates a dramatically different scrap curve.”
   Noting that the minimill industry is consolidating, Applebaum stressed the need for scrap companies to do the same and to seek more public capital for the effort.
Euroscrap Rising? The addition of 10 new members to the European Union (EU) in May 2004 could eventually propel reluctant European nations such as the United Kingdom into adopting the continent’s common currency, the euro, predicted scrap broker Alex Antikides of Pan Global Resources Ltd. (Surrey, England). This, in turn, could strengthen the euro enough for it to replace the U.S. dollar in the international scrap trade. Sales to Turkey and the Far East, for instance, could in the long run switch to trading in euros rather than the dollar, “which has proved to be an unstable currency in recent years,” said Antikides.
   The enlarged EU—which now includes Poland, the Czech Republic, Hungary, Slovakia, Slovenia, Lithuania, Latvia, and Estonia, among others—should see its steel production rise from 159 million mt to 181 million mt compared with 91.4 million mt in the United States, Antikides said. European ferrous scrap consumption will climb from 85 million mt to 90 million mt compared with 57 million mt in the United States, while European ferrous scrap exports will grow from 7.98 million mt to 10.48 million mt in the enlarged EU, surpassing the United States’ ferrous scrap exports of 9.4 million mt.
   Though the new EU members lag behind their American and West European counterparts in technology, “this may rapidly change” as other EU members are already investing heavily in the new members’ yards, Antikides said. An enlarged EU—which will expand again after 2007 when Turkey, Romania, and Bulgaria also join—may become “the most influential factor in the world scrap market,” he predicted.
A Nickel Pause? After skyrocketing to $8 a pound in early January, nickel experienced a “sharp correction” for the rest of the first quarter as speculators jumped out of the market and nickel demand decreased due to lower European stainless production, surging scrap supplies, China’s destocking of nickel and stainless steel, and some substitution of austenitic stainless grades by manganese/ferritic grades, said Jim Lennon of Macquarie Research (London) at the nickel/stainless spotlight.
   Many of these factors are temporary, meaning that nickel is only taking a “pause,” he asserted. For instance, European stainless production was set to increase in the second quarter. In China, destocking was expected to end and large new stainless capacity was scheduled to start. U.S. stainless demand was rising strongly, there were questions whether the surge in scrap supplies could continue, and speculators may
return on the long side of the market, Lennon said.
   Looking ahead, world stainless steel production could grow about 8 percent to approximately 25 million mt, driven largely by capacity additions in China, he stated. Nickel consumption, meanwhile, could total 1.31 million mt this year against nickel production of 1.28 million mt, yielding a 30,000-mt deficit in the world nickel market balance.
   There are some concerns going forward, however, including:
• ongoing strong scrap supplies, which could reduce primary nickel demand almost 50,000 mt this year compared with 2003;
• potential supply problems of primary nickel due to limited production growth and extremely low inventory stocks, even with higher Russian metal in the market; and
• continued loss of market share by the traditional 300 Series austenitic stainless (which are high nickel-containing grades) to manganese/ferritic grades such as the 200 Series. 
   Indeed, some consumer goods that use 300 Series are susceptible to substitution by 200 Series and 400 Series stainless, said Barry Waters of the Nickel Institute (Toronto). “We have seen some movement” away from 300 Series, he noted, asking “Will we see more? Is this a trend? I guess it all depends on what your expectation of the price of nickel is.” As he observed, the price of nickel will be the main factor in decisions on which series to use.
Based on forecasts, Waters said that nickel could average $5.69 this year, while Lennon estimated an average LME cash price of $6 a pound in 2004, rising to $6.50 in 2005.
Stainless Shifts Eastward. There is already a “steady shift of demand” to the Far East in stainless steel cold-rolled flat products, said Simon Merrills of ELG Metals Inc. (McKeesport, Pa.).
   Going forward, he projected, Western countries will see their share of stainless cold-rolled demand slip from 59 percent (7.1 million mt) in 2003 to 46 percent (9.8 million mt) in 2012, while the East will see its demand share increase from 41 percent (5 million mt) in 2003 to 54 percent (11.4 million mt) in 2012.
Not surprisingly, China will be the main “stainless steel demand engine” in the 21st century, Merrills said. China’s demand for all stainless steel product forms has grown almost 18 percent a year since the late 1980s, with its current demand totaling 3.5 million mt—about 20 percent of the world market. Its stainless demand will likely continue to grow around 9 percent a year, reaching 9 million to 11 million mt by 2012 and giving it a 30 percent share of world stainless consumption.
   Stainless scrap usage in Asia reached 2.3 million mt last year, exceeding the 1.75 million mt of regional scrap supplies by some 550,000 mt, Merrills reported. This shortfall was been filled by imported scrap, mostly from the United States and Western Europe. Asia’s stainless scrap imports will continue growing, especially with China expected to increase its crude stainless production from about 1.8 million mt in 2003 to
10 million mt by 2012, he said.
Potential and Problems in Chinese Paper. The “China machine,” which has provided such an attractive export market for U.S. scrap paper dealers, should continue to roll, though there are potential bumps in the road ahead, said David Lee of Ralison International Inc. (Diamond Bar, Calif.), the U.S. buying agent for Chinese paper manufacturer Lee & Man Paper Manufacturing Co. Ltd. 
   Though China’s growing population of 1.3 billion people gives it a large labor force willing to work at relatively low wages, China also has a 10-percent unemployment rate. That translates into about 130 million people out of work and poses the threat of social instability, Lee said. Thus, the Chinese government’s chief goal is creating jobs. Indeed, the country needs to grow its GDP at least 7 percent every year just to create those new jobs, he said, noting that “5-percent growth in China would be a recession.”
   Other potential problems in China include a state-owned banking system “that doesn’t know what kinds of loans they have out there”; an electrical system that forces many factories to shut down for four to five days each week because of power outages; and a currency believed to be as much as 40-percent undervalued and thus under assault to have it float freely in world markets, Lee explained.
   On the positive side, China’s banks are working to privatize and reform parts of their business—and its banking system is opening up to foreign competition now that China is in the World Trade Organization (WTO), Lee said.
Going forward, China is certainly planning on continuing its economic boom. The 43 economic development zones that currently attract billions in foreign investment each year could expand to 48 by the end of 2004, Lee said. Lee & Man Paper Manufacturing is likewise bullish on China’s economic future: The company recently purchased 200,000 acres in the Dongguan region to open two more paperboard lines in the next two years, each with an annual capacity of 400,000 mt, Lee noted. This summer, Lee & Man will reach a total of 1.2 million mt capacity and should grow to 2 million mt by 2006, he said.
No Paper Protectionism. Though global demand, especially from China, is often blamed for the rising cost of scrap paper, “basic economics”—and not any kind of export tax or other protectionist measures—should determine the price of fiber, said Vincent Bonfanti of Harmon Associates (Irvine, Calif.), which provides scrap paper to its parent company, Georgia-Pacific. After all, he noted, “if export demand increases domestic prices, it also increases domestic generation.”
   Georgia-Pacific is investing in projects around the world to “drive deeper into the waste stream” to find usable fiber—from residential generators in the United States who increasingly purchase items online (which are shipped in recyclable boxes) to “massive amounts of untapped supply in Central America, South America, and Africa,” Bonfanti said. But domestic consumers need to know that there are tradeoffs to be made: Either the price of packaging needs to rise or U.S. consumers must accept a lower aesthetic quality in products such as packaging boxes (though the strength and utility of these boxes would be unchanged), Bonfanti stressed.
Distinguishing Tire Recycling From Waste Processing. A court case pending in Pennsylvania—Tire Jockey Service Inc. vs. Department of Environmental Protection—is addressing an important issue for all scrap tire recyclers, namely whether a tire recycler is a “waste processing facility” that needs a residual waste processing permit or a recycling/manufacturing operation that doesn’t require such a permit. 
   At the rubber spotlight, Doug Maloney of Begley, Carlin & Mandio L.L.P. (Langhorne, Pa.), the law firm representing Tire Jockey Service, discussed how the case developed, the issues involved, the challenges of litigating the case, and where it stands thus far. Last October, a three-judge panel of Pennsylvania’s Commonwealth Court ruled unanimously that a scrap tire recycler is not a “waste processing facility.” The DEP petitioned for the case to be argued before the entire Commonwealth Court, but its petition was denied. The DEP then filed a Petition for Allowance for Appeal to the Pennsylvania Supreme Court, which at presstime had not decided whether to grant this petition. 
   For scrap tire recyclers who might find themselves in similar circumstances, Maloney offered the following eight lessons he’s learned from litigating the Tire Jockey Service case:
• Lesson #1: Bring Your Wallet. Tire Jockey Service began operating before securing the DEP permit, which snowballed into a variety of problems. The lesson is: Don’t start your recycling activities unless you have enough time and money to do it right. The owner of Tire Jockey Service “should have had enough money to afford not being in business until he got his permit,” Maloney said.
• Lesson #2: Honesty Is the Best Policy. It’s better for you to reveal any bad information up front than to wait for government officials or another party to discover it on their own.
• Lesson #3: Be Civil. Be friendly and cooperative with government officials and others involved in the process. “It’s not going to be easy all the time, but try to view them as people who are just doing their job,” Maloney said. “Try to view them as partners in this process. A little civility goes a long way.”
• Lesson #4: Pick Your Battles. You don’t have to win every battle in the process. Instead, focus on winning the war. In general, don’t fight a battle unless it’s a battle you can win and unless it’s a battle you must win, Maloney said. If it doesn’t hurt you to concede a certain issue, then give in on it. That way, when you do take a firm position on another issue, you’ve added credibility to yourself. 
• Lesson #5: Do Your Homework. This means reading the regulations that pertain to your jurisdiction. You can’t challenge your local or state regulators if you haven’t educated yourself on the issues and laws.
• Lesson #6: Ensure Good Housekeeping. Keep your operations as neat as possible, and make sure you’re complying with all regulatory requirements, Maloney advised, noting that a messy operation can only hurt you.
• Lesson #7: Know What You Need in a Lawyer or Consultant. In selecting a lawyer or consultant to assist you, ask yourself: Am I in damage-control mode? Do I need a DEP-friendly lawyer? Do I need a bulldog who will fight for me tooth and nail? The answers to these questions will help you pick the right partner in your fight.
• Lesson #8: Seize the Moral High Ground and Hold It. As recyclers, scrap tire processors should consider themselves the “good guys,” said Maloney. “Recycling is a good thing. You should appreciate that and capitalize on it.” You can also enhance your image through community outreach efforts, such as meeting with local officials, providing tours for them as well as local schools, or offering to take tires from the public for free one day.
Coming Rules and Guidelines. Robert Tonetti, senior environmental scientist with the International and Special Projects Branch of U.S. EPA’s Office of Solid Waste (Washington, D.C.), highlighted various domestic and international rules and guidelines that will affect the recycling of used electronics. He explored voluntary guidelines from the Organization for Economic Cooperation and Development (OECD) on environmentally sound management of end-of-life electronics, as well as EPA’s voluntary “Plug-In” program for similar electronics scrap. The OECD guidelines, for instance, address issues such as controlling fumes and dust when melting computer chips or shredding printed wiring boards (PWB) or when dismantling cathode-ray tubes (CRTs).
   Regarding export, Tonetti said the OECD guidelines don’t require recyclers to remove hazardous components prior to shipping scrap electronics within the 30-member OECD, which includes much of Europe, North America, and certain Asian/Pacific countries. But the definition of hazardous waste is sometimes unclear. CRTs are definitely waste and circuitboards are considered waste by Canada, but the guidelines aren’t as clear on other items, Tonetti noted.
   Turning to EPA’s Plug-In program, Tonetti said the guidelines for this “partnership program with industry” are nearing completion. Designed to promote the recycling of end-of-life electronics, the Plug-In program will cover collection programs, export issues, recordkeeping, and even the packaging of used electronics.
   Both the OECD and Plug-In guidelines discuss the need for third-party certification of environmentally sound management systems—such as ISO 14000 or ISRI’s SCRAP3 system, Tonetti said.
   Tonetti also discussed the challenges of the Basel Convention and its “partnership initiatives,” which he likened to an international version of the Plug-In program, and mentioned EPA’s coming rule on CRT recycling, which is expected later this year. Though he couldn’t discuss details of the final CRT rule, he did say it will provide “substantial relief from RCRA for domestic collection, transport, and recycling.” The final rule will also likely “significantly impact poor export practices,” Tonetti predicted.
Managing Electronic Assets. For scrap dealers who don’t normally handle the hazardous wastes found in used electronics—but who are increasingly sent this material by their customers—the best solution might be to partner with more experienced electronics recyclers, suggested Lauren Roman of United Recycling Industries Inc. (Budd Lake, N.J.). That’s because many customers that want to dispose of used electronics need more than just traditional recycling—they need “asset management,” she explained.
   Such asset management includes removing and returning certain valuable components from computers while shredding the rest of the unit, Roman noted. Or it can mean simply erasing the hard drives of desktop units that will then be resold—while also providing the customer with the hard drive of a specific unit so they can determine if the information was completely erased or whether it can still be retrieved. Some customers want to witness the destruction of their sensitive material while others insist on a real-time inventory of what’s happening to their products. In particularly sensitive cases, the customer may even ask you to seal the truck carrying their material—which can be tricky given the need to inspect vehicles, Roman said.

Keeping an Eye on Safety
Controlling Accident Costs. A $10,000 slip-and-fall accident at work will likely cost your company $12,000 above and beyond what your insurance carrier pays out, said Barney Boynton of the ISRI-sponsored RecycleGuardsm insurance program. On average, he noted, indirect costs—such as downtime, hiring replacement workers or paying overtime, or replacing equipment damaged in a workplace accident—outweigh the direct, insurance-covered costs by a factor of at least 1.2, thus turning the $10,000 insurance payout into an additional $12,000 expense borne by the employer.
   Before discussing a new seven-step safety program designed to “increase profitability through loss elimination,” Boynton and RecycleGuard’s Monica McNally outlined the rising trend in losses at recycling facilities. Property-related claims, for instance, increased from 162 claims for $3.6 million in 2002 to 231 claims for $14.5 million in 2003, McNally said. Poor housekeeping, hot work, and electrical failures were the leading culprits, Boynton noted.
   Likewise, auto fleet-related claims rose from 1,533 claims for $14 million in 2002 to 2,125 claims for $14.8 million last year. The three leading auto-related accidents—rear-ending another vehicle, rollovers, and “other”—added up to just $4.5 million of that total, which suggests that improving “driver selection” could be the critical factor in preventing such occurrences, Boynton noted.
   To help reduce the number and severity of all workplace losses, Boynton outlined the following seven-point continuous improvement safety process called RECycle:
• Commitment: The effort must start at the top, and it requires an investment of time, money, and patience.
• Assessment: Conduct an in-depth analysis to determine what conditions, policies, or behaviors are leading to accidents.
• Planning: Realize that you can’t fix everything at once. For the projects you do undertake, be sure to set specific, relevant, and measurable goals, timetables, and accountability.
• Communication: A lack of communication is often the key reason why safety efforts fail, Boynton said. So make sure that all employees know that safety is “everybody’s job.” Use various methods to communicate the safety message and focus on whatever connects the individual to the message, whether it’s a monetary reward, pride in doing good work, or simply being able to go home safely at the end of the day.
• Implementation: Company leaders must take charge of implementing safety efforts. Don’t be like one scrap processor who was injured in his own yard while not wearing protective equipment, Boynton said.
• Measurement: Measure constantly, not just at the end of a safety program, and adjust your efforts along the way.
• Celebrate: Not only does celebrating a safety achievement recognize employees for what they’ve accomplished, it also gets them fired up for future efforts, Boynton said.
   Finally, he added an eighth step to the RECycle effort: Repeat the whole thing as often as necessary (remember: it’s a continuous process).
Implementing ‘Best Practices’ for Safety. Part of a good safety program is having best practices in critical areas such as space management, lockout/tagout, equipment safety, and hazard communication, said safety and health management consultant Susan Eppes of EST Solutions Inc. (Houston).
• Space Management: This covers places in your facility where people and equipment come together, such as loading/unloading areas and traffic lanes. OSHA has no specific regulations in this area, so it falls under the general-duty clause, which requires employers to provide a safe and healthful workplace for employees, Eppes said.
   To address space management issues, examine your facility for danger zones where people—employees or visitors—and equipment are in close proximity. Solutions can be inexpensive and can include requiring employees to wear high-visibility vests, using safety mesh to control where people walk, posting signs instructing people what they can and can’t do, and developing traffic management policies, Eppes noted. It’s a good idea to create a written space management policy, which should then be communicated to employees, customers, and vendors, then strictly enforced.
• Lockout/Tagout: Up to 75 percent of all fatal workplace accidents can be traced to employees not following lockout/tagout procedures, according to Eppes. Of those accidents, nearly 70 percent occurred while cleaning a jam in the machine, making adjustments to the machine, or cleaning/servicing the equipment.
   Aside from following the OSHA lockout/tagout regulations, you need to make sure your policies are practical, concise, and as easy as possible for employees to execute—otherwise, they could seek shortcuts or abandon the policies altogether, Eppes said.
• Equipment Safety: This area encompasses best safety practices around equipment such as balers and conveyors as well as features such as emergency stops and guarding.
   Focusing on guarding, Eppes noted that OSHA’s machine-guarding standard is designed to protect the machine operator and other employees in the work area from hazards created by nip points, rotating parts, flying chips, and sparks. Inadequate guarding causes about 800 occupational deaths a year, as well as 18,000 amputations, lacerations, crushing injuries, and abrasions, reported Eppes.
   Dangers can be addressed through the use of interlocking devices, automatic shutoffs, constant pressure switches, point-of-operation guards, and complete enclosures. Aside form purchasing equipment that meets OSHA/ANSI guarding requirements, best practices include training employees on the importance of guarding, encouraging them to report situations where inadequate guarding exists, and establishing a regular inspection program to ensure that guards are present and adequate, Eppes said.
• Hazard Communication: OSHA’s Hazard Communication standard “is an easy standard to be cited on because it’s very detailed and requires constant rigor in addressing,” Eppes said. The standard is based on the concept that employees have both a need and a right to know the hazards and identities of chemicals they may be exposed to when working. Employees also need to know what protective measures are available to prevent adverse effects.
   Employees must know the requirements of the standard; any operations in their work area where hazardous chemicals are present; and the location of their company’s written hazard communication program, including its inventory of hazardous chemicals and material safety data sheets (MSDSs).
Other important safety areas for best practices are powered industrial trucks, lead, respiratory protection, and walking/working surfaces, Eppes said.

Marketing for Success
How to Manage Accounts. To succeed as a scrap account manager, you must be skillful at managing time, information, and relationships. That was the overall message of Judy Ferraro of Judy Ferraro & Associates Inc. (Lemont, Ill.). Drawing from her 30 years in the scrap business, she offered the following advice to account managers:
• Use a client relationship manager (CRM) system such as Outlook, ACT,
or Goldmine to help manage your accounts. As part of this system, make sure to collect customer e-mail addresses since they enable fast, easy
communication. 
• Categorize your accounts by some criteria—such as volume, tonnage, or profitability—and rank them in order of importance, such as A, B, C, and so on. Also, assess how close your relationship is with each customer. You can then work on improving weak relationships and build toward making all customers like partners, Ferraro said.
• Make time to visit customers regularly, scheduling several appointments each week. “If you don’t see your customers, they will forget about you—even if you call,” Ferraro stated. On visits, you can build relationships by delivering a check to the customer or bringing food items. Walking through your customers’ facilities can reveal problems that you can resolve for them or service issues that you need to address. You can establish a closer rapport with your main contacts by learning some personal facts about them, such as career history; education level; where they live; where they grew up; what they do for fun; their marital status; kids/grandkids; sibling information; hobbies/collections; civic responsibilities; military service; and pets, said Ferraro.
• Be a resource for your customers by sending or dropping off articles on market conditions and providing information to help them answer questions or resolve problems.
• Warn your customers about issues that can affect them, such as scrap thefts during periods of high prices; questionable tactics that could be used by aggressive scrap competitors; startup companies or reorganized firms that could compete with them; and notable market trends, Ferroro suggested.
• Resell your relationship by reminding customers of nice things you’ve done for them, how long you’ve worked together, resources you’ve provided to them, and achievements you’ve made together and individually.
• Collect “account-saving” information—that is, information you can use when you’re in danger of losing a customer. This information can include a list of companies that left your firm only to return, Ferraro noted. You can also collect “crazy price” letters that your competitors send out and use those letters when necessary to retain your accounts.
• Send thank-you notes or other personal correspondence, preferably handwritten, whenever appropriate. Such notes “really help to build relationships,” Ferraro said.
Why Steel Specs Matter. In the workshop titled EAF Steelmaking 101 and the Case for Consumer-Driven Specifications, Darrell Roberts of TXI Chaparral Steel (Midlothian, Texas) explained the basic components of a minimill’s electric-arc furnace (EAF), then detailed how scrap quality issues can affect EAF operations.
   For starters, Roberts noted that accidentally charging a closed container into an EAF could produce shrapnel or an explosion that can harm workers or damage the furnace. A closed container includes anything that was ever designed to hold pressure. Such containers only become safe when they’ve been “completely torn wide open,” Roberts said. Just punching a hole in the container to release trapped gas is not sufficient because residual moisture in the container can create a flash of steam that also causes an explosion.
   Long pieces of scrap can present other problems, such as standing up straight in the charge and blocking the furnace lid as it swings back, Roberts said. A long piece can also make contact with both the arc flame that’s melting the scrap and the water-cooled panel that surrounds the furnace. Electricity from the electrode could then travel along the piece of scrap and blow a hole in the water-cooled panel, leading to a tough maintenance repair or possibly an explosion, Roberts noted.
   Large, chunky pieces of scrap can, in turn, strike and damage an oxygen burner, damage the electrodes as they’re lowered into the scrap charge, or reduce the efficiency of the melt because big pieces melt at a slower rate, explained Roberts. A big chunk can also plug the tap hole and “freeze” in place—which can turn a simple two-minute turnaround job after tapping the charge into an eight-hour struggle with oxygen lances to cut away the obstruction, he said. 
   Though generic industry specs are important, they’re “only the start of the conversation,” Roberts asserted. Instead, consumer-specific specs are becoming increasingly common due to the varied technologies, control systems, and practices used by different EAF melt shops. Understanding both what your mill requires—and why it sets such rules—is the key to better supplier-consumer relations, he concluded. 

Building Relationships
Getting Along. Given the challenges that some scrap operations face just by operating their businesses around other people or companies, it’s smart to work at being a good neighbor, advised Chuck Carr, ISRI’s managing director of communications, and his former partner, Mike Davis of Mike Davis Public Relations Inc. (Raleigh, N.C.).
   Several steps can help, including becoming an “influencer” within your community, which means someone whose opinion is sought out and trusted by other business leaders or members of the community at large, Carr noted. 
“It’s all about relationships,” Davis added, especially having friends who will be there to back you up when you’re in trouble. So get to know the people who can make life harder or easier for your business—from civic leaders to the local media and even the OSHA or EPA officials in your region.
   This isn’t something accomplished overnight—it’s a long-term proposition, Davis said. Don’t wait until you’re in trouble to introduce yourself and your business to the local newspaper publisher or radio or TV station manager. Instead, work at building such relationships over time by using your personal and business resources to best advantage. These resources include donating money or products to worthwhile causes, as well as volunteering your time or granting managers and employees time away from work for community activities.
   Make sure your efforts get the credit they deserve—such as by making one substantial and well-publicized donation to a civic cause rather than numerous smaller donations to a variety of groups.
   When problems do hit your firm, be sure to keep all relevant people fully informed—and never, ever lie about the situation. It will take years to recover from getting caught in a lie, Carr and Davis noted.
   They also solicited examples from attendees on how their firms establish better relationships with neighbors. Answers included one firm that uses its front-end loaders to plow out local streets after particularly heavy snowfalls, another that lets the local fire department come on-site to train with scrapped cars, and one scrap firm that offers free hot dogs to everyone who comes to their site on certain days—whether or not the person is a customer.
Banking on Relationships. Hugo Wyss, a banking consultant from West Cornwall, Conn., who has worked closely with Hugo Neu Corp. (New York City), explored how scrap recyclers can better manage their relationships with financial institutions. Joined by a panel of scrap executives, Wyss suggested that scrap firms seek out banks that finance other processors, even if they’re your competitors.
   “The risk that the bank [will] be indiscreet and divulge your ‘trade secrets’ to your competitor is far outweighed by the benefit of dealing with an institution that is familiar with your activity,” Wyss noted. 
Banks that lend to your customers are also a good choice for financing, especially if your customer is financially weak. “The customer may need the [scrap] material,” Wyss explained. “If the same bank finances you, it may help to structure the transaction for your protection and theirs.”
   Establish a close relationship with your contact person at the bank and try to find one who has responsibility for both understanding the scrap industry and selling you the bank’s services, Wyss said. One panelist even suggested following a good contact person from bank to bank should he or she change jobs rather than trying to get to know a new contact person at your old bank.
   To convince the bank of your creditworthiness, you “should prepare a comprehensive description of the scrap metal market and your position therein,” Wyss recommended. It’s also helpful, he said, to provide your three most recent annual financial statements “to give a historic perspective on asset turnover and profitability”—and be prepared “to explain any unusual changes from year to year.”
   Panelists noted that a “reviewed” financial statement will likely suffice, as a true “audited” statement would require the scrap dealer to physically pick up and weigh his entire inventory.
   Other key documents to give your banker are a business plan, a financial forecast, and an “environmental inventory,” describing among other things your firm’s compliance with environmental regulations, Wyss noted. 

Padnos Brothers Honored With Lifetime Achievement Awards
Brothers Seymour and Stuart Padnos of Louis Padnos Iron & Metal Co. (Holland, Mich.) each received a Lifetime Achievement Award from ReMA at the association’s convention in Las Vegas. This newly created award honors individuals whose work and dedication have contributed greatly to the association and the industry. 
   Seymour and Stuart Padnos took the reins of their family’s scrap business after serving in World War II. They not only carried on the tradition begun by their parents—company founders Louis and Helen Padnos—they built on it, growing the business through customer service, technological innovation, and hard work. Today, Louis Padnos Iron & Metal has nearly 400 employees working at more than a dozen locations in western Michigan, with Seymour serving as chairman and CEO and Stuart as senior executive vice president.
   In their careers, the Padnos brothers have served as leaders and advisers to ReMA and its predecessor organizations. They have improved the lives of others, enhanced the image of the scrap industry, and promoted the value of scrap as an engine of commerce, as a renewable resource for our world, and even as art to improve our lives (a reference to the artworks that Stuart Padnos creates out of scrap materials). They continue to give back to their community through their gifts to education and the arts.
   In giving the awards, ReMA Chair Cricket Williams said the Padnos brothers “have truly made a difference for the scrap recycling business. They lead a family that cares about their community, this association, and our entire industry.”

Debating Global Trade
In one of the convention’s most popular programs, CBS correspondent Jim Axelrod led a panel discussion on a controversial yet fundamental issue affecting the scrap industry—global trade.
   The session—titled Jobs Lost, Markets Gained: Winners and Losers in a Global Economy—featured industry and trade experts Lewis Leibowitz of the law firm Hogan & Hartson L.L.P. (Washington, D.C.), Hans-Gerhard Hoffmann of copper refiner Norddeutsche Affinerie AG (Lünen, Germany), and John Ferriola of steelmaker Nucor Corp. (Charlotte, N.C.).
   This President’s Breakfast session covered the gamut of global trade issues, such as defining free and fair trade, if or when trade restrictions should be imposed, the pros and cons of the U.S. trade deficit, China’s impact on the world economy, the effectiveness of the WTO, the offshoring of U.S. jobs, and which countries will be the winners and losers in global trade in the long term.
   Attendees were able to express their opinions on these issues thanks to opinion-polling technology at each table. The results were displayed immediately on large screens, providing a snapshot of attendees’ views.
Some of the results covered the following points:
• 98 percent said that global trade is a positive trend for the scrap industry;
• 82 percent said that free trade and fair trade are equally important;
• 61 percent agree that trade restrictions should only be used as a remedy for unfair trade;
• 93 percent expect China’s economy to continue growing strongly for years; and
• 79 percent believe the United States is treated unfairly by the WTO.
   The audience was most divided on the issue of offshoring of U.S. jobs, with 44 percent arguing to keep jobs here and 49 percent asserting that offshoring contributes to a better world market.
   In a final lightning round of questions, the audience expressed its bullish views on the scrap market, with 69 percent saying the market will increase going forward and 27 percent expecting it to stay the same.
   The session closed with a question on the upcoming presidential election. According to this audience, it will be no contest—82 percent say President Bush will win reelection compared with 12 percent predicting a Kerry victory.

Taking Advantage of Technology
John Underwood of Systems Alternatives International L.L.C. (Maumee, Ohio) and David Lee of Synergistic Systems (Neptune Beach, Fla.) discussed how new software systems using GPS technology are helping scrap processors track their containers and better manage their truck fleets.
   Among their benefits, such software systems can:
• improve inventory tracking of containers through the use of multiple bar codes on each container;
• improve communications with drivers through the use of a hand-held computer that receives all data/directions for the driver;
• reduce paperwork for the driver by automating various processes, eliminating the entry of manual trip tickets and receipts;
• reduce office paperwork by eliminating the transcription of paper trip tickets and receipts;
• ensure that the right container is dispatched for the job by automatically matching available vehicles with available containers;
• provide accurate time and odometer readings through the use of GPS technology, which monitors each driver’s movements; and
• provide real-time data as well as an integrated information systems approach for the user. •