May/June 2002
ISRI’s 2002 convention enticed more than 2,100 to the Bellagio in Las Vegas, where they learned, networked, and socialized at the scrap industry’s biggest event of the year.
The theme of ISRI’s 2002 annual convention—“Embracing Change”—couldn’t have been more appropriate.
At the event, held March 10-14 in Las Vegas, ReMA did indeed embrace change, including electing new national officers. Ending his term as ReMA chair, Sam Hummelstein of Hummelstein Iron & Metal Inc. (Jonesboro, Ark.) passed the leadership reins to Charles “Cricket” Williams Jr. of Charles Williams & Son Inc. (Richmond, Va.).
Normally, ISRI’s board of directors elects the new chair with a unanimous chorus of “aye” votes. This time, board members ushered in the Cricket era by raising their arms and voting via hand-held “cricket-clickers.”
After the cricket sounds and laughter died down, the board rounded out the slate of national officers by voting in Chair-Elect Joel Denbo of Tennessee Valley Recycling L.L.C. (Decatur, Ala.), Vice Chair Frank Cozzi of Metal Management Inc. (Chicago), and Secretary/Treasurer George Adams of Adams Steel (Anaheim, Calif.).
In his acceptance speech, Williams affirmed his belief that ISRI’s mission is to help its members be more profitable. “We need to be engaged in any activity that increases the profitability of private-sector recyclers,” he said. “Profits are the engine that generates growth, and the more growth we have in the industry, the more growth we’ll have in ISRI.”
Williams acknowledged the hard work of ISRI’s previous national leaders, whom he credited with establishing “a fully informed and engaged board of directors and committee structure that’s poised to do great things for our membership.”
While serving as ReMA chair is no easy job, Williams is used to challenges. In his 30 years of service to ReMA and its predecessor ISIS, he has helped the industry face many difficult issues, including the fight for Superfund liability relief. That’s why Williams’ customary outfit—jeans and a blue blazer—is so appropriate. “Jeans are something you wear when you have hard work to do—and that’s what we have, hard work to do,” he said.
It wasn’t hard work, though, to find ways to enjoy ISRI’s 15th annual convention. The event’s exposition, social events, general sessions, commodity spotlights, and 20-plus workshops truly offered something for everyone. In case you missed some of the action, here’s a look at the highlights.
Keeping Current on Commodities
Onward and Upward for Aluminum. After weathering an “ugly” fourth quarter, the U.S. aluminum market is bouncing back, bolstered by evidence that “the recession is over,” said Lloyd O’Carroll of BB&T Capital Markets (Richmond, Va.) at the spotlight on aluminum.
Leading economic indicators have been improving in recent months, suggesting that the manufacturing sector is finally rebounding, he noted. Unemployment claims are down sharply, consumer confidence appears to be stabilizing, housing starts have held up, and North American auto production has been climbing modestly.
The current economic recovery, however, won’t be as robust as previous recoveries primarily because there’s no pent-up demand, O’Carroll said. The current recovery will likely show GDP growth of 4.5 to 5.5 percent in its first four quarters compared with the historical average of 6.3 percent. The global economic outlook is also looking up, with GDP growth projected to be 2.4 percent this year and 4 percent in 2003.
The improving economic conditions bode well for the U.S. aluminum market, which rebounded from the “ugly” final quarter in 2001 to post increases in orders in January and February, O’Carroll said, though he noted that “things are rising from a very low base.” This year, domestic primary aluminum shipments could grow almost 7 percent to 20.2 million tons, with the transportation sector leading the way with almost 11 percent growth to 7.3 million tons, he reported.
As for prices, aluminum could inch up from its 2001 average of 65.5 cents a pound to 67.2 cents this year, growing further to 76.8 cents a pound in 2003, O’Carroll said.
On the scrap side, the steep decline in manufacturing last year reduced the supply of new scrap, which has led to a scrap shortage that could extend into the summer. “In the short term, get your hands on all the scrap you can,” O’Carroll said. “Several months out, certainly by June or July, the worst should be over and you’ll get back to more normal conditions.”
Scrap prices, meanwhile, have been ratcheting upward in recent months, and the scrap-to-prime ratio has also been rising. “In the next few months,” O’Carroll said, “scrap will move up faster than prime as long as we continue to have some kind of shortage.”
Aluminum’s Automotive Promise. In a talk titled “Riding With Aluminum,” William Bosanquet of Pechiney World Trade USA (Stamford, Conn.) focused on aluminum’s use—and its prospects—in automotive applications.
The transportation sector is currently aluminum’s largest market, accounting for 33 percent of global aluminum consumption, and the light metal will likely continue to gain ground in auto applications, Bosanquet said. By 2005, U.S. vehicles could contain an average of 320 pounds of aluminum, while European and Japanese cars could have an average of 275 pounds, he reported.
Aluminum offers several advantages in the automotive niche compared with competing materials, Bosanquet said. For one, it is a light metal, which enables automakers to lighten their vehicles to improve fuel efficiency and reduce pollution. Also, aluminum parts put less weight on the front axle in front-wheel-drive cars, leading to better car-weight balance and improved braking distances, Bosanquet noted. In addition, cars with aluminum offer better “crumpability”—the ability to absorb energy in accidents. The aluminum pressure-casting process also reportedly offers advantages compared with traditional castings. And last but not least, aluminum is highly recyclable, he pointed out.
Copper—Poised for Growth? Copper demand has grown an average of 3 percent annually for years, yet stocks now exceed 1 million mt and prices dipped below 70 cents a pound earlier this year. The same scenario played itself out in 1999, when many scrap firms took hits or hoarded material awaiting better times.
With the economy on the mend, though, domestic demand is increasing again, overseas consumption is rising in some sectors, and most major analysts see higher prices this year, said experts at the spotlight on copper.
Offering some market perspective, John Gross of J.E. Gross & Associates Inc. (Bayshore, N.Y.) noted that global refined copper consumption—which rose 40 percent from 1990 to 2000—declined 4 percent in 2001, the worst decrease since the 1970s.
In addition, combined copper stocks on the LME and Comex recently reached a record 1.3 million mt, Gross reported. Fortunately, production cutbacks of about 500,000 mt this year could boost prices.
According to Gross, copper is “moving into a period of higher price volatility due to the activity of funds, which have a big impact on the market.” As evidence, he noted that the market experienced two 4-cent price spikes recently despite a lack of any fundamentals to support those moves. He also noted that a market “disconnect” occurred last October when prices turned upward even as stocks continued to rise.
Steven Butler of Asarco Inc. (Phoenix) concurred, asserting that commodity “macrofunds” using computer-driven buy/sell signals are moving the market in ways that may have nothing to do with fundamentals.
Better times are on the way for copper, Gross predicted, noting a more positive global economic outlook, stronger anticipated U.S. growth, and continued expansion in Asia, which accounts for nearly 40 percent of total copper consumption. China continues to import concentrates and other raw materials to feed an appetite that drove its consumption up 25 percent last year, Butler noted. Also, he added, stabilization in the C.I.S. region means that copper consumption there will continue to grow steadily, while U.S. demand is underpinned by high housing-start levels in recent quarters.
In the short term, copper prices may decline again, Gross said, though he noted that growth in global economies and population will push prices higher over time. “The trend is your friend,” he said. “It may not continue going up, but it is going up. It isn’t out of the question to talk about $1 copper again and even new highs within the next two or three years.”
Steel Struggles Back. Prolonged periods of low prices, consolidation, globalization, and increased government regulation have been facts of life as much for the iron and steel industries as for scrap recyclers, said Donald Huizenga of Kurdziel Industries Inc. (Muskegon, Mich.) at the spotlight on ferrous.
“We commiserate with you,” he stated. “You’ve had as much bad news in your industry as we’ve had in the foundry industry.” As proof, he offered these grim statistics: around 30 U.S. steel companies in Chapter 11; 40 foundries closed or in Chapter 11 in the past 12 months; and 400,000 U.S. manufacturing jobs lost in recent years.
Many of the stricken companies cited unfair offshore competition as the basis of their woes. “Globalization is not a passing fad. It’s here to stay,” Huizenga asserted. “They say speed kills, but today, lack of speed kills. We have to deal with change.” He characterized the “speed culture” as a new concept that deals in ambiguity and change in commerce. The events of the past 18 months underscore the need for companies to be able to react to change quickly, he said.
The ferrous spotlight also highlighted Paul Lowrey of Metal Strategies Inc. (West Chester, Pa.), who noted that the 1990s were great for steelmakers, with record demand, unrestricted capital, unrestrained capacity expansion, reasonable pricing (until 1998 at least), and a phenomenal economy. The current decade, in contrast, has brought recession, declining steel demand, capital starvation, shutdowns, and reduced capital expenditures.
Last year alone, U.S. steel demand declined 15 million tons, 11 percent below the previous year’s record level, Lowrey reported. Meanwhile, import penetration into the U.S. market grew from barely 15 percent in 1990 to more than 26 percent in 1998. While imports have since declined, they’re still high—about 20 percent—by historical standards, he said.
Steel prices, meanwhile, “have toppled to historically low levels and are now below the manufacturing costs of many producers,” said Lowrey. Prices for hot-rolled coil reached a low of about $210 a ton late last year. Though they’ve risen slightly since then, they’re still far below the average of $340 a ton in the 20-year period through 2000. “If prices keep falling at the rate they have been, we can assume that steel will be free in 40 years or so,” he said wryly.
Like Huizenga, Lowrey noted the financial troubles in the U.S. steel sector, pointing out that “over half of the integrated steel industry in this country is in bankruptcy.” Overall, “it’s mind-boggling how much overcapacity there is globally in steel,” he said. “There are too many companies—as many as 14 U.S. steelmakers all chasing the same small number of consumers.”
Industry consolidation is long overdue and is now being prompted by dire industry conditions, with the consolidation effort being led primarily by Nucor and U.S. Steel, he said.
Despite this glum situation, Lowrey said that a number of steel policy initiatives could redress the U.S. steel industry crisis. The Bush administration has embarked on a three-part plan that includes import tariffs under the Section 201 case, plus international negotiations to reduce excess capacity and eliminate government subsidies. An emergency steel loan-guarantee program is also a boon to steelmakers and could help offset the legacy costs that are crippling the industry.
In the future, Lowrey sees a gradual recovery driven in part by declining imports, which is starting to create a supply squeeze. Lower imports are occurring at the same time that shuttered domestic capacity is reducing product availability. Also, the U.S. economy is turning upward again. These factors have led to price increases recently ranging from $30 to $60 a ton on most products.
Lead and Zinc—Still on a Losing Streak? Lead continues to defy apparent fundamentals, with prices continuing to be generally lower than demand would suggest. Given lead’s supply-and-demand picture, prices should begin to rise—though it’s difficult to predict when, said George Kleinman of Commodity Resource Corp. (Reno, Nev.).
“I think we all agree that the fundamentals for lead don’t make sense,” he stated. “In the long run, the fundamentals always move the market, but it’s the short term that’s the problem. It’s the unknown that we’re dealing with. As an old trader’s adage goes: ‘The market can remain irrational longer than you can remain solvent.’”
Because price behavior is so difficult to predict, many traders and market analysts put their faith in technical methods, many of which are based on moving averages. A 30-day moving average gives a good indication of the interim movements of the market, said Kleinman, who sees a buy signal if a metal’s price closes above the 30-day average on two consecutive days, and vice versa. A 52-week moving average can be used as well, in which case a buy or sell signal would be two weeks of closings above or below that average.
Recent moving averages and market behavior suggest there may be light at the end of the tunnel for lead. All metals broke above their moving averages in early March and late April, indicating that something positive is happening in the macromarket picture, noted Kleinman. A market recovery, in fact, could be sharper than many have predicted, he said.
“When you have a cheap market for a long time, that market is going to break out at some point. The funds couldn’t push down the price and keep it there unless the fundamentals bear that out,” Kleinman said. By the same token, funds can also work in a seller’s favor by pushing prices up to “irrational levels.”
Another bullish sign for lead is that trading volumes have been exceedingly thin recently, which usually indicates that a market or price cycle is bottoming out. “I think the lead market is looking for an explosive upside movement at some point,” Kleinman said.
- The zinc industry has been dogged for decades by factors that have depressed prices and hindered mining, said Graham White of Considar Metal Marketing Inc. (Toronto).
A major negative factor is the persistent cash-production-cost mentality inherent in new zinc mining projects, he said, suggesting that overall return-on-investment is the yardstick by which new projects should be evaluated. For years, the zinc industry has opened new mines that burden the market with excess metal units while never recouping development costs sufficiently to give shareholders a return, White said.
A second factor hobbling the zinc industry is the relationship between miners and custom smelters. “Custom smelters have very little interest in the zinc price,” White said. “They don’t have much exposure to the price either, except for price escalator and deescalator clauses in contracts. And despite their protestations, the custom smelters have made money.” As evidence of this, White noted that virtually all of the plants to come onstream recently have been custom smelters.
Even so, mining companies deserve the larger share of the blame for oversupply and low prices, he said. “I believe that it’s the responsibility of the miners—not the smelters—to correct supply imbalances in the market. If they cut back output, the smelters wouldn’t have anything to smelt.”
There have been some factors beyond the control of miners and smelters, such as the huge amounts of zinc that flooded the market after the fall of the Soviet Union. By late 1994, LME stocks had risen to an astronomical 1.2 million mt, and it took nearly three years for prices to show any significant recovery.
Commodity funds are another factor beyond the control of miners and smelters. According to White, such funds have the clout to move the price in seeming contradiction to market fundamentals, and they are neither knowledgeable nor rational in their effect on the market. When they sell, they force the price down due to their sheer size in the marketplace, he said.
Last but not least, China’s zinc production has had a bearish effect on the market, White noted. Chinese smelters take in large amounts of concentrates, but the nation is a net exporter of metal units and now accounts for an estimated 6.1 percent of world output.
On the bright side, LME stocks—though still high by historic standards—are less than half the levels seen in the mid-1990s. Meanwhile, low prices have finally induced miners to close or reduce an estimated 540,000 mt of annual production, White said. The resulting reduction in available concentrates has helped put a number of larger new smelter projects on hold, with even China’s production expected to fall about 20 percent this year.
Nickel in Surplus This Year. Primary nickel consumption fell about 5 percent last year, one of the worst declines in recent years. Stainless steel output, however, is forecast to rise this year, with full recovery expected in 2003, said Vanessa Davidson of CRU International (London) at the spotlight on nickel/stainless. If this happens, the result would be higher prices for primary products and scrap.
Any such price improvement could be held back, however, by anticipated increases in global nickel production this year. Pricing in the near-term will depend on commodity-fund buying and other speculative interest as well as the actions of Norilsk, the world’s largest nickel producer, which has recently withheld exports, Davidson noted.
The Western World nickel market will likely end this year with a 35,000-mt surplus, though it could show deficits of about 23,000 mt in 2003 and 41,000 mt in 2003, she reported. LME nickel stocks—currently around 20,000 mt—are at lows not seen since the early 1990s, and they could slip from 12 weeks of consumption to less than 10 weeks by next year, she stated.
These supply factors, coupled with sustained increases in demand (including growth in stainless demand of 5 percent annually through at least 2005), could eventually push nickel to $4 a pound or more, Davidson said. Last year, nickel fell below the $3 mark and is expected to average $2.50 to $2.60 this year. If Norilsk continues to limit its shipments, prices could top $3.
On the scrap side, Davidson noted that stainless steel products currently contain 47 to 49 percent scrap. The shortage of stainless scrap in the past 18 months, however, has forced mills to use more primary nickel, she noted. A decline in scrap exports from Eastern Europe has exacerbated this trend and supported scrap prices in the West.
According to Philip Rosenberg of Keywell L.L.C. (Chicago), however, there hasn’t been a shortage of stainless scrap. In fact, he noted, austenitic grades have consistently traded at 92 to 94 percent of LME spot prices for months. Supplies of stainless scrap have also been stable, at least through February of this year, he added.
There could be higher prices in the near term, depending on how robust the economic recovery proves to be this year, Rosenberg said. A better economy, he noted, would help counterbalance the downturn in the aerospace industry, where recovery will take longer.
Mining the Electronic Scrap Lode. Electronic scrap recycling has come into its own and is fast becoming a major industry with huge potential.
Electronic recyclables—also called IT or telecommunications scrap—constitute a broad range of products beyond computers and peripherals. As more products incorporate electronic components, an increasingly complicated array of dissimilar materials are entering the waste stream. These products can be time- and labor-intensive to disassemble and segregate.
Because of the labor-intensive nature of disassembling electronic materials, recyclers need to offset their costs by researching the market and prices for used components as well as charging for taking electronic materials. “If you’re not charging to pick up [electronic scrap], you’re losing money,” said Bruce Blue of Freedom Metals Inc. (Louisville, Ky.) and a speaker at the electronic scrap recycling session.
While traditional scrap recyclers won’t find it easy to enter this market, the opportunities are worth the effort, Blue said, noting that “there will be 150 million personal computers buried by 2005, and only 11 percent of computers that were obsolete in 1998 have been recycled.”
According to Blue, “the rule is that every 14 months the technology changes. Everything’s obsolete, and all of that has to be recycled. The big companies that are trying to recycle [electronic scrap] really don’t want any problems. They’re trying to outsource this stuff. But there are very few firms licensed to handle electronic scrap right now.”
Electronic scrap yields six categories of materials in the recycling process, with ferrous and nonferrous metals being the most prominent, followed by leaded glass, precious metals (including gold, silver, and platinum-group metals), mixed plastics, and a small amount of waste, said Mark Lotzkar of Pacific Metals Ltd. (Vancouver, British Columbia).
He cautioned that there are potential hazards when dealing with electronic materials, including lead in cathode-ray tubes as well as cadmium and PCBs. Transporting electronic scrap can also pose challenges for recyclers if they run afoul of local and federal laws. “If there’s a problem, it can come back to the shipper, and that’s usually me,” Lotzkar said.
For these and other reasons, electronic scrap recycling isn’t for everyone. “You can’t just jump into it. You have to do your homework,” said Chuck Nettleship of DMC (Newfield, N.H.), an electronics recycling firm.
DMC’s recipe for success includes targeting Fortune 500 companies and offering data security to clients—a factor of growing importance since proprietary information can remain on unscrubbed hard-drives.
Nettleship also advocates rapid inventory turnover. “Don’t hang onto material,” he stated. “You have maybe 18 months before a component becomes obsolete. A five-year-old computer is junk, and you’ve got to price it as that. We try to find a market for computer chips or other components, but we only hold onto material for 30 days. We want to turn it over just like in any scrap yard.”
Though there are currently about 600 companies in the electronic recycling business, that’s not enough to meet current demand, Nettleship said. “With the current capacity, it would take 46 years to recycle everything” available to be recycled.
New Lives for Recycled Rubber. In 2001, 48 million scrap tires were used in civil-engineering applications, including highway embankments, retaining walls, roadways, residential foundations, landfill drainage layers, septic drainage fields, and highway edge drains, noted Dana Humphrey of the University of Maine (Orono, Maine). Promising new markets in this niche include use as a vibration-damping layer under rail lines and as an earthquake shock-absorber under bridge foundations.
According to Humphrey, civil engineering “is the fastest-growing market for scrap tires, and it has potential for even further growth.” That’s because scrap tires—when used as tire shreds measuring 3 to 12 inches—offer valuable properties that civil engineers need, including light weight; low earth pressure; good thermal insulation; excellent drainage; and compressibility.
If a civil engineer needs such properties, tire shreds can be the cheapest alternative raw material. Another reason to use tire shreds in civil-engineering projects is that such projects can consume large amounts of scrap rubber, with 1 cubic yard of tire shreds consuming 75 scrap tires, Humphrey said. Offering an example, he noted that even a small project such as a 170-foot-long bridge abutment in Maine consumed 400,000 tires.
Adding to tire shreds’ appeal is the fact that civil-engineering contractors can use conventional equipment to handle the material in their projects, Humphrey said. Also, according to his research, tire shreds have no negative effect on groundwater quality when used above or below the water table. Plus, there are ASTM guidelines that dictate the sizing and requirements for proper use of tire shreds in civil-engineering projects, which helps ensure that no problems result from using the material.
- Offering a closer look at the use of tire chips in landfills, Dave Gubanc of Central Ohio Contractors Inc. (Reynoldsburg, Ohio) noted that tire chips offer several advantages over gravel in a landfill’s drainage layer—they are half the weight of gravel when compressed to 100 psi; they don’t scale, which can be a problem with gravel; they have a drainage permeability that’s equivalent to or better than gravel; and they don’t require a filter fabric on top of them as does gravel. Using tire chips in landfills can also provide a beneficial use for about 125,000 passenger-tire equivalents per acre, he reported.
There are some drawbacks to using tire chips in landfills, however, Gubanc said. For one, you have to get approval from your state’s environmental agency to use the material in this way. Also, the liner fabric under the tire chips must be heavier than that used for gravel to prevent puncture problems from residual wire in the tire chips. Of course, there’s also strong opposition from the gravel industry, which doesn’t want to give up market share to tire chips. Further, this is a fairly new application that’s still undergoing some testing. And finally, there are some contingent liabilities that aren’t well-defined, such as who is responsible if tire chips cause a problem with a landfill’s liner, Gubanc explained.
In the end, the main benefit of using tire chips in landfill drainage layers comes down to cost, Gubanc said. Offering one landfill’s costs as an example, he noted that the construction costs to use gravel totaled $378,626 while the costs to use tire chips came to $278,611—a 26-percent savings. Overall, he said, contractors can save about $10,000 an acre using tire chips rather than gravel in the drainage layer.
- Compared with conventional asphalt pavement, rubber-modified asphalt is superior from an engineering standpoint and is more cost-effective when applied correctly, said Cliff Ashcroft of FNF Construction Inc. (Fullerton, Calif.).
Asphalt rubber uses about 1,000 tires per lane mile at 1-inch thickness and 2,000 tires per lane mile in a thicker overlay. Given this usage, asphalt rubber’s potential “is absolutely phenomenal with respect to recycling tires,” Ashcroft said.
Aside from its recycling potential, asphalt rubber offers the benefits of long-term performance, resistance to cracking, cost savings, 30-to-50-percent noise reduction, lower maintenance costs per lane mile, and no water puddling because it provides a gap-graded surface, he noted. Plus, asphalt rubber performs so well that engineers can use it in half the thickness of normal asphalt, thus saving on material and installation costs.
Asphalt rubber begins with ground tire rubber that can have only 1 percent wire or fabric contamination, Ashcroft explained. The crumb rubber, which costs about 15 cents a pound, is shipped in 2,000-pound super sacks to the job site, where it is mixed with oil in a ratio of 20 percent rubber to 80 percent oil. This mixture is agitated for about 45 minutes at 350 to 400 degrees F. Eventually, the rubber starts to get absorbed into the oil, while some of the light ends of the oil get absorbed into the rubber. This blending of the two elements creates a thick fluid—the asphalt rubber binder that holds the aggregate pavement material together. Contractors then simply apply the asphalt rubber the same as conventional asphalt, with no equipment modifications necessary, Ashcroft said.
- Scrap tire chips have great promise when used as an aggregate in septic drainage fields, reported Clifton Roberts, a retired official from the South Carolina Department of Health and Environmental Control.
In this application, he explained, tire chips that measure 1/2 inch to about 4 inches are layered about 1-foot thick in septic drainage trenches. The tire chips are covered with geotextile fabric, then dirt is backfilled over the fabric. Water from the septic system is piped into the trenches and filters through the tire chips, eventually seeping into the soil.
Tire chips work better than #5 stone in septic drainage applications for the following reasons, Roberts noted: Tire chips are about half the cost of stone; they offer 62 percent more void space than stone (this allows greater water volume in the field line, which can extend the life of the trench system); they weigh 64 percent less than #5 stone; they save natural resources by reducing the use of stone; they put scrap tires to beneficial reuse; and they’re easier to use. In addition, he said, tire-chip trenches contain more beneficial organisms than gravel trenches. These organisms eat the biomat that forms at the bottom of the trench, which can improve the trench’s infiltration rate and extend its life.
There can be some challenges to using tire chips, however, Roberts said. For instance, chips with too much protruding wire can create problems, the quality of processed chips can vary greatly from supplier to supplier, and there may not be an adequate supply of chips in certain areas. Also, tire chips require more cleanup after a job and using them in septic fields is still a new idea that must overcome resistance, Roberts stated.
- Scrap tires are also recycled for more than just their rubber, as Leonard Robinson of TAMCO (Rancho Cucamonga, Calif.) noted in his talk on the opportunities and challenges of using recovered steel-belted tire wire in the steelmaking process.
TAMCO, a rebar minimill, began using tire wire in its scrap mix in 1996, consuming 676,500 pounds that first year, said Robinson. By 1999, its usage of tire wire had skyrocketed to about 16.4 million pounds. In 2001, TAMCO consumed about 7 million pounds.
Using tire wire benefits TAMCO in many ways, including helping enhance its public image as a recycler, Robinson said. As a raw material, scrap tire wire is valuable because it “has lots of alloys, good stuff that you just can’t get in a shredded car,” he remarked. Also, residual rubber on the tire wire enables TAMCO to reduce its carbon usage (though too much rubber can generate excessive heat in the furnace and cause problems in the plant’s baghouse), Robinson said.
TAMCO gets its tire wire for free from tire processors, who benefit by not having to pay to dispose of the wire. TAMCO would be willing to pay for the material—if processors would be willing to briquette or bale the material to increase its density and make it easier to handle, Robinson noted. In processed form, the material could have the same value as No. 1 scrap, he said.
On the downside, “tire steel is like a box of chocolates,” Robinson said, paraphrasing Forrest Gump—“we never know what we’re going to get.” The quantity, quality, and density of material can vary greatly from supplier to supplier and from month to month, all of which can create problems for TAMCO, Robinson concluded.
Safe-and-Sound Operations
Mercury Continues to Rise. Mercury has become a hot topic in recycling circles, one that isn’t likely to cool down soon, suggested speakers at the “Mercury Rising” workshop.
Mercury enters the recycling stream predominantly through scrapped automobiles, which include the metal in convenience-lighting switches in hoods and trunks as well as in antilock braking systems (mostly in Ford and Chrysler SUVs from 1990 to 2001). Other mercury-containing parts include high-intensity discharge (HID) headlights and video-display panels for onboard navigation devices, though these uses account for only a small amount of mercury usage.
Convenience-lighting switches account for 87 percent of mercury use in vehicles, said Tom Corbett of the New York State Department of Environmental Conservation (Buffalo). U.S. automakers used nearly 13 million of these switches annually from 1970 to 1995, with each switch containing 2 to 3 grams of mercury. “That’s the equivalent of about 13 mt a year,” he noted.
Though U.S. automakers reportedly will no longer install mercury switches in their cars beginning with the current model year, “we still have an estimated 150 mt of mercury waiting in scrap yards or elsewhere,” Corbett said.
Some states have passed laws requiring that mercury switches and components be removed from auto bodies prior to scrapping. Removing these components isn’t complicated or time-consuming, especially lighting switches, which are usually in accessible places in a vehicle’s hood and trunk, according to Corbett.
Mercury that’s not removed from vehicles prior to recycling ends up in steel mills, where it goes up the emissions stack, he noted, asserting that it’s much less expensive to remove mercury early in the scrap stream than to remove it from stack gases. Adding to that point, Hugh Davis of the U.S. Environmental Protection Agency (Washington, D.C.) said research shows that electric-arc furnaces that melt ferrous scrap have become major sources of mercury pollution, with mercury in vehicle components presumed to be the major culprit.
The steel industry could take matters into its own hands if automakers don’t do more to ensure that mercury is removed from the recycling stream or eliminated from cars altogether. “If certain points aren’t taken care of and if steelmakers stop taking shredded autos, recyclers will stop accepting autos—and that’s an important issue for automakers,” said Greg Crawford of the Steel Recycling Institute (Pittsburgh).
The Steel Recycling Institute is addressing the mercury issue, in part, through the Partnership for Mercury-Free Vehicles, which could generate solutions that could serve as a model for the nation, Crawford said. All automakers are not to blame for the mercury problem, however, said David Raney of American Honda Motor Co. (Torrance, Calif.), who noted that Honda has never used mercury in switches or antilock brakes. Raney admitted that Honda’s HID headlights contain mercury, albeit only a pound or so per every million vehicles. “Not that we shouldn’t be concerned if that figure is going to grow,” he said. “We’d like to see a national approach to these issues, though, rather than a piecemeal approach by individual states. That would be better for everybody.”
The Dangers of Beryllium. As beryllium shows up in more products—and thus in more recycled materials—scrap companies must know the potential health risks related to that metal and how to protect their employees, as well as their bottom line, from those risks.
While most recyclers and their employees are well-informed regarding heavy metals such as lead, mercury, and cadmium, beryllium is a light metal that’s difficult to spot without specialized equipment, said Ted Knudson of Brush Wellman Inc. (Cleveland), the sole U.S. producer of beryllium.
A rigorous system for detecting, segregating, and handling beryllium recyclables is essential for a well-run operation, Knudson said, noting that the primary goal is to prevent CBD—chronic beryllium disease.
The incurable disease is caused by prolonged exposure and may have a slow onset, though it can progress even after exposure ends. Most of the danger from beryllium occurs when minute particles are inhaled. The lungs are thus most affected and treatment is similar to that given to chronic asthma patients, Knudson explained.
To develop CBD, an individual must become sensitized to beryllium, a factor that is genetically determined, Knudson noted. Current government standards set a permissible exposure limit for airborne beryllium particulates of 2 micrograms per cubic meter of air over an eight-hour shift, he pointed out.
Scrap recyclers who handle beryllium can’t afford to be complacent, he stated, reviewing the steps employers must take to be safe and in compliance with government regulations:
- Air sampling and adequate ventilation are critical in breathing zones and work areas where beryllium is handled. Local exhaust systems are preferred where possible. Disruption of air flows should be avoided, and ventilated air should never be reintroduced.
- Work practices should include restricted work zones or other areas of possible contamination by particulates. If permissible exposure limits are exceeded in any work area, restricted access should be expanded to include those areas. In addition to employees, visitors and vendors should be educated in how to avoid exposure.
- Protective clothing and apparatus for workers should include respirators and gloves. Skin exposure should be avoided as implanted particulates can cause sensitization over time. Respirators should be the pressure-demand, air-line type.
- Proper cleaning and washing facilities for workers, clothing, and equipment should be provided. Compressed air or brooms should never be used to clean equipment or clothing. Any vacuums used should have high-efficiency air filter systems that can properly contain particulates.
- Medical surveillance of employees is essential. An employer should get respiratory histories from workers and require them to have skin and lung examinations. Lung function should be regularly tested, and workers should have periodic chest X-rays. Blood tests can also be a surveillance method.
Melting Aluminum Safely. A hushed room watched as film clip after film clip showed the grim results of explosions in aluminum scrap-melting furnaces. These explosions resulted in fatalities, lost productivity, and damage in the tens of millions.
While all metals can produce an explosion whenever two materials of different temperatures come into contact, aluminum has the added disadvantage of being one of the most reactive elements in the periodic table, said Sey Epstein, a technical consultant to the Aluminum Association (Washington, D.C.), at the aluminum-safety workshop.
Aluminum-melting explosions are categorized according to the force of the blast. The least destructive is a Force 1 explosion, also known as a “pop,” in which water gets trapped between the molten metal and a solid surface, Epstein explained. This type of incident can throw molten material up to 15 feet from the furnace. A Force 2 explosion is more violent, throwing material up to 40 feet and capable of causing fatalities, though little equipment damage usually results. A Force 3 blast—the most-severe explosion—causes extensive damage to equipment and often blows the roof off a plant.
Though many things can cause an aluminum-melting explosion, the biggest culprit is scrap, particularly wet scrap and sows that haven’t been properly preheated, Epstein stated.
In many cases, improper or incomplete worker training was a primary cause of explosions. Accidental introduction of foreign substances such as fertilizer to the melting process is also a problem, according to Epstein.
After studying the problem for years, the Aluminum Association published guidelines to help improve molten-aluminum safety and developed an incident-reporting program that currently boasts 240 reporters at 300 plants in 20 countries and generates 60 to 125 reports annually, Epstein said. The association has also launched a scrap-rejection notification program. If a scrap load is rejected, participants in the program immediately fax details to the association, which then notifies all other program members.
Running the Legislative/Regulatory Gauntlet
A Big Superfund Victory. Sometimes, if you stand and fight, you can win big. That was one lesson learned from the recent legal victory for recyclers in the long-running Marjol Battery case.
The facts of the case are well-known to lead recyclers: Between 1962 and 1981, hundreds of dealers shipped lead-acid batteries to Marjol Battery Co. in Pennsylvania, whose facility was later found to have extensive environmental contamination. The cleanup has already cost $40 million and could end up costing more than twice that figure. Gould Battery bought Marjol in 1980 and closed the operation the following year. When Gould became the subject of state and federal environmental suits, it sued firms that supplied Marjol over the 19-year period in question.
The legal battles between Gould and the battery recyclers lasted 11 years. About 240 of the defendants settled after losing in the first legal round, paying varying amounts. An estimated 30 more companies tried to ignore the suits by not responding. Only 10 companies continued to the second round, with six dropping out after losing there too. That left just four lead recyclers to continue the fight.
In the final days of 2001, the four finally won their case in U.S. District Court, thanks in large part to the Superfund Recycling Equity Act (SREA), said Donald Mitchell Jr. of Arent Fox Kintner Plotkin & Kahn P.L.L.C. (Washington, D.C.), who represented the four defendants.
Under SREA, he noted, scrap recyclers can be free of liability under Superfund for the sale of recyclable material if they can demonstrate that:
- The recyclable material met a commercial specification grade;
- A market existed for the recyclable material;
- A substantial portion of the recyclable material was made available for use as a feedstock for the manufacture of a new salable product;
- The recyclable material could have been a replacement or substitute for a virgin raw material; and
- For transactions after Feb. 27, 2000, the recycler used reasonable care to determine that the buyer’s facility was in compliance with environmental laws.
Recyclables protected under SREA include scrap metal, spent lead-acid or nickel-cadmium batteries, and scrap paper, plastic, glass, textiles, and rubber (except whole tires).
SREA includes important exclusions, however, Mitchell said, noting that the act doesn’t exempt a defendant from litigation under local or state laws (though a number of states now have their own versions of SREA).mFurther, SREA affords no legal protection if a recycler had—prior to Feb. 27, 2000—“an objectively reasonable basis to believe at the time of the recycling transaction” that the consuming facility was not in compliance with environmental laws, Mitchell explained.
This clause should not be cause for alarm in cases involving transactions prior to SREA’s passage because plaintiffs would have to prove that a recycler knew that the material would not be recycled. This is generally difficult to prove and puts the burden of proof squarely on the plaintiff, Mitchell said. SREA also includes a clause that requires plaintiffs bringing suit after Feb. 27, 2000, if they lose, to pay court costs for the defendants.
The Marjol Battery case establishes two important tenets for recyclers. First, it shows the necessity of checking the environmental compliance of the companies that buy your scrap. Second, the case demonstrates that recyclers can win. The majority of defendants who took the earlier settlement would have paid a lot less had they continued to fight. As for the recyclers who tried to ignore the case by not responding, each ended up paying the fully assessed costs levied by the court, Mitchell said.
Selecting Counselors and Consultants. So you’ve got to hire an environmental attorney or consultant but don’t know where to start. Fear not. Three speakers offered the advice you need at a workshop on just that topic.
- When hiring an attorney, nothing beats experience, said Donald Mitchell Jr. “It’s absolutely key that you get an attorney who knows your industry and your issues.”
Check to see if the attorney has handled cases similar to yours and try to find one that has litigation experience, if possible, because “litigators who practice in the field bring an extra dimension,” Mitchell said. As he explained, litigators know how their advice plays out in the courtroom. Also, if you hire a nonlitigating attorney, you may have to switch to one midstream—at considerable cost—if your case goes to court.
To help you hire an attorney, you can hold a “beauty contest” in which you invite several candidates to make a presentation, Mitchell noted. This process allows you to meet the candidates, question them, and see if they’re compatible with you.
In making your decision, cost should not be the most important issue. “Lawyers are expensive, but it doesn’t matter what the price is—what’s important is winning,” Mitchell asserted. Too many companies are too fee-sensitive, he said, warning that this sensitivity can easily cause you to be out-lawyered. “I’ve seen bad cases won by good lawyers, and I’ve seen winnable cases lost by lawyers who weren’t up to snuff,” Mitchell noted.
Fortunately, there are ways to make attorney fees more manageable. For instance, you can discuss alternative fee arrangements such as a reduced upfront rate in exchange for a share of any settlement at the end, Mitchell said. You can also form a joint defense group—that is, share legal fees with other companies with a similar legal problem, he suggested.
When seeking an environmental consultant, experience is also the most important selection criteria, said Mitchell. While you can hire a consultant by holding a beauty contest, it’s more common to issue a request for proposal. An RFP enables you to easily compare each consultant’s qualifications, plus it gives you several proposals from which to glean helpful ideas.
Another option is to have your attorney hire and oversee the environmental consultant. One reason to do this is that the attorney has privileges not available to you, Mitchell said. The attorney’s “work product privilege,” for instance, means that “everything that I do or cause to be done is privileged, and nobody can discover it,” he noted. Also, the attorney has the experience to review the consultant’s limitations of liability to make sure the limitations are adequate for your project. Further, the attorney can offer informed supervision of the consultant, ensuring that the consultant is doing the work properly. Plus, the lawyer could perhaps get better rates from the consultant as well as review the consultant’s invoices.
- What qualities and abilities should you consider when hiring an environmental consultant? According to Richard Schowengerdt of Envirogen Inc. (Salmon, Idaho), these six points are the most important:
First, the consultant must be able to advocate your position—“he’s got to be willing to fight for you,” Schowengerdt said. In addition to offering experience of your specific issue, the consultant must provide a variety of solutions, participate in the decisionmaking process, and “take a stake of ownership in the solution,” he stated.
Second, the consultant must understand your operation, including its past and present activities and the potential ramifications of those activities, Schowengerdt suggested. This understanding will enable the consultant to integrate the most appropriate and most helpful environmental efforts with your operation.
Third, the consultant must possess knowledge of scrap industry nuances. As Schowengerdt noted, “There are all kinds of nuances in the scrap industry that can either hurt you or help you” when it comes to environmental issues.
Fourth, the consultant must have the ability to “work” with the regulations. “I’m not saying to not comply,” he clarified. “What I’m saying is there are a million pathways to solve the same environmental problem.” The consultant also must be adept at dealing with regulators, knowing how to get them to “buy in” to your environmental approach and when to have counsel step in.
Fifth, the consultant must be easy to work with.
And sixth, the consultant must have a sound background, with proven qualifications and a hands-on, practical approach to dealing with scrap-related problems, Schowengerdt said. “There are a lot of qualified consultants,” he noted, “but if the person doesn’t understand your specific problem, then none of that really matters.”
- Sioux City Compressed Steel Co. (Sioux City, Iowa) knows all about hiring environmental consultants. The company had to do just that when it decided to relocate its scrap plant several years ago, noted Michael Potash.
Sioux City began the selection process by requesting proposals from two environmental consulting firms in its area. After visiting the consultants’ offices as well as a couple of their projects, Sioux City decided to ask both firms to submit an audit of its current operations along with a preliminary conceptual plan for the new yard. “We wanted to come up with the best ideas and incorporate them together,” Potash explained. Later, Sioux City chose one of the consultants to work through the rest of the project.
Offering some advice, Potash advised processors to choose an environmental consultant with engineering knowledge. “The importance of using engineering consultants became apparent as problems emerged,” he said. Also, in Sioux City’s case, “it was very important that we could prove that sound engineering judgment went into our decisions.” Further, Sioux City found that the environmental consultant helped it navigate through the various regulatory and political obstacles of the construction process. “Having our consultants answer any environmental questions helped defuse the political issue,” Potash noted.
In the end, Sioux City spent about $20,000 on its environmental consultants. “In the scheme of a multimillion-dollar project,” Potash said, “that wasn’t too bad for what we accomplished.”
CCPs Can Solve Storm Water Problems. While preparing a storm water pollution prevention plan (SWPPP) can be daunting, there is safety in numbers, said David Kendziorski of Stormtech Inc. (Brookfield, Wis.). He strongly advised recyclers to first create or get involved in a recycling-oriented cooperative compliance program (CCP), essentially a support group and information bank that assists with devising an effective plan and helping to ensure that facilities remain in regulatory compliance.
CCPs are created and sponsored by industry members themselves within a state or region. By combining forces, companies can better assemble the resources and clout needed to deal with regulatory compliance issues, said Kendziorski. Such groups often hire consultants to advise or run the programs, which organize everything from training programs to preparation of annual reports for regulators. CCPs also operate as de facto self-policing entities, conducting annual audits and inspections of members’ facilities and advising on possible deficiencies in regulatory compliance, Kendziorski explained.
Perhaps most important, he noted, a CCP can help a member company prepare an effective SWPPP and can guide members in how to conduct periodic self-inspections to ensure that they’re in compliance.
A CCP formed by Wisconsin recyclers in 1999 is an excellent example, Kendziorski said. The group’s membership grew from 40 members in 2000 to 65 members today, representing about 60 percent of the state’s recyclers. The percentage of program members who had implemented accepted management practices went from 25 percent in 1999 to 100 percent by November 2001, he reported. All members now have SWPPPs that are in compliance compared with only about one-third of recycling facilities in Wisconsin that aren’t members of the CCP.
CCPs work, Kendziorski said, because they provide coordinated industry leadership and intensive assistance. The result is maximum environmental improvement for every dollar a company spends on compliance.
A Higher-Ground Vision
Former U.S. senator and presidential candidate Bill Bradley laid out his vision for America in his March 14 keynote address at the ReMA convention. In his view, America should strive to become a “pluralistic democracy with a growing economy that takes more and more people to higher ground.”
While there’s an “underlying structural strength” to the U.S. economy, Bradley said, an economy’s strength is not only measured by numbers but also by the quality of life enjoyed by the nation’s citizens. “The goal of an economy,” he stated, “should be to improve the quality of life of its people.”
Speaking to the convention’s theme of “Embracing Change,” Bradley said that the key to leadership lies in anticipating, not predicting, change. As he pointed out, nobody could have predicted the Cold War, the fall of the Soviet Union, or the Sept. 11 terrorist attack.
“The point here is that maybe it’s not wise to try to predict the future,” Bradley said. “You have to be ready to react to the unknown, to the future that is sure to come and be different than today, whether you are an individual, a company, an institution, or a country.”
Insurance Industry on the Brink
Sept. 11 dealt what could be a life-threatening blow to some insurance carriers—and possibly the industry as a whole, said experts at the workshop on insurance issues after Sept. 11.
According to Wendy Baker of Lloyd’s America Inc. (New York City), the Sept. 11 attack resulted in $52.5 billion in insurance losses. About 60 to 80 percent of those losses will likely fall on the shoulders of reinsurance companies—firms that provide insurance to insurance companies, said Michael Hayes of Alea North America Co. (Norwalk, Conn.).
Sept. 11 was particularly damaging because it resulted in losses in all lines of coverage at the same time, Hayes noted. Also, these losses were completely unexpected and were caused by a man-made event, not a natural catastrophe like a hurricane.
The Sept. 11 losses struck a heavy blow to an industry that was already reeling financially. Given its tenuous financial condition, the harsh reality is that “the insurance and reinsurance industries cannot face another terrorist incident of the same size and survive,” Hayes asserted.
What does all of this mean for insureds? It means that the steady rise in premiums will continue, and there will likely be more coverage limitations and larger deductibles, Baker noted.
- The insurance challenges aren’t limited to property-and-casualty firms, of course. The recent recession and many corporate bankruptcies have also basically shut down the credit-insurance market due to the massive losses imposed on that sector, noted Craig Bonnell of Global Commercial Credit (Bingham Farms, Mich.).
Usually, buying credit insurance would be one way for scrap companies to manage their financial risk. Since that option isn’t available—for now—Bonnell suggested other ways recyclers can protect themselves. First, he discouraged processors from selling material on open-account terms because that imposes too much risk on them. Instead, processors can consider these options, Bonnell said: require cash in advance—if you can get it; secure an irrevocable standby letter of credit; and do more homework by getting credit-risk reports on customers, requesting their financial statement, checking up on their bank references, asking for six trade references, and making a sales visit to the customer’s operation.
Changing With the Times
The ReMA convention theme of “Embracing Change” provided the perfect backdrop for futurist Michael Annison of The Westrend Group Ltd. (Denver), who spoke at the opening general session on March 12.
“We live in a time when change is so rapid that we see the present only as it disappears,” he said. As a result, the ability to embrace change “becomes increasingly important because the rate of change is going to continue to accelerate.”
In the past, changes used to occur slowly in different segments of society, but today change is pervasive, touching everyone and everything and occurring everywhere simultaneously. It’s true, therefore, that change truly is the constant in our lives. “We used to think of change as a sort of interruption of stability,” Annison noted. “Now what’s clear is that change is the constant in our lives and stability will be the exception.” That means, he said, that we’re all in “the business of managing change.”
Change is easier to make if you start with a “grand design but focus on the individual steps you can take to accomplish that design,” Annison says. Also, in a changing world, decisions should be viewed as experiments, not immovable objects. “Don’t be afraid to test ideas in your company to see what works. If something works, do more of it. If something doesn’t work, stop it and try something else.”
This experimentation supports the concept of “robust decisionmaking”—that is, keeping up with change by making decisions that are approximately right and improving them rather than laboring to come up with the perfect decision, he explained.
In the future, successful companies will be those that maximize the intellectual, innovative potential of their employees—in other words, firms that increase brainwaves and reduce fingerprints, Annison said. Companies also need to focus on quality because “the paradox of finance is that if we focus on quality, we’ll do well financially. If we focus on money, we’ll get in trouble,” he said. Further, successful companies will be those that know how to collaborate because “we’re much more effective working together than working alone.”
Companies that will struggle will be those that think they have plenty of time to prepare for change, misidentify their competitors, defend the past, and reject new ideas. “The challenge,” Annison observed, “is to honor the past without being caught in it.”
Show Me the Money!
Lady Luck smiles on a lot of people in Las Vegas, but at ISRI’s 2002 convention she veritably beamed on Bill White of Joe Krentzman & Son Inc. (Lewistown, Pa.), winner of ISRI’s annual reverse raffle, which raises funds for ReMA PAC.
As the lucky winner, White had his choice of $30,000 in cash or a new Mustang Cobra convertible, which was on display in the exhibition hall during the convention.
White chose the cash.
In addition to the grand prize, ReMA PAC awarded four $250 consolation prizes to Doug Young, Commercial Metals Co.; Marybeth McFadden, Adams Steel; friends from Commercial Metals Co.; and Ron Greller, Morris Iron & Steel Co. Inc.
The raffle began March 12 during the ReMA convention. Over three days, ReMA members winnowed through the collection of almost 700 tickets until only 10 tickets remained. At the closing reception, Robin and Katie Williams—wife and daughter of ReMA Chair Charles “Cricket” Williams Jr.—pulled the remaining nine names to finally decide the winner.
In the end, White wasn’t the only winner. The raffle raised almost $70,000 for ReMA PAC, which will use the funds to aid the industry’s political efforts. Also, the raffle attracted a record number of participants this year, suggesting broader support for ReMA PAC by the association’s members.
Kent Kiser, Christopher Munford, and Aaron B. Pryor contributed to this report.
ISRI’s 2002 convention enticed more than 2,100 to the Bellagio in Las Vegas, where they learned, networked, and socialized at the scrap industry’s biggest event of the year.