ISRI 2009 Convention & Exposition Highlights

July/August 2009

ReMA's annual gathering exceeded all expectations, reaffirming its position as the world's must-attend recycling event, regardless of the economy.

It isn't easy to beat the odds in Las Vegas, but ReMA did it this year at its annual convention and exposition. Despite the recession, despite tightened budgets and travel restrictions, despite the skeptics, ReMA held the second-largest convention in its 22-year history, with 4,300 attendees convening April 26-30 at Mandalay Bay Resort and Casino.

What motivated those individuals—who came from 46 countries and all 50 U.S. states, plus Puerto Rico and the District of Columbia—to turn out during such tough times? In a word, networking. No other recycling industry event brings together more scrap buyers and sellers, and attendees knew they had to be there to keep their hand in the game. A close second is the ReMA exposition. Against the odds, this year's show had the greatest number of exhibitors in the largest ReMA exhibition space ever. The expo, in short, was too good to miss. And attendees came for the take-home value of ReMA's convention workshops, commodity spotlights, and general sessions, which provided information to help them survive the downturn and prepare for the turnaround. It didn't hurt, of course, that former President Bill Clinton was the event's distinguished guest speaker. People began lining up to see him more than an hour before the scheduled start of his speech, and the event was packed to overflowing.

Whatever the reasons, this year's convention was a gamble that paid off big for ReMA and the event's attendees. For those who couldn't be there, here are the highlights in words and pictures.

Market Reports Look Toward Recovery
In addition to the traditional commodity spotlights—a perennial favorite at the ReMA convention—this year's event offered an economic spotlight, which addressed the causes of the current global recession, how long it will last, and how we might get out of it.

Fear played a substantial part in creating the economic crisis, the panelists said. About 95 percent of the economy—everything but the housing market—was healthy in 2007 and the start of 2008, noted Brian Westbury of First Trust Advisors (Wheaton, Ill.). When the Lehman Brothers investment bank failed, however, "people panicked," and the original $700 billion toxic asset recovery plan "caused more panic." That resulted in the biggest drop in 60 years in "the velocity of money—a slowdown in our spending" in September through November 2008.

Fear is sustaining the downturn as people continue to build their savings and curtail their spending, said Bill O'Neill of LOGIC Advisors (Sonoma, Calif.). "We need to get the confidence back in and get the fear factor out," he said, and that will happen once people stop losing their jobs and houses. Deregulation and greed were two other factors that contributed to the economic collapse, said Michelle Applebaum of Michelle Applebaum Research (Chicago).

Westbury envisioned a quick, V-shaped recovery stimulated by the Federal Reserve printing more money. Pointing to the uptick in retail sales in the first and second quarters of 2009, he predicted the second quarter will show GDP growth of 3.5 percent. In contrast, O'Neill called this recession "more serious, structural, and shocking" than those in the recent past, with the economy taking on a swimming-pool shape: "It went down sharply, extends [at the lower level], then comes up." Ultimately he was optimistic, predicting "a recovery [that] will be faster than anticipated," at least for sectors other than housing.

Commodities are tied more closely to the overall economy than in the past due to their increased trading by hedge funds. Commodity prices "have plummeted, but I think the worst is over," O'Neill said. With significant accumulations of metals in LME warehouses since the end of 2008, however, working them down will be a slow process, he said.

In steel, there's not a lot of good news, Applebaum asserted, with China dominating the performance of that sector. "The Chinese steel industry is 60 percent of global capacity, 50 percent of global production, and 40 percent of global consumption," she noted. The discrepancy among those numbers could result in a flood of Chinese steel on the domestic market and spell trouble for U.S. steelmakers. "The hope is that the steel industry in the United States is in a very different position" than it was the last time this occurred, in the 1980s, she said.

In the past, a good or bad domestic economy dictated the performance of the domestic steel market, Applebaum said. Today, after 35 years of downsizing the U.S. steel industry, "you can have a good steel market during a recession" because steel prices relate more to the balance of trade than to the economy, she said.

Commodity prices will rise again, the panelists agreed, but most likely not to the "crazy high" levels of the past year, Westbury said. Those prices were "not due to a surge in demand, but because of money flowing in" from fund buying, O'Neill said. "The drop in prices is a correction," though Westbury said commodities are undervalued right now.

Despite China's still-growing economy, it can't save the world of metals, O'Neill said. The global economy must recover before Chinese production can pick up. But "if the rest of the world, especially China, comes back," steel prices will go up, Applebaum said.

Aluminum Mired in Surplus. After suffering through a "fast and furious" price adjustment in the past nine months, aluminum faces a "very hazy outlook going forward," said William Adams of BaseMetals.com (London) at the aluminum spotlight.

Aluminum consumption in the first two months of 2009 was down 21 percent, a situation Adams called both "very weak" and "pretty grim." On the supply side, Western aluminum producers already have curtailed 6 million mt of production, Adams said, but more cutbacks—as much as 2 million mt—are needed to rebalance the market, and China shows signs that it might restart up to 1.6 million mt of its smelting capacity. The large inventories on global exchanges also reflect "how bad the situation has been." Despite these market dynamics, the situation is "not all gloomy," Adams said. Additional production cutbacks could help balance the market, the supply chain has significantly destocked, and investment funds have had to start covering their short positions, leading to some of the recent price recovery. The pickup in both the amount of metal leaving LME warehouses and the number of canceled warrants suggests increased physical activity in the market—another encouraging sign.

The worst is "to a large extent" past, Adams said, though he cautioned aluminum participants that "global recovery is a long way off." He predicted a 2 million mt surplus this year, an average annual price around $1,300 a mt, and a 5 percent to 6 percent decrease in aluminum demand.

Aluminum prices did not reflect inventory and demand during the recent boom period, said John Tumazos of John Tumazos Very Independent Research (Holmdel, N.J.). He maintained that the aluminum market was never in a shortage in the 2004-2008 boom, as LME warehouses always held 750,000 mt to 1.5 million mt of metal. Aluminum prices rose "in sympathy" with $147-a-barrel oil and price increases in other metals as well as due to investment fund buying. Any demand growth that did occur "borrowed from the future" through credit-funded purchases of houses, cars, and appliances that collapsed in last fall's credit crisis. The result is that "aluminum producers around the world misjudged demand and built factories to serve phantom buyers," Tumazos said.

After declining 3 percent last year, global aluminum demand fell 19 percent in the first quarter of 2009 and will drop 15 percent for the full year, he said. Global production has declined in kind, from a peak of 109,400 mt a day in June 2008 to 93,700 mt a day in March. Tumazos expected production to rebound—surpassing the 46 million mt output record set in 2007—by 2012.

In the short term, global aluminum demand will rebound to 9.5 million mt in the second quarter, 9.7 million mt in the third quarter, and 10 million mt in the fourth, Tumazos said. Longer-term, aluminum consumption will grow at a 1 percent compound growth rate in the 2007-2015 period, to 54.9 million mt, he projected.

Prices will rise as well, Tumazos said, averaging 63 cents a pound this year, 70 cents in 2010, 75 cents in 2011, 85 cents in 2012, 95 cents in 2013, and $1.05 after that.

The aluminum spotlight also offered a look inside Alcoa, which consumes more than 500,000 mt of scrap annually, noted Rich Markiewicz of Alcoa Materials Management (Knoxville, Tenn.). Scrap is a key raw material for Alcoa's operations, which explains why the firm invested in a delacquering process at its plant in Texarkana, Texas, to increase its use of painted/coated scrap. It also added an aluminum can processing line at its Alcoa, Tenn., operations, which will increase its use of that material by 20 percent.

Alcoa expects from its scrap suppliers consistent quality, timely delivery, and competitive prices, Markiewicz noted, but it also realizes scrap recyclers have many outlets for their material, so "we have to understand your needs and concerns in order for us to have a long-term working relationship going forward."

Copper Marches to Its Own Tune. Copper's recent market performance makes it a special case among base metals. LME copper inventories are lower than most other base metals, at just over two weeks of consumption—a much lower inventory accumulation than in previous economic cycles, observed Neil Buxton of GFMS Metals Consulting (London). "The underlying reason is that even though we had higher copper prices in 2008 and early 2009, we didn't see an accompanying rise in mine production," he explained. With little additional capacity coming on-stream in Peru and Chile, copper buyers must increasingly rely on mines in the African copper belt, he said.

Copper also stands out because—in contrast with lead, zinc, nickel, and aluminum—its price is above the marginal cost of production, Buxton noted. He attributed current prices to the Chinese State Reserve Bureau's purchases of copper for its economic/strategic stockpile, but John Gross of J.E. Gross & Co. (Newport, R.I.), publisher of The Copper Journal, warned that the numbers don't make much sense. "There's a complete disconnect between price activity and fundamentals, and the challenges going forward are going to be worse," he said.

Hurting copper's prospects this year are the expected decline in GDP in all but two of the 10 major copper-consuming countries and a drop in industrial production in major developed and emerging economies, creating "severely negative year-on-year industrial numbers," Gross said. "That does not correlate with stronger consumption of copper. … We continue facing the risk of price volatility going forward."

On a more positive note, Gross contended that the trillions of dollars pumped into the global financial system eventually will increase consumption, and countries with shrinking GDPs this year will grow again in 2010. "So there is a case to be made for prices improving going forward," he said.

The International Copper Study Group (Lisbon) foresees a 2009 refined copper surplus of 350,000 mt, more than the 250,000 mt surplus in 2008 but less than the projected 400,000 mt surplus in 2010, reported Daniel Edelstein of the U.S. Geological Survey (Reston, Va.). U.S. copper mine production will decline 100,000 mt in 2009 and 60,000 mt in 2010, according to the ICSG report. Refined copper output will drop 700,000 mt this year, he added, with 200,000 mt of that from reduced secondary production due to a global shortage of scrap.

Ferrous Seeks Light in the Clouds. Despite the recent bleak times for ferrous, at least one speaker at the ferrous spotlight was looking on the bright side. "This downturn isn't any worse than 1982, when we had 11 percent unemployment and a 15-percent mortgage rate," said Charles Bradford of Bradford Research (New York). "It was a lot worse [then] than it is today."

Bradford predicted an upturn in steel orders within a few months as raw material costs drop overseas. Among the major beneficiaries of the U.S. federal stimulus package, he said, will be minimills and the construction industry—"the biggest market for steel and the best market for scrap steelmakers"—though he doesn't expect total recovery in construction before 2011. He even was sanguine about the all-important automotive industry—a huge steel consumer. Though vehicle inventories remain too high and production was down 55 percent in the first quarter, in part because higher-quality vehicles don't need to be replaced as often, "you can't have a scrappage rate of 13 million cars a year and only make 8 [million cars]. We have to have a bounce back."

In response to the market crash, mills have made some of the biggest production cutbacks in history, with global crude steel production falling 23 percent in the first quarter of 2009 and U.S. mills operating at about 42 percent of capacity, said Gavin Montgomery of CRU (London). Bradford sees global demand for steel sheet products declining 22 percent in 2009, down to about 300 million mt, with even Brazil, Russia, India, and China contributing to the downturn. "Conditions could be so severe that we could see the permanent removal of steelmaking capacity in some higher-cost areas," he said. This year "will clearly be the trough year for steel prices and demand," though he expected some recovery "as we move into 2010 and economic conditions improve." Even with double-digit growth in the years ahead, absolute consumption levels will not return to 2007 peak levels until 2012, and even later in some markets, he said.

Joseph Curtin of Tube City IMS (Glassport, Pa.) also did not see any signs of rapid recovery on the scrap side. "There's no light at the end of the tunnel right now… . Everybody's waiting. There's no scrap coming in. Probably 50 percent of the shredders are down or operating at some reduced rate" in the United States and Europe, he said. "I don't think anybody knows what's going to turn this thing around."

Offering a steelmaker's perspective on ferrous scrap matters, Randy Ehret of The Timken Co. (Canton, Ohio) noted that the company segregates its purchased scrap by commodity and source, "and we track each supplier to the actual heat in which the scrap is used." Timken is "value-driven" when determining which types of scrap to use, he said, which means its operators "are willing to switch based on the relative value of grades."

Offering a cautionary tale on the perils of radioactive scrap, Ehret told how Timken inadvertently melted a pencil eraser-sized industrial gauge infused with cesium-137 that was shielded by 300 pounds of lead. No one was injured by exposure to the material, but the mill spent $15 million to clean up the contamination and lost more than 10 days of production. He urged scrap dealers to install radiation detection equipment, train their employees, react properly to low-level alarms, know the source of their scrap, and support proper disposal regulations.

Growth Next Year for Lead and Zinc? Because lead and zinc demand growth correlates closely to annual GDP growth, short-term demand will decline, said Robin Bhar of UBS Investment Bank (London) at the lead/zinc spotlight. For 2009 Bhar expects GDP to decline 2.9 percent domestically and 1 percent worldwide, with 2010 bringing growth of 1.4 percent in U.S. GDP and 2.7 percent worldwide as stimulus packages in various countries create some economic recovery.

Bhar sees a 10-percent decrease in the global market for zinc in 2009 due to the weak automotive and construction sectors, followed by 5-percent growth in zinc consumption in 2010, with the metal averaging about $1,200 a mt this year, $1,300 in 2010, and $1,500 in 2011.

Lead is a slightly different animal, however. Automobile replacement battery demand is about 40 percent of total lead demand, Bhar said, "so consumption will always be more resilient in a recession." He estimated lead will average $1,100 a mt in 2009, $1,200 in 2010, and $1,400 in 2011. Nickel-cadmium increasingly will replace lead in batteries for consumer applications—such as laptops and PDAs—he said, "but we're still many years away from having a viable substitute for the lead-acid battery." The replacement of zinc in various applications will depend on the price of competitive materials such as aluminum and plastics, he noted.

Filling some of the rising demand for zinc will be operations like Steel Dust Recycling (Millport, Ala.), reportedly the first facility to exclusively process KO61 dust, a hazardous byproduct of minimill steel production. SDR can recover 24,000 tons of zinc from every 120,000 tons of steel dust, along with 65,000 tons of iron-rich material annually, said the company's Russ Robinson. Steel plants use much of SDR's recovered zinc—an oxide with 65 percent zinc content—for galvanizing purposes.

Nickel and Stainless Look to China. With more than 100,000 mt of nickel stocks on the LME and vast supplies around the world, why has nickel traded in the past year from $4 to $6 a pound? Four fundamental factors led to nickel's high prices over the past seven years, said Jason Schenker of McKinsey & Co. (Houston): consumer demand, tight inventories, growth in nickel-containing batteries, and liquidity in the marketplace due to speculation.

Much of nickel's fate now depends on what happens in China. "Two years ago, [people asked] 'How many people in China want a stainless steel sink?'" Schenker said. "The question now is, 'How many people in China can afford a stainless steel sink?'"

Scrap dealers, too, attribute nickel's price spikes to China's machinations. It looks like "a cycle of opportunistic buying," observed Denver Staller of Wilkoff & Sons (Cleveland). "When the market gets low enough in the U.S., [the Chinese] buy. When it hits a certain level, they quit buying. ... They're out of the market as fast as they're in the market."

A few years ago, soaring nickel prices prompted mills to replace 304 nickel with lower grades they then subsequently refused to buy as scrap, Staller noted. To deal with this, scrap processors need to step up their inspections of inbound material and partner with their scrap suppliers to obtain accurate descriptions of the material, he said. "There is still demand for the nickel, chrome, and iron units in those grades, at a reduced price," he said. Mills are taking those grades, but they're partnering with processors to "reduce the contamination that may be going into the mill to make the 304 grade."

The economic crisis also has taken a toll on nickel mining companies, which are showing "more discipline" in taking on new projects, said Eric Klenz of KeyBanc Capital Markets (Cleveland). "The large companies are pretty well capitalized to get through this time, although a lot of them are canceling or delaying projects, which leads to a greater potential for a snapback in prices."

Mine location creates some of the major secondary risks—after the primary risks of supply and demand—in the nickel/stainless industry. The risks include currency fluctuation as well as instability in places such as Russia, Colombia, and Cuba.

So have nickel prices hit bottom? Not necessarily. "Given the world economy," Klenz said, "I hesitate to say anything has reached the bottom." Stainless is "very close to finding a bottom," Staller said, "but I would say 20 percent lower would be it." Schenker was more equivocal. "Prices could go up or go down. If the global economy were to get worse, prices could lower, but if you see an uptick, that could push up pricing."

Paper Poised for Demand, Price Rebound. In the past 40 years, global recycled fiber consumption grew from 35 million mt to 250 million mt, and "a lot of that is China," said Bill Moore of Moore & Associates (Atlanta) at the paper spotlight. North America remains China's largest supplier of recovered paper, though its market share dropped from 71 percent in 2000 to 45 percent in 2007 and 2008, he reported.

Prior to the current downturn, the scrap paper market experienced three major corrections in the past 20 years, Moore said: 1989 to 1993; the second half of 1995 and 1996; and 2001. These downturns had some common elements, including an "overheated" market, a decline in the general economy, and lower prices in the ferrous scrap sector, which tends to lead the recovered fiber market by three to six months, he said.

Currently, scrap paper generation and supplies are down dramatically, recovery and collection rates are higher, and supplies of some key grades such as newsprint are on a downward trend, Moore said. Scrap generation will rebound when the economy improves, though office paper, printer grades, and ONP will be "tight commodities," he said. Further, "it won't take much demand uptake to get prices to rebound."

Looking at trends in specific grades, Moore noted that OCC recovery grew from 21.6 million tons in 1997 to 25.6 million tons in 2007, with most of the growth from containers produced in other countries, especially China. "The U.S. containerboard industry is in a modest decline because goods are not made here, and we don't need the boxes," he said.

ONP recovery, meanwhile, posted modest growth from 1997 to 2007—7.4 million tons to 8.8 million tons, Moore reported. ONP's prices have held up longer than other grades because it's in short supply, he said, adding that "recovery rates will skyrocket because production is going to go down faster."

The recovery of mixed paper rose from 6.2 million tons to 13.6 million tons from 1997 to 2007, Moore reported. The United States exports about 72 percent of its mixed fiber to China, mainly because "few mills in North America use mixed paper, and that's not going to change." Mixed paper prices fell harder than OCC and will have a hard time rebounding "because it's a pure export grade," he said, adding that "mixed paper is the only remaining U.S. under-recovered source of fiber."

Rounding up other grades, Moore pointed out that recovery of deinking high grades remained the same from 1998 to 2007 at 3.8 million tons. Sorted office paper prices and demand continue to decline, he said, noting that "the world is turning away from the use of office paper." Tissue remains strong, as it "grows with the population," he said. And demand for deinked pulp is strong thanks to the interest in increasing the recycled content of products such as copy paper, cups, packaging, and magazines.

Plugging Into E-Recycling
Since 2006, ReMA's conventions have included a track on electronics recycling, giving special attention to this growing, specialized market. This year's electronics recycling summit was the first since ReMA's acquisition of the International Association of Electronics Recyclers in January.

A Host of E-Scrap Issues. State regulations, exports, industry consolidation, and the value of certified operating standards were among the subjects a panel of e-scrap executives discussed as part of the summit.

The panelists saw both good and bad in the trend toward state-mandated electronics recycling. Waste Management Recycle America eCycling Services (Lantana, Texas) has grown as a result of state mandates, said the company's Bobby Farris, and he welcomes them. "Without them, it's hard to convince consumers to pay for recycling," he said. "Until state programs create more consistency, it will be hard to create buy-in."

In contrast, Supply-Chain Service (Lombard, Ill.) already had "big counties willing to pay a reasonable price for services" for e-scrap collection events in Illinois, said the firm's Jade Lee, and she expects the state's new e-scrap law to change those relationships.

A potential ban on e-scrap exports concerned the panelists. They gave the example of processing cathode-ray tubes, which no longer takes place in the United States. "We want to cut down on the dumping of e-waste, but we need to develop legitimate markets for CRT glass, among other things," Farris said. "You can shut off our ability to recycle by banning exports." Lee agreed that exporting "is not avoidable," adding that "we need export management systems and downstream due diligence." With that, she said, "exporting can be well-managed." Steve Skurnac of Sims Recycling Solutions (West Chicago, Ill.) noted that there's "no common ground yet" between recyclers and environmental groups on the subject.

Industry standards can help counteract the negative image that comes from media reports of unscrupulous exporters, the panelists said. "Certification is a great first step to separate those doing the right thing from those who are not," said Jake Player of Tech­Turn (Austin, Texas). He advocated a punishment system for those who violate industry standards.

Lee pointed out that certification has many benefits, calling it "an effective management tool for any company [and one that has] transitioned us to a new level" of performance. Her company has achieved ISO 14001, ISO 9001, and IAER certification and is now pursuing RIOS and NAID certification. Beyond the benefits to the company, however, certification is essential for customers, who are increasingly demanding a way to recognize legitimate recyclers. "The momentum toward standards is in the hands of those who buy [recycling] services," Skurnac said. But standards are "only as good as their perception," Farris warned. They "only have value if they're valued by the customer, [who] must buy into them as a sign of a reputable recycler." Customers want something they can recognize and understand, he said, and "it will take a while to get there."

Looking ahead, the panelists expect to see more industry consolidation as large companies try to serve the needs of equipment manufacturers and state programs. The market will continue to sustain both nationwide and local recyclers, Skurnac said, because as some companies merge, others form anew. "There's still plenty of opportunity in metro areas and states," especially in consumer electronics recycling, because there are "huge volumes of pent-up supply," he said.

How to Make Money in a Down Market. Electronics recyclers can provide a wide range of services to ensure their companies' profitability. As Bob Erie of E-World Recyclers (Vista, Calif.) put it, "Don't base your business solely on commodities. Diversify your income streams. Make the most of everything that flows through your facility; otherwise, when the market changes, your business might not be sustainable."

LifeSpan Technologies (Wellesley, Mass.) offers many services under the banner of "asset management," said the company's Dag Adamson. That term covers "IT asset management, IT asset disposal, logistics, reuse, recycling, and demanufacturing, including environmental, privacy, and reputation concerns," he said. Decide "what's most important to the customer," he advised—cost, data privacy, or environmental concerns—and with that knowledge, determine what your company can do to make money from that need. Asset management, inventory control, and data destruction are potential growth areas for recyclers, he said.

One significant development in the computer resale market is the Microsoft Authorized Refurbisher program, which allows program participants to install Windows on refurbished PCs on a large scale, with no restriction on how or where the computers are sold. Microsoft (Redmond, Wash.) is "excited to participate" in the refurbished computer market, said the company's Bill Benton.

When it comes to damaged or defective equipment, "it's wasting money to scrap something you could resell as parts," Erie pointed out. He gave the example of damaged flat-panel LCD and plasma displays. Flat panels are "easy to work on, and you can recover and sell many of the parts," he said, because no matter the brand, "they contain only a few parts from a few manufacturers." Demand exists because "it's easier and cheaper to fix some of these TVs than to replace them," he said.

At the materials separation stage, Len Stock of SiPi Metals Corp. (Chicago), a nonferrous and precious metals smelter, explained how to maximize the value of the metals in processed electronics. Do a time study to determine how much processing equates to how much more value, he suggested. The less plastic, steel, aluminum, mercury, lithium, and beryllium oxide you provide, the greater the value. Further, sizing and shipping efficiency can "get more in your Gaylord boxes and bags or on your truck." He conceded that market volatility is a problem, with prices down 30 percent to 50 percent for most metals other than gold. "Ship [material] regularly to spread the risk of sudden commodity price drops," he said.

The Chinese Perspective on E-Scrap. China's approach to imported and domestically generated electronic scrap was the subject of another session. For several years China has banned the import of scrap electronics, and its recently promulgated regulations for the recycling and disposal of "waste electrical and electronic equipment," which will take effect in 2011, will reinforce the import ban.

Yilei Hao from China's General Admin­istration of Quality Supervision, Inspection, and Quarantine presented data on scrap shipments rejected through AQSIQ's preshipment and postshipment scrap inspection system. Preshipment inspections prevented 572,000 mt of scrap from being sent to China in 2008, Hao reported. China also inspects arriving scrap shipments, opening 50 percent of all scrap containers and unloading 10 percent, with those proportions increasing when problematic material is found. In 2008, the country found 372 out of 256,295 lots of arriving scrap "substandard on environmental protection." That percentage has fallen steadily since 2004, even as the volume of scrap arriving in the country has grown. In 2008, plastic scrap shipments were 57 percent of all problematic shipments, followed by metal and mixed metal at 17 percent each. The rejected shipments came from 44 countries. A significant proportion of shipments of mixed metal scrap are rejected due to the presence of electronic scrap, Hao noted.

"Export bans are not the solution" to the problem of end-of-life electronics, said ReMA's Eric Harris. The economies of China and the United States are interdependent, he said, and electronics recycling offers "opportunity for global strategic partnerships." Harris acknowledged that "some illegal pollution is going on" from unscrupulous electronics processors. "China is working to address it, and we should encourage that," he said. "We should share our technologies and best practices" for sustainable e-recycling.

China is beginning to address its domestic end-of-life electronics as well. China had 641 million cell phone users at the end of 2008, said Alex Zhang of the China Electronic Enterprises Association, and it's estimated that one-third of them get a new phone each year. Only 1 percent of Chinese residents recycle their phones, Zhang said. An estimated 16 percent sell them or give them away, and the remainder just keep them. Nearly 100 companies joined forces to launch a "green box" recycling program for cell phones, which collected just 3 million phones.

Cell phone recycling should be safe, energy-saving, and easily controlled, Zhang said. He outlined the strengths and weaknesses of chemical vs. blast furnace processing techniques in meeting those goals. China's new WEEE law will provide funding for treatment, research, transportation, and storage of scrap electronics, as well as licensing and technical standards, he said.

Riding the Green Wave. Though the "green wave sweeping over society" has shown signs of slowing in recent months, "longer-term trends [will] keep this green wave going and create great opportunities for all of you," said Daniel Esty, an environmental lawyer and consultant who served on President Barack Obama's transition team, who spoke about political and cultural trends that might affect electronics recycling.

Esty warned that new EPA Administrator Lisa Jackson will be a "very tough-minded, enforcement-oriented EPA boss," resulting in strict enforcement of evolving regulations covering carbon emissions, recycling, disposal of materials (including e-scrap), heavy metal usage, and chemical exposure.

Currently, Congress is considering several e-scrap bills, including one that would authorize a National Academy of Sciences study on e-scrap and another that would ban e-scrap exports to the developing world. Esty called a federal e-recycling structure preferable to the current patchwork of state regulations, and he advised scrap recyclers to adopt a united, proactive stance on the issue. "Think about stepping into the breach before the government tells you what to do," he said. "Work with friends in the legislature to come up with model state legislation that would provide consistency and coherence."

In the coming years, recyclers also will need to satisfy the increasingly green concerns of influential stakeholders, Esty said. The communities in which e-scrap companies operate, for example, now feel obligated to ask questions about the green practices of the businesses operating within their borders. Employees want to be part of a company "that's doing good, doing the right thing, being a responsible corporate citizen," he said. And scrap suppliers now know they'll be held accountable for how their products are handled. "There's no better example than Wal-Mart, which over the last several years has begun to focus on environment and sustainability up and down the supply chain," he said.

Under the Obama administration, e-scrap businesses will face both unparalleled opportunities and scrutiny. If recyclers do their job well, they will emerge as "environmental heroes, the centerpiece of one of the important lines of green business," Esty said.

E-Recycling at the State Level. Currently, 18 states and New York City have state-funded electronics recycling programs, and several more states have legislation pending that would authorize such programs, said Jason Linnell of the National Center for Electronics Recycling (Parkersburg, W.Va.) at a session on state issues and challenges. Once those laws take effect, the programs will cover about 52 percent of the U.S. population. Funding for all but one of the state programs comes from electronics manufacturers, either directly or through the state; California uses an advance recycling fee.

Each state program has its own rules and requirements, reimbursement structure, and interaction among recyclers, manufacturers, and the government, Linnell noted. Some programs limit the number of recyclers that can participate. The state programs do affect competition, the speakers agreed. Some collectors and recyclers work exclusively inside their state's system while others work exclusively outside the system, noted Kathy Kiwala, who leads the Oregon state e-recycling program. "What we've heard from recyclers is they want to make sure there's a level playing field."

Gina Chiarella of WeRecycle! (Walling­ford, Conn.) said program differences mean her company sometimes competes with recyclers that have little overhead. Within the system, there are definitely winners and losers, agreed Craig Lorch of Total Reclaim (Seattle). "Winners manage to get a contract; losers don't." At this point, it's unclear how effective the programs are, Linnell said, because they're new and only a few states have collected data.

Some electronics producers would prefer a federal approach to e-recycling because state-by-state differences are "extremely frustrating and complicated as a manufacturer," said Sony's Douglas Smith. He also would like more scrutiny of no-name electronic imports and "what they're doing to contribute to the electronic waste collection infrastructure. Oftentimes, there's no company history; it's uncertain what materials are in the products or how they're designed," he said. He advocated a market-share approach to funding e-recycling infrastructure needs.

Exploring Industrial Plastic Markets. About 2 million tons of industrial scrap plastic is generated annually, with the material typically composed of a single high-quality resin, said Kim Holmes of 4/R Sustainability (Portland, Ore.) at the workshop on industrial and electronics plastics. Only about 5 percent of the plastic produced for goods comes available as industrial scrap, however, so scrap dealers must work with industrial material that's "trickier" to process due to new barrier technologies, new additives, and multiple resins, Holmes said. Most of this material gets exported to China.

Do your homework before entering this niche, cautioned Chris Brough of IntegriCo Composites (Temple, Texas) and Ron Sherga of Sherresults (Arlington, Texas). Brough, whose company manufactures composite railroad ties from industrial scrap plastics, said it doesn't take much capital to start a simple operation, but "easy come, easy go," he said. Also, the industry lacks transparency, Sherga said. There are no standard published price sources, as there are in the metals and paper industries, and there's a lot of false information. He advised starting small and proceeding slowly. "As you gain a sense of volume, comfort, and credibility, then do your own thing."

Brough then explored the challenges of reclaiming various industrial plastics. Copper wire chopper residue that's purely PE or PVC, for instance, usually can go directly to a secondary market, while mixtures are a challenge due to their inconsistency. Aluminum wire chopper residue is usable if it's 100-percent HDPE, but most is cross-linked PE, which has no commercial value because it doesn't melt, he said. The biggest challenge with e-plastics is that they contain multiple polymers that are difficult to distinguish, as well as metal and other contaminants.

The industry faces several other barriers, Sherga said, including the demonization of plastics such as those containing brominated flame retardants. "That's not to say they don't have problems, because they do," he said, noting that flame retardants change the physical properties of reclaimed materials. If a buyer requires flame retardants, however, that feature can be a plus. Contaminants in scrap plastic streams increase separation costs and make it difficult to find end markets for the material, he said. In addition, the color of reclaimed materials can limit where it can go.

Tire Summit Makes Its Convention Debut
ISRI held its popular tire recycling business summit in conjunction with the annual convention this year. For this first time, tire recyclers could capitalize on the summit's focused networking and educational content while having access to the convention's larger opportunities, including the exposition. The move resulted in a strong turnout for the tire summit, leading ReMA to combine the events again at next year's annual convention in San Diego.

Surviving the Government Gantlet. Crumb rubber has taken a lot of flak in recent months, especially regarding its use as infill in artificial turf sports fields. To kick off the panel discussion on government regulation of crumb rubber, ReMA's Jonathan Levy cited newspaper stories with headlines like "Synthetic Turf Nixed" and "Field of Screams" that claimed crumb rubber surfaces harmed student athletes.

Up to now, state legislative action on this issue has been concentrated in Northeastern states such as Connect­icut, New Jersey, and New York, which have introduced legislation calling for moratoriums or risk analysis on the use of crumb rubber in playing fields, Levy noted. He expressed concern about the impact of such moves on the recycled tire industry. "It's important for legislators to understand that, even in the best-cast scenarios, there are very few things you can actually do with a scrapped tire," he said. Rather than seeing scrap tires discarded illegally or burned for energy, ReMA would "much prefer to see that material recycled into a much higher-end use, such as crumb rubber or rubberized asphalt."

In addition to complying with any new legislation, crumb rubber recyclers must be mindful of guidelines established by the United States Access Board (Washington, D.C.), an independent federal agency that writes standards on accessibility for people with disabilities. The board has guidelines for surfaces of new and existing play areas to ensure they're firm and stable enough for children with disabilities but also soft enough to reduce the risk of injury after a fall, explained the board's Bill Botten. "It's my hope that there's an opportunity to work with the rubber industry to make sure that children with disabilities can also come and play," he said.

Annie Costa of the Association of Synthetic Grass Installers (Grass Valley, Calif.) said her members—installers of landscape and leisure sports projects—use crumb rubber infill on everything but sports fields. "We represent what we feel are the emerging uses … for artificial turf and synthetic grass," such as road medians, putting greens, bocce courts, play areas, and kennels, she said. Costa sees a bright future for crumb rubber, though in incremental amounts as far as her members are concerned. "We don't buy it by the truckload," she said. "In a lawn, landscape, or putting green, we typically do between 600 and 1,200 square feet—not a lot of rubber at one time."

From a product liability standpoint, "this is a challenging time to be in the recycling business or to be a manufacturer," said Brendan Ford of Snell & Wilmer (Costa Mesa, Calif.), a law firm specializing in product liability defense. The 2008 Consumer Product Safety Improvement Act, as well as California's Proposition 65, which allows private attorneys to sue manufacturers for violations, have changed the regulatory environment, he said. "The good news is that if you understand the rules, if you're prudent and proactive, and if you work in advance of distributing your products to comply in anticipation of the regulation rather than in reaction to the regulation, you can avoid some of these pitfalls."

Crumb rubber producers must pay close attention to CPSIA requirements, Ford said. When making a children's product, for example, "you need to have a third-party accredited laboratory test it to make sure it complies with standards and other rules and regulations," with the Consumer Product Safety Commission ultimately determining whether it can be sold as a children's product. Vigilance is essential because consequences can be severe, Ford said, pointing to fines of up to $100,000 for a single violation, with an aggregate maximum of $15 million.

Molded Products Offer Growth Potential. Recycled rubber shows great potential in reducing greenhouse gas emissions and appealing to consumers who want to buy "green" products, said speakers at the overview of molded rubber products.

The greenhouse gas emissions of creating molded products from recycled rubber are an estimated four times to 20 times lower than creating those products from virgin rubber, according to preliminary lifecycle data, reported Jeff Padnos of Louis Padnos Iron & Metal Co. (Holland, Mich.), co-chair of ReMA's climate change task force. Padnos predicted the United States would pass climate change legislation with wide-ranging effects on the industry, and he urged the audience to have solid data on the climate benefits of tire recycling.

Those hoping for direct government support of tire recycling should be careful because it can "create more problems than it solves," cautioned Art Dodge of Ecore International (Lancaster, Pa.). He noted that tire collection incentives initiated during the World War II scrap rubber drives resulted in persistent tire piles. Also, some subsidized companies can't find a way to be profitable once the subsidies end. In addition, regional incentives tend to skew the market and don't work in the long term, he said.

The panelists acknowledged some potential benefits from government support, however. Stimulus funds might fund schools' purchase of recycled rubber-containing products, such as artificial turf or athletic surfaces, Dodge said. California has helped tire recyclers develop markets, and it could help the industry overcome compliance, testing, and environmental barriers, said Jana Nairn of Golden By-Products/Ag-Link (Ballico, Calif.).

Consumer products currently account for a small share of the molded recycled rubber market, but that segment could grow the most rapidly—12 percent to 14 percent a year now with the potential for exponential growth in the future, Dodge said. "Buyers who consider green factors in how they spend money are a very aggressive segment" of the consumer population, he said. "This shift to green buying patterns will increase demand" for recycled rubber products. To tap this market, Dodge recommended building brand equity. Ecore has a 10-year-old partnership with Nike to turn its postmanufacturing shoe sole rubber into sports and recreation products under the label Nike Grind. The products have been extremely popular, even though they're twice as expensive as the unbranded equivalent product, he said.

The Ecore and Nike partnership also produces an indoor sports surfacing product. That's part of the indoor construction market for molded recycled rubber, a segment that has the potential to grow 6 percent to 8 percent a year, Dodge said. Outdoor construction and civil engineering uses could grow 4 percent to 6 percent a year, as could agricultural markets, he said.

Molded products are a large and expanding part of the nascent tire recycling industry in California, Nairn said. The molded product market is less seasonal than other markets, such as turf, she pointed out, and its products can have less stringent specifications and use less popular sizes of crumb. But demand for molded products can be volatile, she said, with agricultural demand following feed prices. Further, this market faces thin margins, stiff competition from imported products, and high export costs.

A final market, automobile components, has been hit hardest by the recession and offers the weakest potential for growth, only 3 percent to 5 percent a year, Dodge said.

Making Tire Wire a Hot Scrap Commodity. As ferrous scrap prices were rising and equipment for reclaiming tire wire emerged, the material became cleaner and the market started taking off. With the subsequent fall of ferrous prices, however, "we went from landfilling the material for 17 years to getting record prices to—guess what—back to landfilling again," said Jerry Swenson of Auburndale Recycling Center (Auburndale, Wis.) and president of ReMA's Scrap Tire Processors Chapter.

That trend won't continue if David Borsuk of Sadoff Iron & Metal Co. (Fond du Lac, Wis.) has his way. Borsuk wants to make tire wire a charge material of choice. He estimates that tire wire recycling can produce up to 600,000 tons of steel annually and potentially can be a significant component in automobiles and new tires. "Certainly the base metal is a good grade of steel—generally 1070, 1080 steel, very desirable, clean steel to be recycled," he said, noting that recent landfill bans in several states may increase tire wire recycling.

Many mills have resisted using tire wire due to its residual rubber content, rusting problems, flowability, material handling challenges, and packaging. The cleanliness factor is both a pro and a con, with residual rubber in the metal providing beneficial Btu content and adding some carbon to the mix but causing a safety risk by flashing during the melting process, Borsuk said. Mills also are concerned about rust on the material and note that loose tire wire vaporizes rather than providing useful metal units.

The best way to deal with such objections is get to know a mill's melt superintendent and understand his or her needs, Borsuk says. "They look at things very personally, they take ownership, they use melt materials they feel comfortable with."

Border Issues Abound. U.S. scrap tire processors face challenges north and south of the border, according to speakers at the session on the subject. To the south, Mexico has been a strong market for used (not scrap) tires from the United States, but the country does not have programs in place to ensure the proper recycling of those tires, noted Terry Leveille of TL & Associates, publisher of California Tire Report (Fair Oaks, Calif.). California firms exported about 1.5 million used tires in 2008, with an estimated 800,000 going to Mexico—primarily Baja California—and much of the remainder to Central America, Leveille said. With the shorter lifespan of used tires and Baja's poor road conditions, the Mexican state has "a pretty fast-moving scrap tire problem," generating about 1.5 million scrap tires a year, he said.

Mexican consumers aren't able or willing to pay tire disposal fees and tire dealers typically won't pay landfill tipping fees, thus an estimated 50 percent to 55 percent of discarded tires end up illegal tire piles, Leveille said. Individuals set tire fires to make room for more tires, and the smoke drifts into California, polluting the area. Sometimes floods carry tires from Tijuana into California, Leveille added. In addition to cleaning up the tire piles, Mexico needs to develop a scrap tire management program to put the used tires to productive use. He also called for "cooperative enterprises" among California, the U.S. Environ­mental Protection Agency, and Mexico.

Looking north of the border, U.S. tire recyclers have three major concerns about the Ontario Tire Stewardship program, which would offer subsidies to Ontario tire recyclers, noted Edward Boisson of R.W. Beck (San Rafael, Calif.). First, will it reduce U.S. recyclers' access to scrap tires? It's likely only tire processors in upstate New York will be affected, Boisson said. The scrap tire supply is already tight there and demand is strong, and the Ontario program "could dry up this supply."

Second, will the incentive payments give Ontario recyclers an unfair market advantage in sales of ground rubber and tire-derived fuel? Boisson thinks it will. If the ground rubber market slips into oversupply, prices could head downward. If that happens, he said, "Canadians are going to be in a strong position, with price supports and strong policies."

Third, are such incentive programs good policy? "What would it look like as a precedent?" Boisson asked.

Building Better Tire Processing Equipment. As the scrap tire market progresses and matures, machine innovations follow," said Siegfried Grentz of AMNI Maschinenbau USA (Douglasville, Ga.) at the session on tire shredding technology. Equipment manufacturers face two main demands from customers, said Mike Hinsey of Granutech-Saturn Systems Corp. (Grand Prairie, Texas): Some seek higher-capacity systems that process at least 5 tons an hour, while others want systems that can process less than 1 ton an hour with a favorable return. Everyone wants to process larger tires and produce cleaner and smaller material, he noted. The industry has responded by building shredders that process up to 50 tons of scrap tires an hour; handle tires up to 10 feet in diameter and 3 tons in weight; and have cutting chambers up to 9 feet long and 1,000-hp drives, Hinsey said. There also are systems that make exceptionally clean crumb rubber as well as very fine powder, he noted.

Today's scrap tire processing systems are larger, job specific, made to order, and accepted globally thanks to standardization, said Charles Astafan of Columbus McKinnon Corp. (Sarasota, Fla.). "Today, we develop equipment specifically for tires," he says. "That wasn't always the case." The scrap tire industry has moved away from continuous-flow systems to processing in stages, Astafan said. For tire processors, "volume and multiple markets are key to being successful," he noted. "Without a flexible system to produce material for multiple markets, success is limited."

In addition to the trends toward equipment that can handle greater volumes and larger tires, manufacturers are aiming for lower operating and maintenance costs, easier maintenance, zero-waste systems, and limited downtime, Astafan said. •

—Theodore Fischer, Kent Kiser, Diana Mota, and Rachel H. Pollack