July/August 2013
The ReMA convention drew recyclers to Orlando, Fla., with networking opportunities, educational programs, expo excitement, and memorable—even magical—social events.
In times of uncertainty, we can all use a little magic. That’s what ReMA brought to the 2013 convention and exposition April 9-13. The convention returned to Orlando, Fla., for the first time in a decade, attracting 5,234 people to the Orange County Convention Center—the largest crowd to date for a convention outside of Las Vegas and the third-largest attendance in ISRI’s history. Wowing them in the exhibit hall were about 335 exhibitors with displays and equipment filling more than 350,000 square feet of exhibit space—another record. But the biggest oohs and ahhs were saved for the final night event, an evening at Universal Studios’ CityWalk and The Wizarding World of Harry Potter. Conventiongoers and their families enjoyed a buffet dinner at CityWalk with live entertainment, karaoke, and other diversions. As the sun set, they entered the world of Harry Potter, where dessert was served among building and shops recognizable from the world-famous novels and movies about the teenage wizard. The ReMA crowd had exclusive access to the park’s heart-stopping rides, charming shops, and talented performers.
Preceding the fun and games, however, were thoughtful discussions of national and international issues. Food for thought came from a general session speech by former broadcast journalist and bestselling author Tom Brokaw and a political give-and-take from Haley Barbour and Edward Rendell, former governors of Mississippi and Pennsylvania and chairmen of the Republican and Democratic parties, respectively. Providing inspiration was swimmer Dara Torres, a 12-time Olympic medalist who was the oldest swimmer to compete in the Olympic games and the first swimmer to compete in five Olympic games.
Participants shared industry knowledge and insights through spotlights on the economy and various scrap commodities as well as several dozen workshops. A few topics seemed to crop up repeatedly: Speakers worried about the short- and long-term effects of record government debt incurred to provide short-term economic stimulus, primarily in the United States but also in Europe and other regions. Also of concern was the slowdown in China’s scrap buying, which many attributed to the country’s slower-growing economy and “Operation Green Fence,” the unofficial name of what appeared to be a new Chinese government initiative to strictly enforce trade-related laws and regulations, most notably those regarding contamination in scrap loads. And materials theft continues to grow as an issue, both domestically and internationally. On the positive side, speakers described the potential of emerging and maturing markets for scrap in Asia and Latin America.
Industry safety was a frequent subject of discussion as well. In addition to presenting a variety of safety-focused workshops and toolbox talks, ReMA debuted its Vehicle Safety Awards, recognizing individual drivers and company fleets for their flawless driving records (see “ISRI Bestows Its First Transportation Safety Awards,” page 133). Also carrying the safety message was a spirited address John Gilstrap, ISRI’s director of safety, presented in the general session before Tom Brokaw took the stage. Gilstrap urged the industry to improve a fatality record that’s the fourth worst in the United States.
If you couldn’t do and see everything the 2013 convention had to offer, here’s a more detailed look at this year’s proceedings.
Candid Commodity Commentary
Aluminum’s Promising, Puzzling Dynamics. Uncertainty and caution pervaded the aluminum spotlight, with major concerns including low scrap generation, high inventories in exchange warehouses, and the direction of the global economy in general and China’s economy in particular. Joe Pickard, ISRI’s chief economist and director of commodities, offered a statistical portrait of the secondary aluminum industry that showed strong growth in the past two decades, with Chinese markets providing most of the momentum. Global primary aluminum production, meanwhile, has grown from 22 million mt in 1997 to 45 million mt in 2012, he said, citing data from the International Aluminium Institute (Vienna). The use of aluminum as a substitute for other metals drove that growth, with most of the substitution taking place in China, home to much of the world’s manufacturing infrastructure. From 2010 to 2012 alone, China’s primary aluminum production grew almost 25 percent, to 20 million mt, while North American production fell 20 percent. U.S. aluminum scrap exports have been essential to China’s growth, with such shipments rising from 5,000 mt in 1990 to 1.4 million mt in 2012, Pickard said. This growth has occurred during a period of slowing U.S. aluminum consumption, which peaked in 2007 at 4.5 million mt, he noted.
Finance deals have driven up aluminum prices, and inventories in London Metal Exchange warehouses have remained unusually high since 2008. The 5.2 million mt of aluminum in LME warehouses contributes to a sense of unease about current pricing levels, he added.
Jason Schenker, president of Prestige Economics (Austin, Texas), reviewed the macroeconomic factors contributing to aluminum demand. In the short to medium term, he said he sees modest growth in both the U.S. and Chinese economies, with U.S. gross domestic product growth remaining close to 2012 levels. He expressed particular optimism about the warming U.S. housing market and the potential replacement of the aging U.S. light vehicle fleet, both of which could drive up aluminum demand.
Still, Schenker made clear he’s “no frothing aluminum bull.” He sees significant medium- and long-term risk in the eurozone and U.S. fiscal policies as well as multiple geopolitical concerns. Austerity measures and economic readjustments could have a profound negative impact on aluminum demand, he said.
Finally, Schenker suggested that the expansion of aluminum capacity has brought a new dynamic to the market that he likened to the boom-bust of agricultural commodities. Pickard contended that growing demand in developing countries such as India, Pakistan, and those in Southeast Asia could help moderate any boom-bust cycle, however. At the same time, production growth isn’t confined to developing markets, with the Middle East posting some of the fastest growth in aluminum production in the world today.
The speakers also contemplated the recent shortage of aluminum scrap in the U.S. and global markets. Schenker was troubled by the apparent decoupling of the traditional relationship between economic growth and scrap generation, suggesting the slow rate of U.S. economic growth could be behind it. Pickard cited another decoupling in the market, between manufacturing output and scrap prices, noting that the ReMA scrap price index “hasn’t moved closely with manufacturing output in recent months.” The globalized market for aluminum scrap and the declining role of the U.S. economy in aluminum demand are two possible explanations for this decoupling, he said.
Alan Dick, president of Alpert & Alpert Iron & Metal (Los Angeles), argued that the LME’s North American Special Aluminum Alloy Contract will not die despite its increasing divergence from scrap prices and its subsequent decline as a benchmark. Manufacturers are loyal to the contract, with many seeing benefits from using it as a pricing mechanism, he said. The material that’s actually traded is not what manufacturers use, but abandoning the contract would require collective, and unlikely, action from the secondary aluminum industry, Dick said.
Is China’s Copper Run Done? The copper spotlight focused exclusively on China, “the one country in the world whose copper consumption is greater today than it was prior to the beginning of the Great Recession in 2007,” said moderator Chris Greenfield, vice president, metal purchasing and trading, for The Federal Metal Co. (Bedford, Ohio). From 2007 to 2012, China used “a lot more copper in its industry to produce wire rod products, brass mill products, and copper tubes, while the rest of the world used a lot less,” noted Carlos Risopatron, head of environment and economics at the International Copper Study Group (Lisbon, Portugal).
China’s “enormous appetite” for U.S. copper scrap over the past 20 years “has reached its zenith,” asserted Robert Stein, senior vice president of nonferrous marketing for Alter Trading Corp. (St. Louis). One reason for his bearish outlook is China’s Green Fence import restrictions. Compliance issues have made the costs of exporting copper scrap to China “the highest in the world,” he said; inflation, rising labor costs, and its existing stockpile of copper are other discouraging factors. “As China approaches its as-yet elusive levels of sustainability in industrial, economic, and environmental matters, it risks alienating its copper supply chain as sellers seek cheaper and more efficient markets in which to sell their materials,” Stein warned.
The decline in China’s copper market is not a permanent shift but a temporary, politically induced slowdown, countered Adam Minter, a Shanghai-based journalist. China changed its government leadership last year, he explained, and it’s common for “patronage and infrastructure spending” to be frozen during such periods. He expects China’s spending to resume later this summer with “a very, very large stimulus that should stimulate real copper demand.” One proposal calls for a $6 trillion package that would move China from a 51-percent urban to a 60-percent urban society. “I wouldn’t necessarily call myself a bull on China,” Minter said, “but when the government decides to do these kinds of programs, it tends to do them, and that bodes very well for copper and this industry in general.”
Ferrous Looks to China, Turkey. Global steel production continues to expand faster than demand, reaching almost 1.6 billion mt in 2012, with a 77-percent capacity utilization rate, said Philip Hoffman, vice president of ferrous scrap trading for MedTrade (Houston), at the ferrous spotlight. Electric-arc furnaces generated 440 million mt of that total, while global scrap use reached 570 million mt, he said. The international trade of ferrous scrap totaled 103.6 million mt, with the United States the largest exporter, originating 21.1 percent of all shipments, and Turkey the leading importer, taking in 22 percent of exported ferrous, he added. Turkey likely will retain its leading position as it builds additional steelmaking capacity “despite global overcapacity,” he said. That excess capacity is one cause of volatility in the Turkish market, though Hoffman noted that the government is investing in infrastructure subsidies, and demand is strong and should remain “reasonably good” in the longer term. China is a more difficult market to predict, in part because it’s running a large steel surplus. “The unsustainability of Chinese overproduction has me concerned,” he said.
Likewise, China’s development of “massive” iron ore mining capacity concerns Spencer Johnson of INTL FCStone (New York). “If that significant iron ore comes on the market, with less demand in the market, low iron ore prices will have a negative impact” on ferrous scrap prices, he said. The continuing importance of the Chinese and Turkish markets make it increasingly difficult to correlate ferrous scrap prices with U.S. market fundamentals, he added.
Addressing the European scrap picture, Sachin Shivaram, general manager of metallics purchasing for Severstal North America (Columbus, Miss.), noted that some European countries have been offering prime grades of scrap, which has depressed prices in North America. “If things pick up, you won’t see those exports, and U.S. mills will need to find alternatives,” he said.
Shivaram also spoke about Severstal North America’s decision to begin buying scrap throughout each month—a switch from the steel industry’s normal, “archaic” practice of buying scrap one or two days a month. “It’s time to overcome the stigma that if you buy mid-month you’re desperate for scrap,” he stated, characterizing the mid-month market as vibrant and worthwhile.
Though no speaker would say there are too many shredders in the United States, all seemed to agree that excess shredding capacity is hurting shredder operators. “You have more scrapyards fighting for the same amount of scrap; therefore, margins are squeezed,” Hoffman said. He suggested that the traditional hub-and-spoke system of shredder operators accepting scrap from smaller yards is giving way to an era in which midsized operators are using smaller, portable shredders.
Shivaram and Hoffman commented on whether the backward integration of steel companies into the scrap recycling market is a smart strategy. “I think every steel mill thinks it’s a good idea, us included, to get into every business, but … I think the price paid [for scrap operations] between 2006 and 2008 was too high,” Shivaram said. Hoffman emphasized the difficulties steel mills can face competing against smaller entrepreneurs on the scrap side.
Banking on Higher Stainless Demand. The nickel/stainless spotlight was unabashedly bullish, with much of the enthusiasm coming from panelists who see growing demand in developing countries. The major stainless consuming markets—construction, transportation, industrial machinery, electronic products, appliances, and other metal goods—all are growing in the developing world, pointed out Andy Goenka, president of Steelbro International Co. (Oyster Bay, N.Y.).
Stainless production has largely shifted to Asia: Of the world’s top 20 stainless mills, 13 are in Asia, Goenka said, and production is increasing across the region. From 2005 to 2010, China grew from producing 13 percent of the world’s stainless steel to 35 percent; in the same period, production in the Americas slipped from 11 to 9 percent while European Union output fell from 37 to 24 percent. China’s growing stainless production has not led to significant growth in U.S. stainless scrap exports, however, due to the country’s sizable use of nickel pig iron, which increased from 5,000 mt in 2005 to 300,000 mt in 2010, he said. That could change, however, said moderator Michael Friedman, president of Sustainable Management Corp. (Louisville, Ky.), because Indonesia—a major supplier of nickel ore for nickel pig iron—reportedly will ban the export of raw material ores next year. Such a ban could significantly reduce China’s access to nickel ore and make imported stainless scrap an attractive alternative.
India already is consuming more stainless scrap, Goenka said, with consumption growing from 480,000 mt in 2011 to 585,000 mt in 2012 and expected to reach 840,000 mt in 2013. That said, high freight costs are making it difficult for U.S. traders to ship stainless scrap from the United States to India, he noted.
Despite a shrinking U.S. market share, Mike Schroeder, president of Designed Alloys (Aurora, Ill.), is bullish on North American stainless. In fact, his company added a furnace, he said, “because we wanted to be a manufacturer, not just a trader.” Infrastructure projects are a big driver of current stainless growth, a trend he expects to continue. “We are a country on a six- to seven-year infrastructure cycle, and we’re right on the cusp of turning it over again,” he said. Further, aerospace and battery markets are good and growing consumers of “higher alloys of nickel.”
The convention also devoted spotlights to electronics, paper, plastics, and tires/rubber, which are summarized in the sections devoted to each of those commodities below.
Thwarting Thieves, Externally and Internally
Analyzing the Container-Theft Problem. Though container theft is on the rise worldwide, the workshop on that topic focused on thefts within the United States, 951 of which occurred in 2012, said Ed Petow of FreightWatch International (Austin, Texas), a logistics security firm. In the first quarter of 2013, 18 thefts of containers of metal were reported, with the average loss valued at $93,000. Truck stops, the most common site of such crimes, experienced fewer thefts in 2012 than in 2011, but thefts from “secure areas” increased, indicating the growing sophistication of container thieves, he said.
Metal is a growing proportion of the material stolen in such crimes, he said. It was taken in 4.8 percent of container thefts in 2010, roughly 8 percent in 2011, and almost 15 percent in 2012. Among the metal thefts, 42 percent were copper loads; 19 percent were aluminum; and 20 percent were steel.
The fastest-growing method of container theft, Petow said, is for thieves to create fake trucking companies and make fraudulent container pickups. More container thieves also are using the identifications of legitimate trucking companies to gain access to containers.
Companies can deter such thefts by conducting thorough background checks of drivers and minimizing the time loads are left unattended, Petow said. He also encouraged recyclers to embed multiple tracking devices in loads, even though thieves know where to look for them in a container and have become adept at disabling such devices after a theft.
Ray Fernandez of Sealock Security Systems (Doral, Fla.), a manufacturer of container-locking devices, described the methods thieves use to break into containers without removing the doors, all of which are nearly impossible to detect from exterior visual inspection.
Combatting Theft With Collaboration. Rose Mock of Allied Scrap Processors (Lakeland, Fla.) and a panel of Florida law enforcement officials—Sgt. Matthew Beebe of the Polk County Sheriff’s Office, Detective Daniel Hinsz of the Tampa Police Department, Greg Pollock of the Hillsborough County Sheriff’s Office, and Detective Kelley Burroughs of the Jacksonville Sheriff’s Office—shared how they’ve worked together to fight metal theft. “You have to see them as partners—not enemies,” Mock said of law enforcement agencies. “You have to train them, and they have to train us.” She created a kit with samples of commonly stolen materials, for example, and gave it to local police so they’d know what to look for during investigations. Beebe said his office now conducts metal theft training every year.
The level of communication and trust has gradually grown, but it has taken perseverance and commitment, Mock said. The Florida Recyclers Association now brings together recyclers and law enforcement officials twice a year: once to discuss issues and a second time to socialize and network, which solidifies relationships, she said. Thanks to those relationships, law enforcement officials receive tips from recyclers that help solve cases, Burroughs said. The groups also joined forces to develop a mutually acceptable state metals theft law.
Watching for Workplace Fraud and Theft. More than one-third of companies PriceWaterhouseCoopers (New York) surveyed in 2012 had experienced fraud or internal theft in the past year, an increase of 10 to 15 percent since 2010, said Christopher Bryan, a certified public accountant in Jacksonville, Fla. He described seven common motivations for fraud as well as potential red flags employers should watch for: employees who appear to be living beyond their means, who are facing financial difficulty, who have a “wheeler-dealer attitude,” who are unusually close to a vendor or supplier, who refuse to share certain duties or information, who refuse to take vacations or let others cover their responsibilities while they’re gone, or who are irritable, defensive, protective, or suspicious—especially if such attitudes exist together with another red flag.
A company can reduce its likelihood of becoming a victim of fraud by establishing a culture of ethical leadership, Bryan said. Equally important are internal controls such as audits that can detect fraud and reduce the perceived opportunity for fraud. Also look at the processes for signing checks, reconciling bank accounts and balance sheets, and conducting inventory counts, for example. The ordinary routes by which money goes out of the company are the easiest places to commit fraud, he said.
Pondering Plastics
Plastic Faces the Green Fence. China is the world’s largest importer of plastic scrap. Its purchases from the United States were up slightly from 2011 to 2012, to 1.3 million tons, but its 2013 imports are down slightly to date. “Is this the beginning of a trend?” asked Xavier Cronin, editor of PetroChem Wire’s Repro/Regrind Resin Report, at the plastic spotlight. He believes so, pegging the decline to China’s Green Fence initiative. “From what we’re hearing about [shipments] being turned back … you are going to see less material getting to China—at least for now,” he said. It’s too soon to know the full effects of the initiative, he said, in part because so many different Chinese government agencies are involved, including customs, environmental protection, and quality inspection. “The mindset in China—and we’re talking about thousands of inspectors—is that they’re going through these bales and taking a lot of time to make sure they don’t let in a contaminated load,” Cronin said.
Despite the hassles, China is still worth the trouble: It’s the world’s second-largest economy and the largest consumer and producer of plastic products. Surendra Borad, chair of Gemini Corp. (Antwerp, Belgium), said China consumes about 60 percent of international plastic scrap supplies, with its demand expected to reach 29 million mt by 2015 and 85 million mt by 2020. “All roads have been leading to China, and this has made our lives really difficult,” he said.
Borad urged plastic recyclers to turn their attention to the rest of the world, particularly Europe, where the EU is trying to keep scrap in Europe and reach a reuse and recycling rate of 50 percent by 2020. The current U.S. plastic recycling rate of 12 to 15 percent also “provides great opportunity for growth and innovation,” he said. “I don’t know how long this Green Fence policy in China is going to last, but I think plastics have tremendous possibilities in the rest of the world.”
Plastics Recycling for Beginners. U.S. plastic production reached 31 million tons in 2010, but the overall recovery rate is only about 8 percent. Adrian Merrington, chief technical officer of Eco Bio Plastics Midland (Midland, Mich.), described many of the barriers to this market’s growth in “Introduction to Plastics Recycling.”
Whereas metals and glass can be recycled repeatedly with no change in their physical properties, that’s not the case for plastics, he said. Plastics can degrade due to heat, chemical reactions, the presence of additives, and other reasons. Further, recycling is not always cost effective when you compare the cost of collecting, cleaning, separating, and preparing material with the relatively low cost of virgin plastics. Generally, the resins that are the least expensive to recover also have the lowest market value. Virgin material can sell for 15 to 40 cents more per pound than recycled material, he said.
Those interested in recycling plastics should consider whether to take postindustrial material or postconsumer material. For each material a recycler receives, it must know the resin, whether it’s one or multiple layers, how it was produced, whether it’s petroleum- or plant-based, what additives it contains, and whether those additives must be removed. Merrington went into more detail about the recycling of polyethylene terephthalate and high-density polyethylene bottles, the resins with the highest recycling rates, pointing out that recycling technology and infrastructure exist for both, and bottle bill laws in some states subsidize their collection.
Creating Value From Plastic Scrap. Efficiency is the key to profitable plastic scrap recycling. Know everything about the materials you’re buying and selling—including how the buyer plans to use them—and have the ability to separate different materials, maximize weight, label material correctly, and accurately report what you’re doing, said Jason Edelson, account executive at Maine Plastics (Zion, Ill.), adding “the devil is in details.”
With more than 40,000 types of plastic on the market, Edelson urged recyclers to avoid mixing apples and oranges. “Most plastics cannot and should not be commingled,” he said. “Even similar types of plastics can have completely different melt flows and other properties, and one little piece of contamination can lose the value of the plastics.” Clear or natural-colored materials are most valuable, followed by white, black, mixed colors that go black, and mixed colors that won’t go black, Edelson said.
Stephanie Lam, managing director of UNM International (Hong Kong), said her company handles primarily casings from computers, monitors, TVs, printers, photocopiers, and home appliances made of acrylonitrile butadiene styrene, polystyrene, and polycarbonate/ABS. “There’s strong demand in China, but problems getting it through customs,” she said.
Scrap exporters who ship low-density polyethylene must consider color (natural vs. colored), cleanliness, labels, size, moisture (whether it’s stored indoors or outdoors), and contaminants such as drying agents, paper, trash, or grocery bags—“Keep them out,” she advised.
Lam described China’s Green Fence as a 10-month, nationwide initiative to prevent imported shipments that are contaminated with solid waste. China Customs is subjecting containers to H986 noninvasive inspection, bale breaking, and other measures. “Any metals in plastics are definitely rejected; if they find one screw in a container, they will reject the whole container,” she said, adding that buyers such as her company “are happy to pay more to buy quality scrap.”
A Global Perspective
China Gets Tough on Imports. The session on China’s exporter license renewal system and pre-shipment procedures took place as many attendees expressed concerns about the Operation Green Fence initiative and reports of increased scrutiny of scrap shipments. Chinese officials at the meeting either couldn’t or wouldn’t reveal the thinking behind Green Fence, noting only that China is enforcing its existing laws.
Cui Lei, deputy general manager of the CCIC Inspection Group (Beijing), asserted that “scrap, if it’s put in the wrong place, is garbage. If it’s put in the right place, it’s treasure. We have zero tolerance for problems created by scrap.” He went into considerable detail explaining CCIC’s pre-inspection procedures to ensure illegal scrap does not enter China. CCIC inspects about 1.8 million containers a year worldwide, not including those coming from Hong Kong, with more than a third originating in North America, Cui said. Worldwide, 65 percent of CCIC-inspected containers have held paper; 17 percent, plastics; 8 percent, mixed metals; 8 percent, nonferrous scrap; 1 percent, ferrous scrap; 2 percent, ferrous slag; and 1 percent, textiles.
The number of containers CCIC has rejected has remained relatively steady for several years, with 4,024 rejected in 2010, 4,228 in 2011, and 4,530 in 2012, Cui reported. U.S. containers were a small proportion of those rejected, numbering 35 in 2010, 36 in 2011, and 44 in 2012, he said. Thirty-nine percent of the plastic scrap rejections were because the “carried waste exceeded the standard,” 26 percent because the loads contained electronic scrap, and 22 percent due to radioactivity, he added. On the metal side, 25 percent of nonferrous and mixed metal scrap rejections were tied to e-scrap, while garbage and other waste were the causes of 53 percent of the paper rejections.
Despite those rejections, Cui said North American exporters have a good track record. He singled out Japan for criticism, saying China recently received more than 100 containers from Japan that contained radioactive scrap.
Moving From Emerging to Emerged. The workshop on emerging markets featured speakers from several countries that are maturing rapidly. Establishing this theme, moderator Adriano Assi of EcoBrasil (São Paulo) described Brazil’s scrap markets in 2012: The country recycled 11.5 million mt of iron and steel, 511,000 mt of aluminum, 23,000 mt of copper, 4.2 million mt of paper, and 736,000 mt of plastics. These sectors all are growing rapidly, boosted by Brazil’s swelling population, rising income levels, and supportive government policy, he said. Municipal recycling programs, especially, are raising the country’s recycling consciousness and its volume of collected materials, and a 2010 law will result in the development of more such programs and a move toward producer responsibility, he said.
Among its challenges, Brazil is “a nation of landfills,” many illegal, which tacitly encourages disposal over recycling, Assi said. By 2014, every Brazilian landfill must be licensed, which will increase the cost of disposal and thereby provide an economic incentive to recycle, he said, though he’s also concerned about support for incineration in Brazil’s environmental protection agency. Meanwhile, the low-cost labor that once allowed the cheap recovery of recyclables from Brazil’s landfills is drying up, and recyclers are turning to mechanical alternatives. “The paradox is that just as Brazil’s demand for secondary materials is rising, there are few collectors on the streets capable of getting them,” he said.
Brazil’s next big recycling opportunity likely lies in the automobile sector, Assi said. The country has 5 million to 6 million vehicles that are at least 20 years old. Recent government measures could help funnel those vehicles into a formal recycling system by eliminating bureaucratic red tape that encourages the illegal dumping of old autos.
Is China an emerging market or a saturated market? It’s neither, said David Chiao, vice president of Uni-All Group (Atlanta). Unlike other recently booming markets, China’s economy is not a bubble likely to burst, he said, for several reasons: First, the authoritarian nature of the Chinese government allows it to react to economic and financial problems faster than other countries. Second, economic problems in Japan and other Asian nations all started with real estate bubbles, but in China, “the government owns the land, and it won’t hurt its own feet,” he said. Third, China is a continent more than a country, and its various regions prosper and fail at different times, which gives China an unusual stability.
Even so, China’s scrap markets won’t remain static, Chiao said. Greater environmental consciousness will drive the government to step up its regulations, including in the nonferrous sector. “We need to understand that low-grade scrap probably won’t get into China at some point, so we need to start thinking about mechanization,” he said. In terms of scrap demand, however, as long as China grows 8 percent a year, “it’ll need scrap.”
The rising cost of doing business in China, especially escalating labor costs, creates an opportunity for Mexico to grow its scrap industry, said Alejandro Jaramillo of Recicladora Cachanilla (Tijuana, Mexico). “China is no longer the obvious option for scrap processing,” he said. “As a result, several manufacturing sectors are relocating to Mexico. Automotive, aerospace, and electronics are among the most important.” Though there are several roadblocks to Mexico’s emergence as a scrap power, including corruption, crime, and logistics, the macroeconomic trends point to growth, he said.
Running—and Selling—a Recycling Business
A Taxing Situation. To bring scrap recyclers up to date on various tax issues, Dawn Olivardia, a tax partner in Grant Thornton’s Orlando, Fla., office, reviewed economic stimulus provisions in the American Taxpayer Relief Act of 2012 that extended through 2013, including 50-percent bonus depreciation during the first year that new equipment goes into service, the Section 179 first-year write-off limit of $500,000, and the extension of the 100-percent gain exclusion for small business stock. At the same time, various federal tax cuts expired at the end of 2012, and higher-income taxpayers face an additional 0.9 percent Medicare tax to cover the costs of the Patient Protection and Affordable Care Act, commonly called Obamacare. Olivardia warned of ongoing congressional efforts to “close loopholes that aren’t really loopholes; they’re just deductions we can take,” including those for accelerated depreciation and domestic production as well as the research and experimentation tax credit.
Of the 46 states that charge sales tax, 32 offer an exemption for manufacturing equipment, but the recycling industry often has trouble qualifying for it, said Joel Waterfield, a director in Grant Thornton’s McLean, Va., office. If a company taking the exemption gets audited, the main question is whether the equipment was used directly and predominantly in the production process—directly, meaning it’s part of the production process; and predominantly, meaning at least 50.1 percent of the time.
Waterfield stressed the importance of proper documentation to obtain tax exemptions on broker transactions that typically involve a supplier, a broker who wholesales goods, and the recycler who ultimately buys them. “During audits, if you look like you understand what you’re doing and actually have the paperwork ready, they won’t care if you miss one or two things,” he said. “If they don’t think they’re going to make money on this audit, they’ll move on to an easier target.”
The Human Resource Factor. Companies that don’t have a full-time, trained human resource staff should hire such professionals on a contract basis or work with insurance brokers or consultants who have such knowledge, said Joseph Appelbaum, president of Potomac Cos. (Gaithersburg, Md.), at a session that reviewed federal employment laws and regulations.
The Social Security Administration (WashingÂton, D.C.) believes 70 percent of all employees are misclassified in their exemption status, Appelbaum said. He cautioned companies not to base a classification on job title alone but to evaluate each position—including contract workers who function as employees. “When you’re truly in doubt, you can get an IRS determination,” he said.
Because employment eligibility documents must be available for inspection by federal or state agencies, Appelbaum recommended storing all employees’ I-9 forms in one binder or folder and ensuring they’re complete. “You have to take the information, but you don’t have to verify it unless you’re a government contractor,” he said. He suggested employers conduct annual self-audits and watch for I-9 updates and new forms at www.uscis.gov. New employees should provide documentation and complete forms within three days of employment, he said.
Companies also tend to err in their implementation of the Family and Medical Leave Act, Appelbaum said—which applies to employers with 50 or more employees in a 75-mile radius—and related state laws, which might apply to a broader range of companies or situations. “Not knowing is not an excuse for not complying,” he said.
State and federal agencies are auditing organizations of all sizes, Appelbaum cautioned, and they have begun cross-auditing. “If you have an IRS audit, they may start to ask you about your benefit plans … and then pass that information along” to the U.S. Department of Labor, he said.
Valuing and Selling a Scrap Business. Vincent Pappalardo, a managing director in the investment banking group at Stout Risius Ross (Chicago), had encouraging words for recyclers interested in selling their businesses: There are plenty of buyers because “all the larger public companies and scrap companies you would consider consolidators are looking at what’s going to be very slow growth within their own regions, and the only way to show shareholders growth is to make acquisitions.”
In his view, sellers are still adjusting their expectations after 2007 and 2008, “when valuations were as high as anybody thinks they will ever get,” he said. Many owners put their companies on the block when they realized their children wouldn’t—or couldn’t—run the business. “Oddly enough, though, the recession kind of reinvigorated the youth of the scrap industry because when the crash hit, children came back into the business, and now they’re thinking about keeping it,” he said.
One crucial consideration in any valuation of a recycling business is its access to transportation—trucking, rail, and waterways, Pappalardo said. Other factors are long-term material supply relationships, breadth and differentiation of product and service offerings, market position and reputation, the quality of existing customer and supplier relationships, potential merger synergies, and management capabilities.
Earl Phillips Jr., a partner in Robinson & Cole (Hartford, Conn.), outlined the three principal approaches to performing environmental valuations—market approach comparables; cost approach weighing replacement costs; and income approach—and offered simple truths about the process. Real estate appraisals often disclaim or disregard environmental considerations, as do business valuations, “which often carve out environmental considerations and say, ‘That’s to be dealt with separately,’” he said. That’s especially true in the recycling industry, where environmental conditions and compliance situations that materially affect real estate and business values are often separated out. Phillips maintained, however, that recyclers should refuse to let the environmental tail wag the business-objective dog.
Two additional sessions—“Planning for Retirement and Ownership Transi-tions” and “Preparing a Scrap Business for Sale”—complemented the valuation workshop, covering accounting and tax issues and the financial consequences of leaving or selling the business for the older generation. “Transitioning ownership in a family business becomes more difficult as the generations progress,” Pappalardo pointed out, because “the number of shareholders increases as time goes on.” He described the financial and managerial issues a company must resolve before, during, and after the sale.
Timothy Kneen, senior vice president for wealth management and a senior institutional consultant at UBS Wealth Management (Denver), warned against being too generous. Although “gifting the business” to your children might be great for them, “it doesn’t give you any income,” he said. Instead, consider a sale of shares to a trust for the benefit of your family in exchange for a promissory note with an interest rate based on the term of the note. “It’s a way to sell your company without an actual sale,” he explained.
Richard Fil, a partner in Robinson & Cole (Providence, R.I.), advised sellers to conduct a complete audit of their company’s physical operations, its history of on- and off-site pollution, operational compliance, and successor and contractual liability. When it comes to environmental issues, he noted, “ambiguity is always interpreted negatively.”
E-Recycling’s Present and Future Promise
Investing in E-Recycling. The electronics spotlight offered a venture capitalist’s view of the electronics recycling industry. Michael Farello, a partner in Catterton Partners (Greenwich, Conn.), said his firm bought into the e-scrap industry seven years ago and remains there today for three main reasons: insatiable back-end demand; a growing sense that information technology assets need to be managed in an environmentally responsible manner; and increased awareness of the risks of data leaks.
The e-recycling market’s exponential growth attracted Kleiner Perkins Caufield & Byers (Menlo Park, Calif.), said partner Maritza Liaw. “That kind of volume and growth creates new business opportunities,” she said, crediting the highly fragmented e-scrap market for evoking “continuing interest for us to explore more opportunities in downstream processing and distribution.”
Ben Gordon, founder and managing director of BG Strategic Advisors (West Palm Beach, Fla.), said e-scrap companies have five options for planning their futures: do nothing “and wind up competing for a smaller space”; aggressively pursue organic growth; bring in capital by self-financing or relying on friends and family, private equity, or venture capitalists, “who tend to go after businesses with proprietary ideas and great technology”; merge with one or two other companies; or sell. “Pick a strategy and decide where you want to go, and put yourself in a position where you can be one of the winners in what we believe will ultimately be a winner-take-all market,” he said.
What do venture capitalists look for in e-recycling firms? Golden Gate Capital (San Francisco) looks for companies that have intellectual property protection. “That’s very important because that makes it economical to reclaim, repair, and resell a product,” said Jake Mizrahi, managing director. They’re also looking for companies that handle products with long lives that are available in huge quantities. “Because you’re getting a reclaimed product, you have to collect that product in large quantities for the market to be large enough to make sense for us,” he added.
Handle Electronics With Care. When processing used electronics, incorrectly handling certain materials they contain can land you in trouble with federal regulators, in the hospital, or worse, pointed out the presenters at a session on how to handle such materials responsibly.
Jim Levine of Regency Technologies (Twinsburg, Ohio) described the impediments U.S. recyclers face when handling devices that contain cathode-ray tubes. Because leaded glass has a negative inventory value, companies should charge their suppliers a fee for CRTs to cover the processing costs, he said.
The federal CRT rule governs both domestic handling and exporting of CRTs, Levine pointed out. “You must have a well-documented game plan for the timing and method of moving this material. You don’t want to store it for more than a year” because doing so triggers additional regulatory requirements, he said. Exports to countries that are not part of the Organization for Economic Cooperation and Development (Paris) require permission from the receiving country, he noted. Recyclers must also be aware of landfill bans on CRTs in certain states and localities and the requirements of any certifications they hold. He urged companies to perform detailed downstream due diligence: “What products are [downstream vendors] making with that material, where, with what process, and can I see it?” If you can’t get answers to those questions, he said, think twice before shipping material to that facility.
The goal of safe battery handling is to make the process boring, said Craig Boswell of Hobi International (Dallas). “When it’s not boring, your facility’s on fire or an employee is going to the doctor.” Electronics processors must be able to identify each type of battery they’re likely to encounter, know how to handle damaged batteries, provide the necessary personal protective equipment and training to workers, and have the right fire extinguishers for the types of fires a short-circuiting battery can cause, he said. He described the specific safety hazards that nickel-cadmium, nickel-metal hydride, lithium-ion, lithium button cell, and sealed lead-acid batteries can present—which include fires and skin and eye irritation—as well as in what devices recyclers are likely to find each type of battery.
Know the legal requirements for packaging and shipping these batteries, cautioned Commodor Hall, ISRI’s transportation safety manager. Federal laws dictate how batteries must be packaged if they are being transported by motor vehicle for storage, disposal, or recycling. He gave an overview of the requirements for labeling, transporting, or shipping wet batteries (such as lead-acid and lead-alkali batteries) and dry batteries, with a particular emphasis on the high degree of volatility of lithium and lithium-ion batteries.
Mark Kasper of mercury recycler AERC Recycling (Flanders, N.J.) described where electronics recyclers are likely to encounter mercury in used electronic products and what they should and should not do when they encounter it. Older telecommunications, medical, and testing and measurement equipment can contain mercury-wetted contact relays, he said. Mercury also appears in cold compact fluorescent lamps, laptop computers (except those with LED screens), cell phones, copiers and all-in-one fax/scanner/copier machines, and nearly all circuitboards. Mercury-containing devices are universal wastes unless they’re crushed, which turns them into hazardous waste, he said. Thus, it’s important not to shred or crush items such as circuitboards while the mercury-containing items are still attached. At the same time, he cautioned attendees about the risks of mercury exposure—through both inhalation and skin contact—when removing mercury relays, mercury switches, and small fluorescent lamps from electronics.
Earning More From Reuse and E-Scrap Recycling. Recyclers could be finding more value in their used electronics at both ends of the product life cycle, according to speakers at a session on that topic. Kyle Wiens, CEO of iFixit (San Luis Obispo, Calif.), described how recyclers can use the iFixit website to refurbish and resell more of the products they receive. The free, open-source site contains reportedly the world’s largest collection of technical manuals for the repair of electronic devices. The manuals describe the location of hazards in each device as well as how to disassemble and repair it. Such information can improve workers’ safety and speed, he said. The company also sells parts and specialized tools for this work.
Wiens called for electronics to be more repairable and recyclable. A law Congress passed in January that makes cell phone unlocking illegal effectively keeps such devices out of the refurbishment market, he pointed out.
At the other end of the product life cycle, recyclers could be recovering more precious metals from electronic scrap and doing so in a more cost-effective and environmentally conscious way, said Michael Korzenski from ATMI (Danbury, Conn.), which specializes in using the principles of green chemistry to improve manufacturing processes. Current options for recovering the precious metals require exporting material to integrated smelters in Canada, Europe, or Japan or to facilities that use chemical leaching, which uses toxic chemicals, he said.
Korzenski described ATMI’s eVOLV process, which he said is more efficient with lower environmental impacts than other precious metal recovery methods. It can “chemically depopulate” circuitboards at room temperature, extracting the lead and tin solder for recycling and leaving the integrated circuits intact for resale or further processing, he said. A second stage dissolves and recovers the precious metals from the board. Processing takes between 5 and 20 minutes depending on the type of circuitboard. The process reuses the same batch of chemicals repeatedly, and it reuses the same water until it becomes too soft, at which point it can be discharged without further treatment, he said. Ultimately, 45 to 50 percent of what the system recovers by weight is fiberglass; 15 to 20 percent is copper; 0.4 percent is precious metals; 10 to 40 percent is components; and the remainder is lead or tin solder. The process was more than 99.5-percent efficient at removing gold, and the gold had greater than 99.9-percent purity, he added. The process can be scaled up to handle 100 tons per batch, though he recommends processing one type of circuitboard at a time for better efficiency.
Wistron, a 10-year-old electronics manufacturer based in Taipei, Taiwan, is working to improve the recovery of electronics commodities by constructing a precious metals smelting facility in McKinney, Texas, and a plastics recycling facility in Kunshan, China. At its Texas facility, the company plans to use the latest technology to refine the precious metals from circuitboards and integrated circuits, said Patrick SN Lin, a general manager in Wistron’s recycling division. The plastics recycling facility is the first in China to use optical sorting and to put sorting, purification, and compounding all under one roof, he said. The facility expects to produce more than 60,000 mt a year of ABS, high-impact polystyrene, PC/ABS, and PC pellets.
Lin also called for more design for recycling, suggesting that products’ carbon footprints and life-cycle impact assessments take into consideration the energy used in recycling or refining the commodities they contain.
Brazil and China Take on E-Recycling. Brazil and China are growing rapidly, as are their volumes of used electronics, said speakers at the convention’s U.S.-Global Electronics Recycling Summit. The volume of discarded electronics in Brazil is growing 7 to 10 percent a year and is expected to reach 1.2 million mt in 2016, said Beatriz Martins Carneiro, a general manager with the Ministry of Development, Industry and Foreign Trade (Brasília, Brazil). The country needs to improve its collection, sorting, recycling, and treatment of electronic products, she said.
Brazil’s 2010 national solid waste policy and related regulations create a takeback system for electronics in which consumers give products to distributors or retailers, who send them to producers and importers, who must do “proper and environmentally sound disposition,” she said. By the end of this year the country plans to have a takeback system in place for every city of 80,000 people or more, to have one collection point for each 25,000 residents, and to collect 17 percent, by weight, of what was sold in the country five years before the law took effect. By 2018 the country expects to collect 77 percent of all discarded electronics, she added. Unresolved problems include a lack of recycling technology, the high cost of collecting and transporting products from far-flung cities, regulations that treat all discarded electronics as hazardous waste, and questions of how to spread costs among the various stakeholders, encourage the return of electronics for recycling, and promote reuse, she said. At the same time, the law has created a large market for recycling equipment, and it’s likely to create jobs and reduce the improper disposal of electronics. It also creates financial and tax incentives in the recycling chain, she said, some of which could benefit foreign investors.
China’s volume of discarded electronics and appliances is growing rapidly as well, reaching about 3.5 million pounds in 2011, though some of that material might be illegal imports, said Lixia Zheng of the Basel Convention Regional Centre for Asia and the Pacific (Beijing). Zheng described the various laws and regulations governing discarded electronic products, most notably the 2009 law on the administration of recycling and treatment of waste electric and electronic equipment, which took effect in 2011. That law established two collection systems and a fund for the recycling and treatment of scrap electronics. Later regulations established the catalog of covered items, permitting systems for recyclers, and more. In 2011, the takeback system collected 95.2 million electronic products and appliances, Zheng said. To date 64 facilities have received permits to recycle electronics, she added.
Paper Pluses and Minuses
The Future of Deinking High-Grade Scrap. The tissue and postconsumer writing paper sectors are dependent on deinking high-grade scrap, but “that supply pool is shrinking,” said moderator Joel Litman, president and co-owner of Texas Recycling/Surplus (Dallas), at the paper spotlight.
Bill Moore, principal of Moore & Associates (Atlanta), outlined the different types of DHGs available—sorted office paper, coated book stock, old magazines, and coated groundwood sections—and expressed optimism for the industry. “Global tissue production capacity is growing,” he said, noting that such capacity tends to grow along with income and population. “The emerging developing countries are on a tear with tissue.”
Tissue, the largest market for sorted office paper, is one of the strongest paper sectors worldwide, Moore said. “Every week another tissue machine is announced somewhere in the world.” Though recycled fiber-based tissue is more prevalent in certain markets—notably North America, Europe, the Middle East, and developed Asian countries such as Japan and South Korea—China’s tissue business is largely growing with virgin fiber. U.S. demand for deinked pulp, meanwhile, has been “OK,” he said, and he expects it to remain reasonably strong due to “real, sustained interest in recycled content [in] a variety of products,” such as copy paper, cups, packaging, and magazines. U.S. DHG consuming capacity is growing, Moore said, naming new tissue-machine installations in Virginia, Georgia, and Kentucky with annual capacities of 70,000 tons, 33,000 tons, and 75,000 tons, respectively.
Given the declining use of printing and writing papers, mills must seek new sources of recovered paper supplies. One option, Moore said, is the growing collection of poly-coated paperboard cartons from residences, which is expanding the DHG supply.
The Ailing Newsprint Market. Newsprint consumption worldwide continues to decline, said John Lucini of SP Fiber Technologies (Dublin, Ga.), and “expect more of the same going forward. We’re going to see additional capacity reductions, with machine closures and conversions,” he said. A decrease in paper widths and thicknesses as well as a decline in newspaper subscribers have contributed to the market’s drop. “Lower circulation means fewer tons to recover,” he said. What is collected tends to have higher levels of contamination due to single-stream collection programs. “Commingling increases exposure to contaminants,” he said. “On top of that, you have municipality pressure to collect more commodities,” which will further expose old newsprint to contaminants and make it a smaller part of overall collections. The mix of fibers in ONP also is changing due to a greater proportion of coated papers, which reduces mill yields, he said. The change affects finished newsprint performance during printing, Lucini said, noting that “older systems were designed for higher [uncoated] paper content.”
Managing Safety and Environmental Challenges
Prepare for Truck Audits and Accidents. Audits from the U.S. Department of Transportation (Washington, D.C.) “are coming fast and furious,” said Bill Nichols of Nichols Consulting (Denton, Texas), a former state trooper with the Texas Department of Public Safety (Austin, Texas). The factors that elicit an audit include fatal accidents, new companies applying for DOT numbers, complaints, and Compliance Safety Accountability scores. To survive a DOT audit, maintain the paperwork that documents driver qualifications, your company’s controlled-substance program, drivers’ hours of service, and vehicle maintenance. “You write the rules, but once they’re established they must be followed,” Nichols said.
Each year there are about 300,000 DOT-reportable truck accidents—those that involve fatalities, or vehicles or injured people transported from the scene—and 5,000 people are killed, said Commodor Hall, ISRI’s transportation safety manager. The average cost of an accident involving only property damage is $15,000; a serious but nonfatal accident is $195,000; and a fatality is $3.6 million.
If one of your vehicles is in an accident, your responsibilities include getting answers to the “five W’s”: Who? What? When? Where? Why? Make any accident-related interviews informal, not interrogations, and conduct them as early as possible after the incident. “People tend to forget, and as time passes, chronological events become confusing,” Hall said.
Essential equipment for accident investigations includes a 100- to 300-foot tape measure, graph paper for making sketches, notebook, flashlight, gloves, digital camera, tape recorder, and laptop computer “to download photos and send [them] right away to let your insurance company or someone in upper management know what’s going on at the accident scene,” Hall said.
Ultimately, you are responsible for determining if the accident was preventable. “Believe it or not, 80 to 90 percent of all accidents are preventable,” Hall said. “If a driver didn’t do everything humanly possible to prevent that accident, it was preventable, and your decision sets the standard in the work force.”
Wading Through Stormwater. Jeffrey Longsworth, a partner in Barnes & Thornburg (Washington, D.C.), and David Wagger, ISRI’s director of environmental management, offered an overview of stormwater regulations past, present, and expected in the future. Most scrap facilities are covered by state general permits, which typically follow closely the U.S. EPA’s multi-sector general permit, Wagger said. The current MSGP expires Sept. 29, with proposed changes expected to focus on streamlining and clarification, Longsworth said. That said, the stormwater permit program is “on the threshold of going to the next level,” he said. The EPA wants to implement a hydrology-based standard that would require all new or redeveloped sites’ stormwater characteristics, such as flow quantity and flow rate, to remain at predevelopment values, he said. “If EPA has its way, you will have to get a permit for the active construction and then another permit for the life of the project that makes your site mimic predevelopment hydrology,” Longsworth explained. “So if [the site] was a forest before it was a scrap recycling facility, the hydrology after the development would have to mimic the hydrology of a forest.”
Although the EPA has the authority to expand the stormwater program, it hasn’t taken the necessary steps to do so, such as issuing a report or receiving public comments on the proposed rule, he noted. Instead, the agency is using its influence to force certain municipal separate storm sewer systems to implement such requirements through their current MS4 permit programs, he said. The agency also is attempting to change rules by issuing guidance memos. “It issues guidance, says it’s not final, and then tries to change the interpretation of regulations,” Longsworth said. One such memo shifted stormwater permitting strategies from best management practices to numeric effluent limits, “which for stormwater does not work,” he said.
State permits are changing along similar lines as the federal MSGP, Wagger said, “and will likely begin containing specific total maximum daily load requirements, post-development performance standards, and/or more stringent benchmark provisions.”
Rounding Up Rubber Recycling Opportunities
Finding Uses for Tire Fiber. The spotlight on tires and rubber focused on the potential use of tire fiber in textile and carpet manufacturing. Russ DeLozier of J&J Industries (Dalton, Ga.) and John Peoples of Martex Fiber Southern Corp. (Spartanburg, S.C.) reviewed their products’ material requirements and whether they could incorporate tire fiber. Before Martex can consider tire fiber a viable feedstock, it needs to know how clean the material is, if it has the necessary fiber length, and if there is any residual finish or treatments on the fiber, Peoples said. DeLozier also had questions about how tire fiber would be collected, cleaned, and used, noting that contaminants such as residual rubber are a concern for manufacturers. “At some point, the level of contamination begins to impact efficiency,” he said. Residual rubber isn’t necessarily a “deal breaker,” Peoples said, but he couldn’t specify how much rubber is acceptable.
DeLozier said his company would need to analyze the tire fiber and run a few hundred pounds of it as a trial to determine if it’s worthwhile raw material, “especially with the cost to ship it.” As Peoples put it, “Until we see what applications will accept it, it’s hard to answer questions. The worst case is, you want to offset management costs. If I can’t do that, I can’t help you.”
Hitting the Road. In the session on asphalt rubber, engineers from Arizona and Virginia shared their states’ experiences with AR in roadway projects, including how and why they developed the mix specifications they use. Pavement contractors can produce AR by adding crumb rubber to their asphalt mix using either a dry process or, more commonly, a wet process, said moderator Mark Belshe of the Rubber Pavements Association (Tempe, Ariz.). The wet process with agitation uses a mix with about 18 to 22 percent crumb rubber, with particles in sizes from 8 to 10 mesh, though state agency specifications vary, he said. Wet processes without agitation use a mix with 5 to 18 percent crumb rubber, with particle sizes from 40 to 80 mesh. Every mile of rubberized asphalt can use up to 4,000 scrap tires, Belshe noted.
Adding rubber to asphalt enhances the performance of the binder and mix, Belshe said. Traditional asphalt becomes brittle in cold temperatures and softens in high temperatures, which can lead to thermal cracks or rutting and surface deformations. Modifying asphalt with rubber makes it “more temperature-stable,” he said. The nearly 23 million rubber particles per ton of mix help prevent cracking, said Ali Zareh, senior pavement design engineer for the Arizona Department of Transportation (Phoenix). AR also reduces noise levels on roadways and increases safety on wet road surfaces due to its better drainage properties, he said.
Arizona uses AR in many of its roadway projects, Zareh said. The state’s AR is 80 percent asphalt and 20 percent ground tire rubber, which is mixed together to form a binder that is then combined with hot aggregate, he explained. The hot mix then is applied in the same way as conventional pavement. Since 1988 Arizona has recycled more than 50 million tires in AR roadway projects, Zareh said. Each year the state uses the equivalent of 1.5 million scrap tires to produce 375,000 tons of AR mix, and about 48 percent of state roads now feature AR, equivalent to 16,900 lane miles, he said.
Although Virginia doesn’t have a standard specification for AR, the rubber additive must pass completely through a No. 40 sieve, and the AR cement must contain at least 10 percent ground rubber by weight, said Kevin McGhee, associate principal scientist for the Virginia Center for Transportation (Charlottesville, Va.). The state began using AR in test projects in 2011 as part of its Quiet Pavements Program. Although it’s too early to determine overall material performance, McGhee credits a slight drop in roadway decibel
levels to the addition of crumb rubber. Several obstacles still block acceptance of crumb rubber statewide, he said, such as the cost of additional asphalt plant equipment, the settling of rubber particles in the mix, and determination of its performance. There also are concerns about the possibility of fires in stored, recycled pavement due to the rubber content, he said. Whether such concerns are valid isn’t as important as the perception that the danger exists, McGhee said.
—Theodore Fischer, Adam Minter, Diana Mota, and Rachel H. Pollack
Gachman Is Lifetime Achievement Honoree
ISRI presented its Lifetime Achievement Award to Arnold Gachman, CEO of Gamtex Industries (Fort Worth, Texas), for his lifelong dedication and leadership in the field as well as his commitment to ISRI. Gachman became general manager of his family’s scrap business at age 27 and five years later, in 1974, became president. Early in his career, Gachman got involved in ISRI’s two predecessor organizations—the Institute of Scrap Iron and Steel and the National Association of Recycling Industries. In ISIS, he served as national secretary and in leadership roles in the Gulf Coast Chapter. His involvement in both ISIS and NARI gave him the ability to assist when the two organizations merged in 1987 to form ISRI. He was elected second vice president of the new association and ultimately served as ISRI’s third president, from 1992 to 1994.
A lifelong resident of Fort Worth, Gachman has built community ties by giving tours of his facility and operating a public buyback center as well as supporting Congregation Ahavath Sholom and the All Saints Health Foundation.
Debt, stimulus, and slow growth Dominate Economic spotlight Discussion
This year’s spotlight on the economy focused on China and the massive amount of debt developed-world economies have accumulated in the past decade. The panelists expressed short-term optimism about the effects of various stimulus efforts but concern in the medium and long term over how developed economies will deleverage and the negative consequences of doing so.
Jason Schenker, president and CEO of Prestige Economics (Austin, Texas), gave a sobering perspective on current conditions in the scrap industry and how the global economy could affect it in the coming years. “This is an industry under siege,” he said, pointing to tight supplies, thin margins, and excess processing capacity. Other factors pose even greater threats, he said, devoting particular attention to sovereign debt issues. “There’s $17 trillion in U.S. debt, $10 trillion in U.S. state debt, and $100 trillion in entitlement obligation—and that’s not even mentioning pension obligations for states, local governments, and the military,” he said. “These are daunting, significant risks.”
The healthy first quarter of 2013 had given many a “false sense of security,” said Bart Melek, head commodity strategist at TD Securities (Toronto), but fundamentals are expected to turn uglier in the second quarter, largely due to slowing conditions in China. Regarding metal demand going forward, he said the three drivers to watch are “China, China, China.”
Melek said he expects India and China to grow over the next several quarters, which is good news for metal consumption. “For every unit of GDP growth in those locations, there is a disproportionate demand for metal, and that’s a good thing.” Resource shortages also are bullish for scrap markets, he added.
Timothy Kneen, senior vice president for wealth management and a senior institutional consultant at UBS Wealth Management (Denver), used a metaphor to describe a U.S.-centric global economy: “We view the United States as the front wheel of a global tricycle, while China and the eurozone provide somewhat wobbly traction on the sides.” China’s loan growth and its growing middle class are “pushing things along,” he said, though he expressed doubts about continued strong Chinese growth. As with Schenker, however, his biggest concern was sovereign debt. “How do we deal with the massive amount of deleveraging that must happen out there?” he asked. “We’re in uncharted territory. We’ve never seen this much leverage in the system, or anyone try to unwind it.” Answering his own question, Kneen said he expects countries to “stimulate growth through more stimulus programs in [the] hope that we’ll grow our way out of the leveraged problem. We’ll keep punting.” He wasn’t completely negative, however, asserting that there’s “incredible” upside in the U.S. housing market.
Douglas Hepworth, director of research at Gresham Investment Management (New York), pinned recent volatility in global commodity markets on China. He expects the country to accumulate other commodities—especially copper—as it has accumulated soybeans and aluminum. He described this buying pattern as “irrational,” saying this irrationality creates fear and higher prices.
Should the United States get used to an economy that rarely grows more than 3 percent a year? Kneen said that’s likely due to global deleveraging. “When governments pay off debts, they stop building roads, bridges, and so on,” he said. “That stops a huge input into the economy that’s a driver of GDP.” He also expects national governments’ increasing reliance on stimulus programs to increase inflation. That said, stimulus programs work, he acknowledged, asserting that Japan’s newly announced program will revive its economy. “But the question is not whether or not running up the balance sheet gets you out of problems,” he concluded. “The question is: How do you get yourself out of it? The more countries that do it, the harder it becomes to get out of it.”
Auction Raises Funds for RRF Research, Scholarships
The Recycling Research Foundation’s annual silent auction continued its fundraising success in Orlando, bringing in record revenue for the fifth consecutive year. This year’s auction, held on the exhibition floor during expo hours, brought in approximately $28,400 from the sale of 34 items such as vacation packages, artworks (including several made from scrap), equipment and services, a professional basketball experience, ads in industry trade magazines (including Scrap), and a quilt. The event raises funds to support RRF research projects and scholarships through certain ReMA chapters and for U.S. military veterans. For more information on the RRF auction—including plans for next year’s event—contact Tom Crane, 202/662-8536 or tomcrane@isri.org.
Tire Chapter Recognizes Hinsey
ISRI’s Scrap Tire Processors Chapter gave Mike Hinsey of Granutech-Saturn Systems Corp. (Grand Prairie, Texas) its 2013 Service to Industry Award for his contributions to the chapter, association, and industry. Hinsey has been a member of ISRI’s Tire and Rubber Division and now serves on the chapter’s tire and rubber specifications committee and tire fiber task force. He also has participated in several ReMA committees, including shredders, member services, Design for Recycling, and convention; has chaired the Equipment & Service Providers Council; served on the board of ReMA as the designated associate member representative; and continues to serve on the Recycling Research Foundation board and ISRI’s Plastics Recycling Council.
ISRI Bestows its First Transportation Safety Awards
Bill Willis of Grossman Iron & Steel Co. (St. Louis) received ISRI’s first Safe Driver of the Year Award for logging more than 1.5 million miles over more than 35 years without a single preventable accident. The award, given at the ReMA convention’s closing general session April 13, recognizes outstanding drivers who have driven a commercial vehicle for at least 20 years without incurring a preventable accident. Willis received a trophy, certificate, leather jacket, congratulatory letter, and $500 check as well as travel and lodging at the convention.
ISRI also announced its first Vehicle Safety Awards, which recognize members in two categories for outstanding commitment to the safety of their employees and the public through progressive, effective fleet safety programs. The Best Fleet Award honors ReMA member companies in different class sizes with the lowest vehicle accident rate and lowest U.S. Department of Transportation recordable accident rate in 2012. The Pacesetter Award, also based on company classes, uses the same criteria but looks at the three-year period from Jan. 1, 2010, to Dec. 31, 2012. Here are the inaugural winners.
Small Class: 300,000 to 500,000 miles per year
Pacesetter Award: Metals Recycling–Schnitzer
Northeast (Johnston, R.I.)
Best Fleet Award: First place, Metals Recycling–
Schnitzer Northeast (Johnston, R.I.)
Intermediate Class: 500,001 to 1,000,000 miles per year
Pacesetter Award: Industrial Services of America
(Louisville, Ky.)
Best Fleet Award: First place, Industrial Services of
America (Louisville, Ky.); second place,
Consolidated Scrap Resources (York, Pa.);
third place, Prolerized New England Co.
(Everett, Mass.)
Medium Class: 1,000,001 to 5,000,000 miles per year
Pacesetter Award: The Newark Group (Cranford, N.J.)
Best Fleet Award: First place, The Newark Group
(Cranford, N.J.); second place, Schupan & Sons
(Kalamazoo, Mich.); third place, Metal Exchange
Corp. (St. Louis)
Large Class: More than 5,000,000 miles per year
Pacesetter Award: OmniSource Transport
(Fort Wayne, Ind.)
Best Fleet Award: First place, OmniSource Transport
(Fort Wayne, Ind.)
Sincere Thanks to Our Sponsors
The ReMA convention can offer so many memorable events, useful giveaways, and enjoyable amenities thanks to the support of sponsors. ReMA thanks the following companies for their generosity.
Al-jon Manufacturing: Pocket schedule and ferrous hospitality area
Alpert & Alpert Iron & Metal: Cyber Café and ReMA convention mobile app
America Metal Export: Tote bag insert
Caterpillar: Chair-elect’s general session featuring Tom Brokaw
CNA Metals: Exhibitor locator boards
Coca-Cola Recycling: Lanyards
Harris: Convention program
Howell Tractor: Tote bag insert
K2 Castings: Tote bag insert
LBX Co.: Tote bag
Perry Johnson Registrars: R2/RIOS short course
Potomac Cos.: Tote bag insert
RecycleGuard: Opening general session
Royce Corp.: ReMA Café
Sennebogen: Highlighter pen
Sierra International Machinery: Hotel keys
More Than A Quarter Century of Support
It isn’t easy to do anything for 26 consecutive years, but 16 companies can lay claim to exhibiting at every single ReMA convention in the event’s 26-year history, including this year’s expo in Orlando. ReMA recognizes and thanks the following companies for their dedicated support for the past quarter century.
Al-jon Manufacturing
American Pulverizer Co./Hustler Conveyor Co.
ASKO
Caterpillar
Central Manufacturing
CP Group
Granutech-Saturn Systems Corp./Mac Corp.
Hammermills International/Osborn Engineering
Harris
LBX Co./Link-Belt
NASCO-OP
Ohio Magnetics/Stearns Magnetics
Sierra International Machinery
Stanley LaBounty
Walker Magnetics
Wendt Corp.
The ReMA convention drew recyclers to Orlando, Fla., with networking opportunities, educational programs, expo excitement, and memorable—even magical—social events.