January/February 2002
Scrap markets were dealt a bad hand in 2001, but will 2002 be any better? The answer depends on the wild cards of supply and demand, consumer confidence, the worldwide recession, the war in Afghanistan, and more.
By Robert J. Garino and Robert L. Reid
Remember back in 2000 when all the talk was about what kind of landing the U.S. economy would experience—soft, hard, or in between? How irrelevant that question seemed at the end of 2001, when not only the United States but the entire world was struggling with recession and the effects of Sept. 11 made market forecasts a true guessing game.
Against this uncertain background, ReMA held its three-day commodities roundtable forum in Chicago in October. Not surprisingly, many speakers offered little optimism for better markets before the middle of 2002 or even into 2003. Whether dealing in aluminum, copper, ferrous, lead, or zinc, processors and consumers face a host of problems ranging from overcapacity and shrinking demand to questionable scrap quality. Here’s what speakers forecast for these critical commodities.
The Future for Ferrous
The U.S. steel industry has been plagued with problems, including some 23 steelmakers in bankruptcy, said Charles Gedeon of USX Corp.’s U.S. Steel Group (Pittsburgh). (Since Gedeon’s mid-October talk, the number of bankruptcies has reportedly grown to 26). Other problems include producers “hemorrhaging cash”; prices “lower than they’ve ever been”; falling stock prices; and financial markets uninterested in investing even though there’s record demand for steel products.
Looking back, Gedeon noted that 20 years of “extremely painful restructuring” had turned the U.S. steel industry into a success story. Since 1980, he noted, the industry had eliminated around 60 million tons of obsolete capacity, invested more than $60 billion in plant modernization, and improved labor productivity from 10 to about 3.5 man-hours per ton. These efforts were largely undone in 1998 by “a huge surge in imports, after which the industry’s financial performance collapsed,” Gedeon asserted. These imports—often from countries with state-supported steel industries—“crippled every attempt at recovery” by U.S. producers, he said.
As a result of such foreign government intervention, global excess capacity averaged roughly 250 million mt from 1998 to 2000—or nearly twice the level of total annual steel consumption in the United States alone, Gedeon said. “The result is a global steel sector that is dysfunctional”—and “not in the long-term best interest of the world’s trading system or of steel’s customers,” he stated.
To remedy this global problem, Gedeon expressed support for the Bush administration’s Section 201 investigation (which shortly after the roundtables ended in a ruling from the International Trade Commission that foreign imports have indeed harmed the U.S. steel industry). He also called for a drastic reduction in global steelmaking capacity, as well as an end to all “trade and market-distorting practices” such as steel subsidies, market barriers, cartels, and other anticompetitive activities.
Minding Metallics. Excess steelmaking capacity was also cited by Sara Hornby
Anderson of Midrex Technologies Inc. (Charlotte, N.C.) in her discussion of scrap and “alternative-iron” products such as direct-reduced iron (DRI) and pig iron.
Though steel demand and production reached record levels in recent years, metallics prices have plummeted due to an estimated 200 million to 300 million mt of excess steelmaking capacity, an oversupply of metallics (especially from Brazil and the former Soviet Union), and the strong U.S. dollar, Anderson said.
The most recent downturn—in 2000 and 2001—is especially disturbing, she added, because it occurred barely two years after the last deep price drop. Since this runs counter to the “normal” steel cycles, which historically last five to eight years, Anderson asked: “Does this portend a change in the relationship between steel production and prices and in steel cycles?”
Worldwide, she noted, electric-arc furnace (EAF) steelmaking increased its demand for metallics by 37 million mt from 1995 to 2000, with scrap leading the way by accounting for 18 million mt of that increase. During this time, however, world scrap trade changed in two key ways: U.S. scrap exports fell by more than 5 million mt during this period, “as high minimill demand kept that material at home,” while Russian scrap exports skyrocketed by 10 million mt following the lifting of certain export controls, Anderson explained.
DRI and hot-briquetted iron (HBI) were the next-most-consumed metallics, increasing by 12 million mt, followed by hot metal (4 million mt) and pig iron (3 million mt).
Despite DRI’s growth, however, the current downturn has “severely hampered” the profitability of merchant DRI plants, Anderson added. Together with soaring natural gas prices—which tripled in 2000—the poor metallics market has forced the idling of more than 7 million mt of DRI capacity in the United States, Canada, and Mexico. Some of that capacity has since been restarted, but other sites have been mothballed indefinitely.
Looking ahead, Anderson said it might take as long as two years for metallics prices to recover, but growth in worldwide EAF production should bring “a significant increase in metallics demand.”
Where will EAFs get the additional feedstock? By 2010, scrap generation should grow by more than 21 million mt in North America, with worldwide demand increasing 70 million mt, Anderson noted. By contrast, North American imports of pig iron should decline while world merchant pig iron demand should remain flat.
Hot metal is likely to grow dramatically, both in North America and worldwide, Anderson predicted, though its total usage will remain relatively small—just 4 million mt in North America and 9 million mt globally by 2010.
Anderson also forecast “a new wave of interest” in DRI plants occurring in the 2003-2005 period, especially for captive DRI facilities.
Currently, she explained, DRI comprises about 8 percent of the charge mix in North American EAFs and 13 percent globally, with all forms of alternative iron accounting for 15 percent of the North American mix and 20 percent globally.
“Assuming the world’s economies continue growing at a moderate pace and steel demand does also,” Anderson said, DRI production should increase 2.9 million mt a year in North America and 30 million mt annually worldwide from now until 2010.
Copper Cutbacks?
Copper fundamentals for 2001 suggest that the year will end with a 462,000-mt surplus, resulting in a 71.9-cent Comex average, predicted Ronald McGrainor of Metal News & Views (Hudson, Ohio). In addition, McGrainor forecast a “large global copper production surplus” for 2002, depending on the extent of production cutbacks.
If, for instance, the industry shuts down an additional 200,000 mt of production in 2002, the remaining surplus should still reach 422,000 mt, given the expected 2-percent increase in refined consumption this year compared with last year, McGrainor said. Copper prices would then fluctuate from 60 to 70 cents, with an average of about 65 cents. If there are no additional cutbacks, prices could fall below 60 cents, he warned.
Though the average cost of production has dropped to its lowest levels in 30 years, higher-cost mining operations continue to operate, McGrainor noted. These operations are the prime candidates for cutbacks, especially since one reason they’re still operating is that 2001 began with some “overly optimistic” forecasts of copper prices that obviously were never realized, he explained.
While certain analysts are again projecting prices for 2002 that McGrainor finds too optimistic, he said there won’t be a sustained copper price rally before the second half of 2003. Thus, “high-cost producers will soon revise their optimistic price forecasts downward and, at that time, production cutbacks will occur,” he said.
The Changing Secondary Market. The secondary copper world has changed dramatically over the past decade—and not for the better, said Hans-Gerhard Hoffmann, spokesman for the executive board of Hüttenwerke Kayser AG (Lunen, Germany), a secondary copper refiner that recycles 270,000 mt of recovered copper a year.
Hoffmann noted that when he first spoke at an ReMA roundtable in 1991, there were many secondary copper refiners in North America and Western Europe that have since gone out of business, leaving “only a limited number” in the market. Likewise, there used to be many copper scrap merchants in Europe that made planning easier through long-term contacts with refiners—but they have also disappeared, he said.
As a result, refiners today find themselves forced to deal with numerous small or regional suppliers, with fewer long-term contracts available—which, in turn, makes supplies more volatile, Hoffmann noted.
Even the secondary material itself has changed. Less and less copper scrap is coming from such traditional—and easily processed—sources as the construction industry, Hoffmann explained. Instead, more scrap comes from automobiles and electronics, which generate more “complex” scrap containing greater amounts of plastics, steel, and other impurities.
To cope with such new technical challenges, refiners need to talk directly with the original equipment manufacturers to pursue better designs that will facilitate future recycling, Hoffmann suggested.
Turning to the markets, Hoffmann noted that he’s never seen a situation in which the markets were weak all over the world at the same time. “In all important regions of copper use,” he noted, “we have very low consumption, low copper premiums, low generation of copper scrap, and little hope for short-term recovery.”
He did forecast, however, that more copper scrap would enter the market after the adoption of the euro in key West European countries on Jan. 1, 2002, since certain traders were holding material until the currency changeover for tax reasons.
Looking at world trade, Hoffmann criticized Russian and Ukrainian policies that have largely stopped copper scrap exports from those countries, resulting in major shortages in Western Europe.
He also raised questions about the wisdom of brokers and merchants relying too heavily on export markets such as China and India. While lamenting the loss of secondary refining capacity in Western Europe and North America, Hoffmann asked the industry to “think a little further than the current enjoyable high exports to the Far East.
In closing, he asked, “What does it mean if a major industrialized region doesn’t have any of its own secondary refining/recycling facilities?” Without such domestic demand, it might not be long before “a large part of the merchant trade will not be needed anymore,” he answered.
One Scrap Consumer’s Trials. Copper scrap heading to the Far East has also created problems for domestic consumers such as Wolverine Tube Inc. (Huntsville, Ala.). This manufacturer of tubing and other products purchases some 158 million pounds of copper scrap annually, along with 13 million pounds of copper scrap alloy—roughly 45 percent of its total infeed, explained Wolverine’s Thomas Morton.
The company is “losing bare bright on the East Coast to China,” Morton noted, because it’s cheaper to ship the material from Miami to China than it is to send the same load to Decatur, Ala.—site of one of Wolverine’s major plants.
Given the increasingly thin walls of today’s tubing products, there’s less room than ever for quality problems, Morton said. “Our customers are looking for better and better quality,” he explained, which puts greater pressure on his department to procure quality raw material.
While many of Wolverine’s facilities could use a larger percentage of scrap, availability and quality problems can sometimes make it “a hard sell to get the plants to use scrap,” Morton said.
Chief among the quality problems is contamination by metals such as aluminum, lead, and tellurium, he noted. Packaging also presents problems, especially when loads arrive with loose material or unacceptable items such as connectors or solder joints, copper foil, radiator fin stock, or small items that could fall to the bottom of a furnace and plug the tap hole.
Delivery is also a concern. Wolverine has sometimes had to purchase additional cathode when scrap wasn’t delivered on time, Morton noted. Together, all these problems are making the firm “almost indifferent between buying scrap and cathode.”
Lead’s Steady, Zinc’s Not
In 2001, lead was “marking time,” with LME prices averaging 22 cents a pound in the first nine months while also staying within a penny-and-a-half range, noted Carl Fischer of RSR Corp. (Dallas). With Western World and North American primary and secondary supply expected to “easily match” forecasted demand, there was modest interest in this LME-traded metal among metal traders, lead producers, and battery manufacturers, he said.
All About Batteries. Reviewing the all-important battery sector, Daniel Breidegam of East Penn Manufacturing Co. Inc. (Lyon Station, Pa.) noted that domestic lead consumption for batteries was 1.4 million mt in 2000, or 82 percent of the total 1.7 million mt consumed for all applications. Automotive batteries accounted for 80 percent of the batteries produced, he said, reporting that of the 107.5 million auto batteries shipped in 2000, 88.2 million were replacements and 19.3 million were original equipment.
According to the Battery Council International (Chicago), the recycling rate for automotive batteries over the past five years averaged 93.3 percent, representing more than 6 million tons of reclaimed metal, Breidegam said. Because there are few lead suppliers and battery manufacturers, the recycling of scrap automotive batteries is managed by a small number of firms.
This concentration has resulted in an efficient system for the conversion of scrap back into new batteries, Breidegam stated. The major manufacturers are either fully integrated or have their scrap converted/ tolled by a few independent smelters, he explained.
Because of the established practice of tolling battery scrap owned by battery manufacturers, there’s little opportunity for “open-market” purchases and sales of spent batteries by scrap processors and domestic smelters.
According to Breidegam, between 70 to 80 percent of the batteries manufactured by the three largest producers are held within a “closed loop” consisting of the manufacturer, the retailer/wholesaler, and the smelter. Tolling, he asserted, is a “better” way for consumers of lead to secure a scrap supply that isn’t directly tied to global commodity-price volatility. This helps to ensure market stability as well as high recycling rates.
Zinc’s Oversupply Problem. Zinc prices trended lower throughout 2001 while LME inventories “relentlessly increased,” Fischer reported. As the fourth quarter began, inflation-adjusted LME zinc prices were at levels last seen in the early 1940s. The global balance for zinc suggested a “significant” surplus in 2001, which weighed heavily on LME transacted prices and premiums being paid by domestic consumers.
Both Tom Brugel of Noranda Inc. (Toronto) and Michael Rapson of Scotia Capital (Toronto) addressed the Western World outlook for zinc and came to essentially the same conclusion as Fischer: There’s simply too much supply relative to projected demand. Both speakers also stressed that much of their analysis was based on information and expectations of world economic behavior prior to Sept. 11.
After noting that the apparent weakness in the U.S. economy was also affecting the global economy, Brugel focused on zinc’s Western World balance in the near term. In his view, zinc’s statistical surplus could increase from 64,000 mt in 2000 to 173,000 mt in 2001 and 226,000 mt in 2002 before declining to 170,000 mt in 2003. Consequently, stocks held by producers, the LME, and merchants are expected to grow.
Rapson’s analysis also noted surpluses for 2001 and 2002 but offered a somewhat more encouraging fundamental picture based on lower supply expectations in 2002. According to Rapson, zinc supply will grow at a rate closer to 1.6 percent next year while Brugel suggested that supply will increase 3.4 percent. Both, however, expect demand and consumption to grow around 3 percent next year.
Calling for Zinc Cutbacks. Brugel and Rapson also agreed that zinc’s 2001 prices are “unsustainable” for producers and that certain mine projects have to be cancelled or at least scaled back. Rapson noted that 40 to 50 percent of the mines operating in 2001 weren’t covering their cash costs, and 80 percent weren’t covering their fully allocated costs.
Looking ahead, Rapson’s supply-demand balance for 2002 calls for an 85,000-mt zinc surplus with an LME cash average of 45 cents a pound. Brugel, whose forecast points to a 226,000-mt surplus, noted that other research firms are predicting a 44.6-cent average, though these price forecasts were offered prior to Sept. 11.
What’s Affecting Aluminum?
The “ever-increasing” importance of the LME to the secondary aluminum market was the opening theme in the presentation by Mike Spear of Samuels Recycling Co. (Madison, Wis.). Noting that LME three-month aluminum prices had fallen more than 20 percent since October 2000, Spear linked this sharp decline “directly or indirectly” to recent drops in scrap aluminum prices, noting how more customers are asking for scrap price quotes based on LME formulas while many processors and brokers are working from large LME-hedged positions.
Other factors affecting the scrap aluminum market include the declining demand from secondary aluminum’s three largest consuming industries. Automobile and truck sales—which consume about 40 percent of scrap aluminum supplies—have “fallen off considerably,” Spear said, while a key sector of the building products industry offered only “modest appetites” for scrap throughout much of last year. Likewise, the packaging industry hasn’t shown much strength in its demand for UBCs or can sheet.
The result was an oversupplied or well-supplied market for much of 2001, Spear said.
Year-long forward selling by scrap processors, however, raised the possibility of an aluminum scrap shortage, possibly in early 2002—but only if something boosts domestic auto sales, housing starts, or consumer spending, or gets the global economy moving again, Spear predicted. More likely, there won’t be any improvement until the middle of 2002 at best, he concluded.
‘Forced Rationalization’ for Secondaries? Speaking from a secondary alloy producer’s point of view, Edward Cowan of Beck Aluminum Corp. (Mayfield Heights, Ohio) noted that while scrap spreads relative to primary aluminum are increasing, the spreads relative to secondary aluminum “have declined to short-term lows.” Thus, with scrap representing as much as 75 percent of secondary smelters’ costs, “there isn’t much left” after adding in labor, utilities, freight, capital, and other fixed costs, he explained.
“We have not been able to maintain the margins of early 2000,” he noted, adding that “even those times are better than
today.”
Cowan emphasized the need to correctly evaluate incoming scrap. Though smelters have sometimes benefited from misidentified material that was actually higher-grade than expected, they can’t tolerate the reverse. “We can’t buy mixed clip that’s old sheet, borings with 10-percent allowed volatile that are really 15 percent, or any other misrepresentations,” he stressed.
Looking to the future, Cowan predicted that secondary aluminum volume will fall, with demand unlikely to increase. Since margins of scrap to ingot haven’t increased over the past 25 years, perhaps “forced rationalization” is the only way to improve business conditions for smelters, he said.
Awaiting Good—or Just Stable—News. The “real story” in 2001 was that smelting demand was declining much more rapidly than capacity, said James Southwood of Commodity Metals Management Co. (Wexford, Pa.). After predicting in October 2000 that Western World demand might increase 2 percent in 2001, Southwood’s company shifted its forecast downward. The firm now expects a Western World decline of 5.6 percent (with North American demand falling more than 11 percent) and a global decrease of 3.6 percent for 2001, Southwood said.
That 3.6-percent global decrease in demand compared with just a 1-percent decline expected in smelting capacity “explains why prices are declining month after month,” Southwood noted. Global smelting capacity should decrease by only
1 percent because of a dramatic increase in Chinese capacity of about 20 percent.
Price predictions for 2001 and beyond also shifted from some initially bullish forecasts to the current expectation that prices will continue downward in 2002, Southwood said. As of October 2001, Commodity Metals Management was forecasting a price of $1,100 a mt this year, well below the market’s long-term average of $1,480 cash LME, he noted.
Given the historical trend of roughly 32 months to each bear cycle in aluminum, Southwood added, the current downturn—which began in June 2001—could easily extend until December 2003. He tempered that gloomy outlook with another observation: When the markets expect nothing but bad news, sometimes even a little good or just stable news can create a rally. “The perception right now is so bearish,” he said, “that if things actually get a little better or even just stay the same, prices will go up, not down.”
Improve Scrap Quality—or Else. Scrap quality—or more precisely, a perceived lack of it—dominated the presentation by Bob McHale of Alcoa Metal Purchasing, Trading and Transportation (Cressona, Pa.), who stated, “We have seen absolutely no improvement in the quality of the scrap we receive in the last four years.”
He cited problems including deliveries and packaging, mixed alloys, improper paperwork or lack of paperwork such as purchase orders or bills of lading, closed containers, and oxidized material. One shipment was so oxidized, McHale joked, he couldn’t decide “whether to test it to see what alloy it was—or to do carbon dating on it.”
McHale blamed such quality problems on a “dealer mentality” that says: “Do as little as possible to get paid as much as possible, while producing a scrap package that meets the lowest acceptable standard.”
When challenged over why Alcoa doesn’t reject low-quality scrap, however, McHale seemed to concede that both Alcoa and scrap processors rely on a “safety net” of downgrading material. “We try to be accommodating,” he noted. “We’re trying to work with people, ask for corrective action.”
That said, McHale put attendees on notice that Alcoa “is going to lead a change on downgrades.” The firm will start being punitive, dropping suppliers who continually ship poor-quality scrap, he warned. That might hurt Alcoa in the short term if it becomes harder to meet its scrap demand, “but we’re willing to take that risk,” McHale said.
Four years from now, he stated, he does not intend to report yet again that there’s been no improvement in scrap quality.
Talking Things Over
McHale’s comments on poor scrap quality led off the consumer/processor dialogue that closed the roundtable sessions.
The dialogue was divided into two sections. The first involved processors and primary aluminum mill executives such as Steve Craver of Newco Metals (Pendleton, Ind.), Dennis Crooker of Alcoa Recycling Co. (Alcoa, Tenn.), Gary DuMont of Nichols Aluminum (Davenport, Iowa), Jane Waldemar of Alcan Aluminum Corp. (Cleveland), and Jerry Zeffren of Commercial Metals Co. (Dallas). Larry Sax of Jack Engle & Co. (Trenton, Ontario) moderated the primary consumer portion.
The secondary mill portion, moderated by David Fink of Allied Metal Co. (Chicago), featured processors and consumers such as Irwin Becker of Timco (Fontana, Calif.), Stuart Cohn of Behr Metals Inc. (Rockford, Ill.), Larry Lockamy of Tennessee Aluminum Processors Inc. (Columbia, Tenn.), Tom Lobel of House of Metals (Toronto), and Steve Nedelman of Philip Metals Inc. (Nashville, Tenn.).
Addressing McHale’s quality concerns, Dennis Crooker stressed that he has seen a “big improvement” in UBC quality over the past decade, thanks in part to efforts by ReMA members. Both Crooker and Alcan’s Waldemar stressed the need for consumers to work with scrap suppliers to improve quality in the future.
Commercial Metals’ Zeffren compared the consumer/processor relationship to a marriage, with discussions and concessions required by both parties. “Misunderstandings and arguments do occur,” he noted, but “open and frank communications” are the key to resolving such disputes to preserve the long-term relationship.
Conversely, a “divorce” is likely in the consumer/processor relationship if one party “fools around,” the panelists noted. Trying to pass off a load of dirty scrap by simply hosing it down was one such indiscretion. Repeatedly sending poor-grade material was also cited as grounds for a breakup.
Along with the need for greater dialogue between consumers and processors, though, there seemed to be an appeal for greater tolerance. Nichols Aluminum, for instance, will try to find some way of using the scrap it receives, even if that requires revaluing the shipment, DuMont said. Likewise, Alcan can’t tolerate unacceptable UBCs because of safety concerns but will try to work with suppliers on the remelt side of the business, Waldemar said.
The primary mill panel debated the merits and limitations of using ReMA specifications, with moderator Larry Sax emphasizing the point that the consumer’s own requirements will always override ISRI’s guidelines.
The need for greater consumer/processor dialogue was also noted during the secondary mill discussion. For instance, Behr Metals’ Cohn explained that even though secondary mills often accept material that was rejected by a primary mill, they need to know why the material was originally refused.
“If we knew in advance what to expect, we might be able to handle it better and maximize the dollars [the processors] were looking for,” he explained. Without such knowledge, the secondary mill may end up downgrading the material yet again.
Other panelists agreed, noting that while secondary consumers are often “the market of last resort,” they aren’t a dumping ground for poor-quality scrap.
On the processor side, panel members rejected the idea that they prepare their material differently for secondary smelters than for primary mills. “You can’t retrain your people on a day-to-day basis” for one customer or another, Tom Lobel explained. Instead, “you train them to the highest standards all the time.”
To improve scrap quality, Steve Nedelman stressed for processors to know their suppliers well and to be willing to drop a supplier who repeatedly delivers unacceptable material.
As with the primary mills, the secondary consumers also showed a willingness to work with processors to improve quality—up to a point.
“A bad ‘packer’ is different from a bad ‘shipper,’” explained Stuart Cohn. “A bad packer is someone we can work with over time to get the package better. A bad shipper is someone who ships us bad-quality material. We like to differentiate between the two, working with the one and forgetting the other.”
Plugging Into Electronics
New to ISRI’s roundtables was a session on recycling electronic equipment, a growing field that defies classification along the usual commodity-based lines. Instead, it offers processors something from nearly every category, from the well-known but diminishing amounts of precious metals to the steel, glass, plastics, and aluminum that form the bulk—by weight—of electronic products. Plus, there’s the reuse/resale of equipment and components that reportedly represents the most lucrative side of the electronics recycling business.
Leading off the electronics roundtable was John Powers of Integrated Solutions & Services Inc. (Wakefield, R.I.), who also serves as general manager of the International Association of Electronics Recyclers (IAER) (Albany, N.Y.). Powers outlined the basic framework of electronics recycling, which he described as “an emerging and expanding industry, still in its early stages of development.”
Electronic equipment itself is “almost 100-percent recyclable,” Powers explained, but the huge volumes of such products—which range from computers and printers to cell phones, consumer gadgets, aviation and automotive parts, and other devices—combined with logistical problems, hazardous material issues, and the costs associated with recycling have contributed to a “growing inventory of obsolete equipment.”
Currently, most of the electronic material being recycled involves computer equipment collected from the original manufacturers and large users, Powers said.
Small businesses and individuals aren’t contributing much material to this market—in part because there’s no infrastructure to collect the material and because electronics recycling almost always requires users to pay someone to take away their obsolete equipment.
Powers identified various segments of the electronics recycling industry, ranging from inventory and disposition planning to repair, refurbishment, and upgrading to demanufacturing, recovery of usable parts and subassemblies, and finally the processing or refining of commodity materials through shredding, grinding, pelletizing, and other methods.
Many firms already work in more than one of these segments, Powers added, with the trend definitely moving toward more firms handling more and more segments.
David Garrett of Belmont Trading Co. (Northbrook, Ill.) echoed that theme of the expanding role of electronics recyclers. Garrett—whose own company helps recover and recycle computers, cell phones, and other electronics—explained that electronics recyclers are moving away from being simple “chip pullers” who just recover a few reusable components from electronics. Instead, such recyclers are striving to become value-added middlemen who recover as much recyclable material as possible from obsolete equipment before sending off what’s left to be crushed down to its glass, plastic, and metal
commodities.
Garrett also noted that some firms are putting environmental staff—rather than financial personnel or plant managers—in charge of their obsolete electronics. When environmental people get involved, he added, “they want special things done, special handling,” which is only strengthening the fee-based nature of the industry.
Currently, Garrett noted, people who buy tires or car batteries often pay an extra charge, right in the purchase price, to help cover the cost of recycling those products. “You’ll start to see the same thing with computer equipment,” he predicted.
Another Scrap Niche. Universal Recycling Co. (Pty) Ltd. (Johannesburg, South Africa) is one “traditional” ferrous and nonferrous scrap processor that also recycles electronic scrap, shredding some 150 mt a month of such products as computers, fax machines, photocopiers, calculators, cellular phones, and other telecommunications equipment, noted David Loewenthal, managing director. The company does not recover the resellable components or certain platinum and palladium items, which are removed prior to arrival at Universal, he said.
Universal got into the electronics recycling business somewhat by accident—the company mainly wanted to reduce the freight charges of sending unwanted ferrous scrap to refineries along with the desired nonferrous materials, Loewenthal noted.
Soon, however, the company found itself removing the 40 to 50 percent recoverable ferrous content of its electronic scrap, plus the 12 to 17 percent recoverable copper, 7 to 10 percent recoverable aluminum, 6 to 10 percent recoverable nonmagnetic stainless steel, and even the hard-to-extract 5 percent recoverable zinc.
But in one key area—plastics—Universal has never been able to recover a product that its consumers want, Loewenthal said. Still, the company’s electronics recycling efforts save the firm about $250 a ton on freight costs, he noted.
Predicting Precious Metals. Though other speakers noted that the precious-metal content of electronic equipment has diminished in recent years, the recovery of this material from various types of scrap, including used electronics, “has become an increasingly important segment of the precious metals markets,” explained Vanessa Motto of CPM Group (New York City).
In fact, scrap accounts for 10 to 30 percent of total supplies in the major precious metal markets, Motto noted, with the contribution from used electronics varying by
commodity.
Palladium, for instance, represents the largest market—at least by percentage—for electronic scrap. Secondary sources currently account for roughly 24 percent (about 1.5 million ounces) of total palladium supply expected for 2001, Motto reported. Electronic scrap will fill 75 percent of that secondary need, she predicted.
By contrast, secondary supplies represent about 10 percent (about 500,000 ounces) of total platinum supplies predicted. Automotive catalysts and electronic scrap are the two main sources of this secondary supply, with catalysts dominating the market at roughly 80 percent. Electronic scrap accounts for only another 10 percent of that secondary feed, Motto said.
Overall, scrap accounts for roughly 30 percent (about 208 million ounces) of total silver supply predicted, Motto said. The bulk of that secondary supply comes from spent photographic materials and films, with used electronics and batteries contributing 6 to 7 percent of the secondary total.
In gold, used electronics only account for about 1 million ounces, or roughly 4.5 percent, of the 22 million ounces of secondary gold supply predicted for 2001. By contrast, old jewelry should account for roughly 19 million ounces of that secondary total, Motto said.
Turning to the future of precious metal recycling, Motto said CPM Group is “bullish” on silver, platinum, and palladium, in particular. While the electronics sector for palladium and other precious metals languished through 2001, strong demand is likely to return soon, she stated. Even so, platinum-group markets have been extremely volatile over the past few years, “and this may continue to be the case in 2002 and beyond,” she warned.
Silver prices, meanwhile, should “rise back above $5, most likely in early 2002, and continue rising through the year,” said Motto. As for gold, CPM Group says the metal is unlikely to reach $500 an ounce—at least not for any sustained period in 2002, she stated.
—Robert J. Garino and Robert L. Reid
Scrap markets were dealt a bad hand in 2001, but will 2002 be any better? The answer depends on the wild cards of supply and demand, consumer confidence, the worldwide recession, the war in Afghanistan, and more.