Report: BIR Miami—The Forecast From Florida

July/August 2014

Despite improving economic conditions, recyclers at the spring 2014 BIR meeting in Miami Beach worried about increasing regulation, low margins, excess processing capacity, and higher quality demands.

By Diana Mota and Rachel H. Pollack

Miami Beach is known for its sunshine and sandy beaches, yet as the Brussels-based Bureau of International Recycling’s 2014 convention got underway there June 2-4, the clouds rolled in. The overcast, windy, and intermittently rainy conditions continued for the length of the conference, as if the participants’ unsettled mood had manifested itself in the local weather.

The worries hanging over the international scrap recycling industry were consistent across commodity areas. Participants decried government interference in recycling markets, either to limit commercial collection and processing or to prevent free and fair international trade of recycled commodities. They worried about low profit margins, whether due to tight supply markets or excess processing capacity increasing competition for material while demand grows more slowly. They expect higher quality standards from importing countries, most notably in Asia. But, taking advantage of the conference location, they also explored the untapped potential of Latin American countries as suppliers or consumers of scrap.

Nonferrous Looks at Latin America

With slow improvement in the manufacturing sector, competition for scrap fierce, and scrap prices rising for consumers and processors, scrap recyclers are “working twice as hard and making half as much money,” said Nonferrous Division Chair Robert Stein of Alter Trading Corp. (St. Louis) at the division meeting. In such conditions, “we can’t replace what we sell at acceptable margins,” he said. Stein questioned whether the reduced availability of scrap is the “new normal” for the industry, regardless of prices, and if so, what effect excess processing capacity will have on capital investments in the industry.

Some of the industry’s problems stem from governments that don’t understand recycling, Stein said. Ironically, those that understand scrap’s value are now working to prevent its export to protect their domestic consumers. He urged governments to “keep their hands off our business and allow markets to determine where and how scrap is utilized.” Free and fair trade, which BIR advocates, is “the proven best economic system known to create responsible growth in industrializing nations,” he said. Technological advances in scrap processing and smelting in the developed world allow such countries to compete against countries with cheap labor and lax environmental policies, he pointed out.

Despite the industry’s difficulties, Stein had high expectations for its long-term potential. “The inherent value of the materials that we trade is far too important to the world’s industrial infrastructure,” he said. Scrap recycling is the “only viable and economic replacement for the damaging processes of extracting metals from the ground.”

Luis Fernando Rogério de Souza of Brazil’s only copper smelter, Paranapanema (São Paulo), addressed the Brazilian and world copper markets. He noted Brazil’s positive fundamentals for copper, with its consumption of the red metal growing faster than GDP from 2010 to 2013. Its per capita copper use is still low, however, and the country invests very little in its infrastructure, giving the market “a lot of space to grow.” Better domestic industrial production, infrastructure development for the World Cup and Olympic Games, and growth in real estate all support future demand growth, he said, as do forecasts of 3 percent GDP growth next year. Brazil also is moving from a copper scrap exporting country to an importing country, de Souza said. The global picture for copper scrap is less positive, however, with primary copper production expected to grow faster than copper consumption through 2015, he noted. This will drive down copper concentrate prices, which is likely to reduce interest in “expensive” copper scrap, he said.

In his overview of world nonferrous markets, Ibrahim Aboura of Aboura Metals (Dubai, United Arab Emirates) added to Brazil’s positive outlook. The potential election of a more market-friendly government has improved the country’s financial indicators, he said, but inflation and slow growth remain concerns. Recent elections in India had a similar impact, strengthening the currency and leading to a flood of foreign investment, he said.

China’s economic slowdown and related tight economic policies are reducing its chances of reaching the 7.5 percent GDP growth this year it projected, Aboura said. A proposal to reduce its value-added tax on scrap had not moved forward in three months. Elsewhere in Asia, growing auto production and sales are strengthening aluminum markets in Indonesia, Malaysia, and the Philippines, though Thailand’s car sales have fallen nearly 47 percent due to political instability.

Europe is showing signs of recovery, Aboura reported. Expectations for Germany’s business climate improved at the start of the second quarter of 2014 despite the unresolved sovereign debt crisis, potential inflationary pressure, and concerns about low interest rates resulting in false investments in key markets. Italy has seen positive developments in industrial and trading conditions, leading to optimism in the scrap industry. Russia continues to reduce its export duties per its World Trade Organization obligations, which might draw more demand for its scrap from foreign buyers at the same time its domestic supplies of copper, aluminum, and lead are expected to fall short of demand.

Aboura noted improved economic conditions in the United States, with automotive demand driving secondary aluminum and a slight uptick in Comex copper, though the latter did not affect the spreads on copper scrap. Mexico’s scrap processors are faring worse, he added, with fiscal reform causing distress in the industry. Despite robust industrial production, falling automotive sales and domestic consumption have led the International Monetary Fund (Washington, D.C.) and Organization for Economic Cooperation and Development (Paris) to revise their GDP growth expectations for Mexico downward from 3.95 percent to “barely 3 percent” for the year.

Alejandro Jaramillo of Glorem (Tijuana, Mexico) presented a more detailed picture of Latin America. Mexico and Brazil generate 64 percent of the region’s GDP, which was expected to grow 2.5 percent this year, but shortfalls in first-quarter growth in those two countries will have an impact. Still, the region’s growth is better than the developed economies, and it’s especially robust in Peru, Ecuador, Bolivia, and Colombia, so “it pays to look off the beaten path,” he said.

The region’s strengths include its growing labor force and its labor efficiency, Jaramillo said, with some forecasting that Mexico’s labor costs will be lower than China’s by 2020. Auto, aerospace, and electronics manufacturing facilities are relocating from China to Latin America, he reported, pointing out that they will need recycling services and semi-finished products. Ease of trade is another plus, he said, noting the region has few barriers to scrap imports, though Venezuela and Argentina either ban or heavily tax scrap exports.

Aluminum looms large in Latin America’s scrap industry. Overall, the region has access to 70 percent of world automotive markets and more than 90 percent of the world’s can market, he said. Brazil is seventh in world automobile production and a world leader in aluminum can recycling, with a nearly 98-percent recycling rate in 2013. The country’s aluminum consumption is projected to grow almost 9 percent a year, making it a net importer of aluminum. Mexico is eighth in world automobile production, primarily for export. It imports a significant quantity of remelted scrap ingot, but it exports an even higher volume of aluminum scrap. Much of Mexico’s imported aluminum scrap comes from the United States and Canada, whereas Brazil imports from as far away as Europe and the Middle East.

Challenges for business in Latin America include the geographic size of the region, a lack of infrastructure, and high freight costs, as well as oligopolies in some industries that can hinder industry development, and “supply management is not always up to international standards,” he said. Also, corruption is “prevalent but not unavoidable.”

Ferrous Sees Slow Recovery

After three consecutive years of “painful market conditions,” the global steel recycling industry shows signs of slow recovery, said Ferrous Division President Christian Rubach of TSR Recycling (Bottrop, Germany). The World Steel Association (Brussels) expects 3.1 percent growth in apparent steel use this year and 3.3 percent in 2015, he said. Although that’s good news, severe margin compression nearly worldwide and huge overcapacity—“which will remain for a long time our biggest problem”—continue to affect markets, Rubach said. Policies that hinder free and fair trade also affect the market, he noted, though “slight signs of hope” exist for the EU in that regard, which Rubach attributed to BIR’s efforts and Europe’s surplus of steel scrap. China and its steel industry remain a question, with record low prices for steel products and iron ore recently, Rubach said.

Reporting on the market in Europe, including Turkey, Tom Bird of Van Dalen Recycling (Sheffield, England) said it “combines areas where business is reasonably good with some others where business is weak.” Global long steel products still show uncertainty amid political tensions, Bird noted. Prices improved somewhat through March, despite a mild winter, he said. The Turkish market has been “relatively buoyant,” Bird said. Although Turkish mills cut production by a third at the end of last year, they saw “normal production levels” and prices improve as political instability in Ukraine attracted customers from that market, Bird said. The EU domestic market improved in April across most regions, which helped reverse first-quarter reductions. Black Sea exports are down so far in 2014 compared with the same period in 2013 as materials find homes in domestic markets, Bird said.

“Competition for material across all European Union regions remains very strong,” Bird said. Many scrap operations are still down 50 percent from normal capacity, he noted. “Margins are therefore under pressure in most areas.” The downturn in business has led to some yard closures, but small operators almost always open facilities in the same area, which maintains overcapacity, he said. Further, “exchange rate movement has somewhat dampened the local monetary benefit of increased prices in dollar terms within the European market.” Overall, the third and fourth quarters of 2014 should deliver a somewhat stronger market, Bird said.

U.S. domestic scrap prices in early May ranged from unchanged to down $25 depending on grade and location, said Bill Schmiedel of Sims Group Global Trade Corp. (New York). “Even with this downturn, U.S. exporters cannot compete and therefore have not been able to increase their arisings,” he said. Year-to-date U.S. exports will annualize to about 13.7 million mt—far below the 2013 level of 18.5 million mt, Schmiedel said, with Turkey, Taiwan, and South Korea the biggest buyers. U.S. steel imports in April increased 15 percent over March to an annualized rate of 40 million mt, “which historically is very high,” he said.

China’s ferrous scrap imports in April decreased 8.4 percent month to month, to an annualized rate under 3 million mt, with Japan supplying about 90 percent of that material, Schmiedel said. China’s raw steel production set a new record in April at about 2.3 million mt a day, he said. “Tremendous” iron ore imports in April and May caused prices to erode, Schmiedel said. Steel exports through May appear to have increased to an annualized rate of about 90 million mt, which would make China’s exports alone greater than the annual total steel output of every country other than itself and Japan, he said. Two factors that could affect China’s future production, Schmiedel said, are its recent passage of a landmark environmental protection law and reports of banks requiring larger deposits for financing iron ore purchases.

In South Korea, domestic scrap prices have fallen recently, he said. Scrap imports in April increased about 22 percent month to month, to about 801,000 mt, which annualizes to about 9.6 million mt, slightly higher than last year. In Taiwan, containerized ferrous purchases should annualize to more than 4 million mt, he said. Continued rumors of Chinese rebar being imported into Taiwan bear close scrutiny, he said, adding he recently read that Taiwan is receiving a shipment of 80,000 tons of billet from China. “This could be the start of something, and if it happens, it’s a definite market-changer,” he said.

In India, larger steelmakers, operating direct-reduced iron plants at reduced rates due to natural gas shortages, have replaced lost iron units with scrap, he noted. India has not purchased much bulk cargo lately, but “container inquires continue at increased rates,” he said.

 Based on current data, Schmiedel estimated the world will produce 49 million mt more raw steel and 29 million mt more iron as well as consume 20 million mt more purchased scrap this year compared with 2013. “Sales volume and liquidity do not appear to be the issue,” he said, “but the common lament I hear as I travel worldwide concerns margin erosion, which is obviously a direct result of overcapacity. This will not change until [the excess capacity] is utilized or rationalized.”

Growing demand, a lack of scrap, and poor infrastructure characterize the Latin American markets, said Ignacio Sanchez of Scrapservice (Buenos Aires, Argentina), who gave an overview of the region’s three largest markets: Brazil, Mexico, and Argentina.

Newly emerging steel markets, recovery in Europe, and further growth in the United States will help drive steel production globally, said analyst Renate Cakule of Wood Mackenzie (London). Turkey’s increased production will raise its need for scrap, and the Middle East’s metal requirements exceed its domestic supply, Cakule said. India’s future steel scrap needs remain a mystery, she said, but she predicted the country won’t rely primarily on imports. Over time, Chinese domestic scrap availability will increase and it could begin exporting steel scrap, but its lack of scrap collection infrastructure, uncertain government policies, and scrap quality unpredictability, among other factors, could make that difficult.

Christopher Plummer of Metal Strat­egies Consulting (West Chester, Pa.) shared 17 “surprising” facts about the steel industry. He sees more room for growth in the recovery because sectors representing nearly 60 percent of the steel market have yet to significantly recover. “Don’t blame yourselves for the capacity surplus,” he told processors, calling it instead a “demand deficit.” Also boding well for ferrous processors was his prediction that aluminum will never be more than about 15 percent of an auto body, despite the move toward lightweighting.

Less positive was Plummer’s forecast of higher prices for raw material. Electric-arc furnace production is getting more expensive, he said, making direct-reduced iron more competitive with ferrous scrap.

Rolf Willeke, BIR’s ferrous statistics adviser, introduced BIR World Steel Recycling in Figures 2009-2013 at the division meeting. Trends he noted included greater growth in blast furnace steel production, now 71 percent of all steel production. Thus, while steel scrap use has increased 8 percent, it has fallen as a proportion of steel production. Global trade in scrap fell 9.5 percent last year, he said. Correspondingly, scrap exports were down in most major markets.

Stainless Steel Expects a Wild Ride

The United States has gone from a surplus in stainless steel scrap to a deficit in less than six months, said Simon Merrills of ELG Metals (McKeesport, Pa.) at the Stainless Steel and Special Alloys Committee meeting. Paul Gielen of the Cronimet Group (Karlsruhe, Germany) sees the opposite happening in Europe, which will have a surplus it needs to export.

Today’s U.S. market is under pressure, Merrills said. In 2014, available scrap—including imports—could reach just more than 1 million mt due to falling prices, uncertain demand, and mill discounts for scrap over primary above 30 percent, he said. Such a large discount makes it uneconomical to extend stainless steel scrap supplies using primary nickel, Merrills said. Domestic scrap demand should reach just more than 1.1 million mt, but actual consumption will only reach 919,000 mt, he noted. U.S. demand will require imports of about 12,000 mt a month, he added, and the supply will fall short unless U.S. mills melt less scrap or attract scrap from Europe, Canada, and South America. The latter will depend on “the discount from primary metal offered by the world’s smelters for scrap units,” he said. “When scrap is sold at a discount to virgin prices, it will always be, by definition, in short supply.” How quickly Asian mills shrink discounts to capture lost nickel units due to reduced production of nickel pig iron will affect U.S. scrap flows, Merrills said. “With discounts of 20 percent, there is currently ample room for upward movement before we bump up against the prime or ferro alternatives.”

China now produces nearly 50 percent of the world’s stainless steel, Cronimet’s Gielen said, but it has a scrap ratio of just 30 percent, he said, making it “more dependent on primary materials and investing in nickel pig iron.” The nickel ore export ban in Indonesia has caused China to become short of nickel units, however, he said. Several conditions will continue to affect the market’s outcome, including price volatility, which can lead to speculation in nickel-containing scrap, nickel ore availability, and the quality of scrap, he said. Western world stainless steel producers “need lower stainless steel scrap prices or nickel units in stainless steel scrap in comparison with nickel pig iron” to compete, he said.

January 2014 started with exactly the same LME nickel prices as January 2006, Merrills noted. If the 2014 nickel market mimics 2006, “we’ll see scrap prices over 100 percent of intrinsic values as buyers try to beat tomorrow’s market,” he said. Higher nickel prices will loosen scrap from speculators’ hands, Merrills said. Whether imports compensate for the U.S. shortfall will depend on buyer’s discounts to primary elements, he added. Regardless, buying activity in all areas of stainless steel will likely pick up, and given the absence of “any near-term negative growth signals,” it will continue through the summer. “A sustained high level of activity feeds on itself, and as market players try to get ahead of price rises, we can expect to see some further volatility,” he said. “The roller-coaster ride for the stainless steel scrap market in the United States will continue for some time.”

Barry Hunter of Hunter Alloys (Boonton, N.J.) moderated a “fireside chat” with Merrills and Gielen that covered a wide range of topics, including the global supply of scrap, the changing role of wholesalers in the market, what drives scrap availability and LME nickel prices, and the effect of European ownership of two major U.S. stainless mills.

Paper Division Looks at Global, Regional Issues

BIR Paper Division Chair Reinhold Schmidt of Recycling Karla Schmidt (Haren, Germany) warned against “over-regulation” of the European recycling sector and protectionism, which he called “detrimental to economic growth and our companies.” Germany’s 2012 circular economy law in particular has endangered both commercial and nonprofit recycling, he said, calling for a level playing field between the public and private sectors: “Give us the best chance to be successful on the market.”

Otavio Pontes of Stora Enso Bio­materials (São Paulo) spoke about the intersection of virgin and recycled fiber in paper production. About 402 million tons of fiber are used in paper production worldwide, 228 million of which was recovered fiber, Pontes said. The recycled content of Stora Enso’s paper is increasing gradually, he said, adding “I don’t know where it will stop, but the next ton costs more than the last ton.”

How does the company decide whether to use virgin or recycled material? “Cost and availability will be the dominant factors in this market, as always,” Pontes said. Recovered fiber prices increased much more than hardwood virgin pulp from 2000 to 2011, he said, a trend he expects to continue as new, more efficient pulp mills in developing countries displace older mills in Europe and North America. With pulp prices falling 1 percent a year, virgin fiber is increasingly what mills choose for the tissue and packaging markets. “If [recyclers] want to come into this market, we must be very efficient and on the low side of cost,” he said.

U.S. broker George Chen of G&T Trading International Corp. (Clifton, N.J.) said 2014 has been a very challenging year so far, with pulp and paper inventories dropping and energy costs rising, forcing paper producers to increase their prices for finished products.

Chen’s outlook for the U.S. market was somewhat bullish. U.S. collection in the first quarter was hampered by the harsh winter, but second-quarter conditions improved, he said. He expects growth in domestic demand, with some U.S. mills starting new machines this year and next year. Challenges facing U.S. paper brokers, Chen said, include the poor quality of material from single-stream collection and more ports potentially creating incentives to load at night.

Overall U.S. paper recovery grew 76 percent from 1990 to 2012, but the 65-percent paper recovery rate is still not enough, he said, especially with demand increasing an estimated 9.5 million tons a year. He called for better public education about the value of separating recyclables for collection, sorting systems that can meet mills’ quality demands, and more focus on sustainability in packaging.

Chen also addressed the slowdown in China’s imports of recovered fiber, which he attributed to weaker demand, pollution concerns causing the closure of small mills, and additional scrutiny from China’s inspection and quarantine officials. Despite the end of Green Fence, the scrutiny will continue, Chen said, especially of mixed paper. He also noted that some companies are having difficulty renewing their AQSIQ export licenses.

The United States exports 48 percent of its recovered paper, Chen said—22.3 million tons with a value of $3.46 billion in 2012—with China the primary destination. The aforementioned mill shutdowns and tighter quality controls will mean less demand from China in the future, he said, though it will remain the top market. Other major destinations include Indonesia, India, Mexico, and South Korea. He expects demand in India and Vietnam to grow.

Looking ahead, Chen expects prices will stay “steady and flat,” he said, “making it difficult for small packers to survive,” so he expects more consolidation among recyclers and brokers.

In the country and region reports, conditions in Eastern and Northern Europe were described as balanced and stable, while France and Germany were having trouble finding sufficient supply. Italy and Spain are seeing some better stability, if lower collection volumes, but increasing energy costs are hurting mills in both countries. Jean-Luc Petithuguenin of Paprec (Paris) and Dominique Maguin of La Compagnie des Matières Premières (Paris) decried EU Commission efforts to declare paper mills recyclers. Mills can use either virgin or recovered fiber to make paper, Maguin pointed out, whereas recyclers “have turned something that would have been waste into a raw material.”

Merja Helander of Lassila & Tikanoja (Helsinki), giving the report from the European Recovered Paper Association (Brussels), noted the EU Parliament’s rejection last fall of the end-of-waste framework for paper, “to our surprise and disappointment.” The association plans to start the process again, but this time it wants recyclers and mills to agree to a binding solution. ERPA recently published a new recovered paper and board standard, EN643:2014, she added.

This year should be a “game-changer” for the recovered fiber business, said Ranjit Baxi of J&H Sales International (London), giving the Asian market report. The Asian economies continue to grow, with Chinese growth of more than 7.5 percent and Indian growth of more than 6 percent expected this year, he said. China imported 31.6 million mt of recovered fiber in 2013, up 5.2 percent from 2012. Imports were up in the first quarter of this year compared with that period in 2013. He expects steady continued growth in recovered fiber demand this year, with China remaining the market leader. More stringent quality standards are spreading beyond China to India and Indonesia, he noted.

Plastics Addresses Trade, Quality, Supply

Trade restrictions were at the forefront of the Plastics Committee meeting. “Over 40 countries worldwide have some kind of protectionist measures to keep scrap in their country,” said Chairman Surendra Borad of Gemini Corp. (Antwerp, Belgium), urging countries to “take reasonable care that scrap is recycled in an environmentally friendly way, [but] let the market decide the flow of goods.” Europe does not have sufficient capacity to recycle all the plastic scrap it generates, he pointed out: It recycles only 12 percent and landfills 38 percent. Tamsin Ettefagh of Envision Plastics (Reidsville, N.C.) also called trade restrictions “scary,” noting that “China’s [plastics] industry could not have grown without buying from other countries,” and other countries’ policies mandating recycling collection could not have survived without Asia as a destination for the material.

In the China market report, Steve Wong, chairman of the Chinese Plastics Recycling Association (Beijing), said the perspective of China’s Ministry of the Environment and Chinese Customs is that Green Fence never ended—their commitment to stopping imports of contaminated material continues. A regulation China issued a few weeks before the BIR meeting bans imports of black recycled pellet, he said, and authorities also might ban imports of lump and compacted extruded polystyrene due to contamination concerns. Despite those restrictions, demand for recycled plastics remains strong in China, Wong said, especially scrap “that doesn’t need much labor for sorting because labor costs are getting higher.” China’s imports of plastics fell 30 percent from 2012 to 2013, most likely due to Green Fence, Borad said, but he once again called it a “blessing in disguise” for bringing attention to the quality issue.

Giving the European market report, Gregory Cardot of Veolia Propreté France Recycling (La Plaine St. Denis, France) said the end of 2013 had stable prices and orders, and in the first quarter of this year, stocks are under pressure. “Demand is normal to good, even if prices are not what recyclers would like.” Export demand also was normal and stable, even with an increase in sea freight, he said, although Europe has increased some customs controls and document demands.

James Glauser of consulting firm IHS (Englewood, Colo.) looked at the drivers of recycling and global recycling rates by resin, noting that rates vary by resin and region. Plastic use per capita is growing faster than the population, he said, and recycled plastics have a niche in the market that will continue to grow.

In a panel discussion on the future of plastic recycling, speakers identified challenges facing this market that include improving collection and material quality and addressing changing conditions in China. On the collection side, there’s a “lack of perceived recyclability of plastics today” that’s resulting in more demand for postconsumer material than supply to meet it, said Bill Carteaux of the Society of the Plastics Industry (Washington, D.C.). One solution, he said, is to “look beyond traditional packaging—and beyond packaging, which is only one-third of all plastics—into durable and nondurable plastics, too.”

The logistics of reaching further into communities to boost collection is an issue, said Dawn Gaines of Rock-Tenn (Norcross, Ga.). The company also would like more ways to use and sort the wider range of plastic packaging it now collects. Ettefagh pointed out the correlation between low landfill tipping fees and “making recycling economical.”

New York City residents only recycle 16 percent of their plastics, said guest speaker Maite Quinn of Sims Municipal Recycling (Jersey City, N.J.). Challenges in raising that rate include high housing turnover and the prevalence of multi-unit housing, where “there’s a different mindset—less ownership of doing it right” than in single-family homes. Sims, which has a 20-year contract to collect all of the city’s metal, glass, and plastic—240,000 tons a year—spends $6 million a year on public education, she said.

The Association of Postconsumer Plastic Recyclers (Washington, D.C.) is working to reduce contamination in recovered plastics such as metal closures and paper and other-resin labels, said APR Technical Director John Standish. It has created model bale specifications and guidelines for designing packaging for recyclability, and it has programs to honor innovations that improve recyclability. Along those lines, Ettefagh said her wish list includes resin markers in plastics that would allow optical sorting by type and more focus on sustainability from label producers.

Import quality requirements are only going to get stricter, said Hamilton Wen, plastics division director for Newport CH International (Orange, Calif.), and China’s regulatory changes happen with no warning, which is a “huge challenge for brokers,” he said. Recycled plastics exporters need to develop alternative markets to China, he said. Malaysia, Vietnam, and Indonesia are where “low-value industries” are moving, he said, but such countries are imposing Green Fence-like import restrictions as well. “The long-term solution is to improve quality overall,” he said.

New Technologies Could Boost Tire Markets

The scrap tire industry could be closer to technologies that will help close the tire recycling loop, according to two speakers at the BIR Tire Committee meeting. Breakthroughs in pyrolysis and devulcanization could help retrieve high-value material from scrap tires that could substitute for virgin materials, said Kees van Oostenrijk of RecyBEM (The Hague, Netherlands). Pyrolysis produces carbon black, used in tire production, as well as oil and gas; devulcanization produces a rubber that could replace 40 percent of the rubber in a new tire, he said. While pyrolysis has a “ways to go” to operating on a commercial scale, devulcanization is coming close “to a good, usable technology,” he said. The success of these technologies will depend on whether they produce high-quality material “at economically viable prices,” said guest speaker Charles Astafan of Columbus McKinnon Corp. (Sarasota, Fla.). Two U.S. pyrolysis plants are in start-up phase, but to his knowledge, no one is “aggressively” working on devulcanization here. If it works, “it will be very good for the market,” he said.

In an overview of the U.S. scrap tire market, Astafan reported that stockpiles have fallen from 2 billion tires in the early 1990s to about 100 million today, of which 75 million are in one state. Major U.S. markets for recovered tires include tire-derived fuel and aggregate as well as coarse and fine crumb rubber. Coarse ground rubber used for playgrounds and mulch has become a large and growing market in the United States, he added.

The U.S. tire recovery rate grew from 82 percent in 2005 to about 90 percent in 2007 before falling due to the recession, Astafan said. The TDF market fell more than 30 percent and ground rubber markets by 20 percent. Today, “we’ve come out of the recession,” Astafan said. “Our markets have matured. We’re recycling about 90 percent of all of the tires generated here.” About 38 percent of recycled tires go into TDF, 24.5 percent into ground rubber, 8 percent into civil engineering applications, 8 percent are exported, and “a small percentage is being landfilled,” he said. Industry consolidation in the past 10 to 15 years has resulted in six companies controlling 85 percent of scrap tires, Astafan said. Competition for tires is driving tipping fees down, he added. “There’s compression on the market, compression on the economics, and compression on the processors.”

For scrap tires in Europe, “landfilling has gone down to 4 percent; energy recovery is increasing; material recovery is increasing;” and retreading, reuse, and exports are stable, said Tire Committee Chairman Barend ten Bruggencate of the Dutch tire industry association VACO (Leiden, Netherlands). BIR and the European Tyre & Rubber Manufacturers Association (Brussels) are updating and developing standards for the industry, he said. Michael Blumenthal of the Rubber Manufacturers Association (Washington, D.C.) gave an overview of U.S. standards, including those for TDF, asphalt rubber, loose-fill playground rubber, and synthetic turf infill rubber.

Van Oostenrijk gave a more detailed look at Europe’s scrap tire industry. Tire granulates and tire casings for retreading could soon achieve end-of-waste status in Europe, he said, which “will create stability and space for new developments for materials from end-of-life tires.” Currently two-thirds of all tires in the EU are collected under a producer-responsibility system. Europe collected a combined 3.4 million mt of tires in 2012, with most of the tires coming from Germany, France, Spain, Turkey, and Italy, he said. Of the total collected in 2012, 653,000 were partly worn tires destined for reuse, exports, and retreading, he said. The 1.3 million mt of scrap tires used for material recovery include 157,000 mt for civil engineering and public works and 1.2 million mt for material recycling. Another 1.3 million mt of ELTs were used for energy recovery. He expects similar numbers for 2013 because ELT arisings did not grow last year, he said.

He and Astafan both expect to see international trade in recycled tire products. Historically, the industry is a “very regional market” due to high transportation costs to move material, Astafan said, but material travels further today. For example, Viborg, Denmark-based Genan’s investment of $140 million in a new Houston facility, which will process 10 million tires annually, doesn’t make economic sense, Astafan said. To make it viable, the firm will have to import material into the market. “We believe there will be overcapacity in production that will force a market correction,” which could force weaker companies out of business, he said. “If we get into an overcapacity situation, it’s only going to hurt the marketplace.” To grow, scrap tire recycling needs “new, higher value” markets, Astafan said. “Value-added markets have driven this industry since its inception. Our existing markets are fragile, as the Great Recession has proven to us.”

The Forgotten Recyclable

Strengthening the textile recycling industry by increasing diversion rates and uniting stakeholders was on the minds of attendees at the first International Textile Recycling Summit, held June 2 in conjunction with the BIR convention. The Secondary Materials and Recycled Textiles Association hosted the event with the Council for Textile Recycling—both based in Abingdon, Md.—and BIR’s Textiles Division. The daylong event brought together for-profit and nonprofit textile recycling and reuse companies as well as apparel manufacturers and representatives from academia and government agencies. Three panels, each moderated by one of the host groups, discussed challenges facing the industry, sustainability, and future trends.

The textile recycling industry has reached an inflection point, said Nir Katz of Whitehouse & Schapiro (Baltimore). Awareness about the industry has grown, resulting in more competition and collaboration, he said. Coupled with competition and demand for raw materials, however, is more demand for products with recycled content, said Darrell Turner of Leigh Fibers (Wellford, S.C.). While the U.S. supply has increased from this winter’s “extreme” shortages, quality remains a problem, said Eric Stubin with Trans-Americas Trading Co. (Clifton, N.J.), who also represented SMART/CTR. Demand for postconsumer textiles from the automotive industry has increased, but pricing is a challenge, Turner said. Unpredictable supply and demand mean commercial and nonprofit recyclers have to work together, said Tim Murray of Goodwill Industries of San Francisco.

Brooke Nash of the Massachusetts Department of Environmental Protection (Boston) called textiles “the forgotten recyclable.” From a state agency’s perspective, it’s a perfect waste stream to target, she said: It’s discrete; it’s easy to manage; it has ample markets and demand; local businesses want it; and it’s not hazardous. Miscommunication exists, however, she said, which keeps people from recycling the full spectrum of textiles. Only recently, people are beginning to understand they should treat textiles no differently than paper or plastic, said Samantha MacBride of Baruch College (New York).

At the same time some municipalities are recognizing the need to divert textiles from landfills, others have begun to limit the private sector’s ability to collect used clothing by banning collection bins from public spaces, Katz said. Stubin noted that one large charity in California has proposed laws to prevent the private sector from collecting postconsumer textiles, which most in the private sector view as “unconstitutional, antibusiness, and ill-figured,” considering 85 percent of postconsumer textiles nationwide go to landfills. The industry needs to control the conversation about textile recycling so that others don’t, Katz said.

In 2012, the United States discarded 20.4 billion pounds of clothing and footwear as well as 2.6 billion pounds of linens, of which only 1.4 percent and 17.8 percent, respectively, were recovered, according to a U.S. Environmental Protection Agency report on municipal solid waste, Stubin said. SMART estimates that 95 percent of landfilled items could have been reused or recycled.

BIR’s Textiles Division meeting kicked off the summit, with market reports on the United States and Europe. Alexander Gläser of Rechtsanwalt & Notar (Stuttgart, Germany) examined his country’s 2012 circular-economy law and its potential effect on charitable and commercial textile recycling operations. Commercial enterprises could lose the ability to collect used textiles as well as some of the sorting, he said, but “marketing will remain their domain.” Timo Perschke of PYUA—Ecorrect Outerwear (Kiel, Germany) shared his company’s closed-loop recycling model that aims to sell, collect, and recycle its garments into new ones. For it to work, however, “a great deal will depend on consumers and whether they participate in this loop,” he said. Olaf Rintsch of Textil Recycling K&A Wenkhaus (Hamburg, Germany) stepped down from the division presidency at the meeting, promoting Vice President Mehdi Zerroug of Framimex (Appilly, France) to the position.

The summit’s host organizations presented research and marketing company Cotton Inc. (Cary, N.C.) with the first Leadership in Sustainable Apparel-Recycling Innovator Award for its Blue Jeans Go Green denim recycling program, which has diverted more than 600 tons of denim from landfills and has generated more than 2 million square feet of insulation to assist with building efforts.

ITC Meeting Looks at Trade Barriers

BIR’s International Trade Council meeting addressed barriers that can impede international trade in scrap. Ray Fernandez, vice president of Sealock Security Systems (Miami), said the scrap recycling industry has seen a 300- to 400-percent uptick in crime and theft in the past couple of years and showed a video demonstrating various techniques for defeating container locks and seals. ITC Chairman Robert Voss of Voss International (Rickmansworth, England) reminded BIR members to report container thefts to the International Maritime Bureau (London), which will track them and identify trends.

Tshanda Kalombo, senior international trade specialist with the U.S. Department of Commerce (Washington, D.C.), spoke about the Transatlantic Trade and Investment Partnership, multifaceted U.S.-EU negotiations aimed at eliminating all tariffs on goods and reducing cost differences caused by different standards while preserving competitiveness and health, safety, and environmental protections. The negotiators have not heard much from the recycling industry, she said, noting that a lack of understanding results in “unfortunate” regulatory and policy approaches. “I think you have an important story to tell,” she said.

Bob Yang of the China Entry and Exit Inspection Quarantine Association, Recycling Branch (Beijing) updated attendees on the country’s latest scrap import data. In 2013, China imported 54.85 million mt of scrap worth $33.7 billion. In the first quarter of this year, China imported 11.9 million mt of scrap worth $7.76 billion, Yang said. That’s down 10.4 percent by volume and 11.3 percent by value compared with the same period in 2013, a decline he attributed to price volatility, price inversion, and more trade difficulties “making brokers and processors unprofitable.”

Despite concerns about the impact of China’s 2013 Green Fence initiative, Yang pointed out that out of 75,200 batches of imported scrap inspected in the first quarter of this year, only 55 were rejected. That said, a new law that takes effect Jan. 1, 2015, makes environmental protection a higher priority than economic development throughout China. It will force Chinese recyclers to invest more in their operations and management, he said, but in the long term it will “play a positive role in promoting the entire recycling industry’s transformation and upgrading.”

IEC Grapples with Regulatory Overload

The pitfalls of regulation were on display at BIR’s International Environment Council meeting. Russell Fraker, an associate with Beveridge & Diamond (Washington, D.C.), described laws in Latin America that affect the recycling industry. Most major markets in the region have extended-producer responsibility or other laws regulating recycling of some products, he said. All Latin American countries are Basel Convention signatories and “very aware of their obligations,” but they are still developing their waste laws and classifications, which can be a challenge for trade, Fraker said. Argentina’s especially broad definition of hazardous waste as well as laws that make it difficult to move waste across province borders make it “the last place to find opportunity for new material flows,” he said. In contrast, “the attitude of [government] agencies in Brazil is much more practical,” he said.

Alfred Rosales, executive director of French recycling federation FEDEREC (Paris), described recyclers’ concerns with the 2001 Extended Producer Responsibility Guidance Manual for Governments from the Organization for Economic Cooperation and Development (Paris). French EPR laws affect only a small volume of recyclables, “but in terms of regulation it’s a large issue,” he said, because the 24 different EPR schemes create “lots of risk for a recycling company.” Confusing or poorly written EPR regulations can disrupt functioning markets or create winners and losers, he noted. “Recyclers should be involved in updating EPR guidance at the national level to protect ourselves [and] to provide technical expertise,” he said. Also, “we need to keep the capability to sell our product. If we can’t sell, we’re not recyclers.” BIR’s Ross Bartley echoed Rosales’ concerns. The guidance manual needs updating to reflect the past decade of experience with EPR programs, he said, and there should be outreach to non-OECD countries to explain the pitfalls of these schemes.

Bartley updated the committee on the Basel Convention’s Expert Working Group on
Environmentally Sound Management. The group is developing five-page practical manuals on the ESM concept for various stakeholders and fact sheets on specific material streams, such as lead-acid batteries, tires, cars, and mercury, he said. Bartley expressed some concern about “mission creep” as the Basel Convention addresses nonhazardous materials because it might set a higher performance bar for ESM than the OECD. “We need parity between what’s required of OECD and non-OECD countries,” he said.

Improving Shredded Scrap Quality

Speakers at the Shredder Committee meeting addressed creating higher-quality ferrous shred. Abdullah Hosdir of steel plant ICDAS (Istanbul) said his company’s ideal shred has a maximum impurity level of 0.5 percent and a maximum diameter of 20 cm per piece. Oversized shred should not exceed 3 percent of the supply, and it should be no more than 50 cm per piece, he added. Shred should be freshly produced and have minimal moisture. Density should range from an average of 65 to 70 pounds per cubic foot, and nonmetallic and nonferrous content—especially copper—should be minimal. The industry should use an internationally accepted method of sampling and testing, he concluded.

 All shredded scrap is not created equal, said Dan Pflaum of Gamma-Tech (Dayton, Ky.). Shredding is a “highly variable process” due to the wearing down of parts and inconsistent feedstock and pickers, he said, and despite the prevalence of visual inspection, “you can’t tell by looking at scrap what’s in it.” His firm’s CrossBelt Recycled Metal Analyzer provides full-stream density and composite analysis of aluminum, stainless, or ferrous scrap as it travels by conveyor through the analyzer. A radioactive isotope in the bottom of the analyzer emits neutrons that interact with the scrap. Four detectors on top capture the output of that reaction, he said. Because the reaction occurs at the speed of light, the speed of scrap through the instrument does not matter, Pfluam said, and the analyzer can penetrate into 10 to 12 inches of scrap depth. The cost is about $1.50 to $2 per gross ton processed, he said. The goal of such tools, Pflaum said, is to produce ferrous shred with less copper, which would allow companies to differentiate themselves in the market according to their scrap quality and, ideally, receive a higher price for their scrap.

European Shredder Group Chairman Manuel Burnand of Derichebourg (Paris) provided an update on the EU’s progress toward development of its best available technologies reference document for shredding metal scrap. The group expects to have a first draft by the end of the year and a final document in 2016, he said.

Opportunities, Regulations Abound for Electronics Recyclers

BIR’s E-Scrap Committee meeting addressed the global and European electronics recycling pictures. Volker Pawlitski, senior vice president of the recycling and precious metals business unit for Aurubis (Hamburg, Germany), pointed out that electronic scrap and white goods now constitute more than 15 percent of the smelter’s secondary material stream. Electronics product life spans are getting shorter, the products are getting smaller, and the nonferrous and precious metal content is falling, Pawlitski said. The supply of end-of-life electronics is growing fastest in emerging markets, he pointed out, in countries that do only very rudimentary e-scrap collection, processing, and refining with few environmental, health, and safety protections. He urged electronics processors and refiners to adapt quickly to the shifting supply picture. ReMA President Robin Wiener noted there are “responsible and irresponsible companies” in both the developed and the developing worlds.

Surendra Borad of Gemini Corp. (Antwerp, Belgium) gave details about one such developing country–India. The United Nations’ Solving the E-Waste Problem initiative (Bonn, Germany) estimates India generates 2.7 million mt of electronic scrap, he said. Formal recycling systems handle roughly 4.5 percent of that, according to a June 2012 report from the Associated Chambers of Commerce & Industry of India (New Delhi); another 4 to 8 percent ends up in landfills; and the remainder is handled informally.

The formal sector consists of about 100 registered dismantlers and recyclers that have a licensed capacity to handle about 296,000 mt of electronics annually. “This is changing quickly,” Borad said, now that large companies such as Tata Motors (Mumbai, India) are getting involved in electronics recycling. “The e-waste management market is very under-penetrated and offers immense potential for recyclers,” he added. A report by TechSci Research (Burnaby, British Columbia) estimates the sector will grow nearly 31 percent between now and 2019, he said.

The Indian state governments are implementing the federal government’s 2011 law on e-scrap management, Borad said. The law applies to all manufacturers, dealers, and collectors, and requires registration, product tracking, reporting collection and processing volumes, and the minimization of lead, mercury, cadmium, and other hazards in manufacturing. The government also strictly monitors imports, making it “extremely difficult if not impossible to illegally import e-waste into India,” Borad said. “It might take some time” to get the government to see end-of-life electronics as a resource, not a waste, he added. With “e-waste” one of the fastest-growing waste streams in India, Borad said, growing at a compound rate of 30 percent from 2014 to 2015, he expects the government to make e-scrap regulations more business-friendly because “the volumes are too much to ignore.”

Ross Bartley, BIR’s environmental and technical director, updated attendees on the latest developments in the Basel Convention’s (Chatelaine, Switzerland) work on the transboundary shipment of electronics and e-scrap. A working group of the parties is discussing whether controls are needed on electronics going for warranty repair or being leased, he said. And Manuel Burnand of Derichebourg (Paris) spoke about work being done in the European Union to develop a best-available-technologies document for recycling refrigerators, freezers, and air-conditioning units as a subset of the development of such a document for shredding metal scrap.

Baxi Receives Papyrus Honor, Launches Book

The BIR Paper Division presented its latest Papyrus Prize to Ranjit Baxi of J&H Sales International (London), BIR treasurer. Division President Reinhold Schmidt noted Baxi’s “exceptional performance and entrepreneurial knowledge as a leading exporter of recycled fibers, deep knowledge of the Far East market, [and] exceptional work in his honorary posts” in BIR, calling him a “highly estimated personality worldwide [and] promoter of trust and partnership in the entire recycling chain.” Baxi established the Papyrus Award when he was president of the Paper Division six years ago.

The Miami convention also marked the launch of Baxi’s book, Recycling Our Future: A Global Strategy. More details on the book are in Scrap Beat on page 26.

Slow Growth Ahead, Schenker Says

The global economy will grow slowly for about three more years before it begins to contract, forecasted Jason Schenker, founder and president of Prestige Economics (Austin, Texas), the keynote speaker at BIR’s general assembly. He expects global gross domestic product growth of 3 to 3.5 percent this year, more than 3.5 percent in 2015, 4 percent in 2016, and up to 4.5 percent in 2017—“but then 2018 could be 2.5-percent growth.”

Schenker pegged U.S. GDP growth at 1.9 percent this year, 2.5 percent in 2015, and 3 percent in 2016, with a gradual increase in the federal funds rate and inflation and a decrease in unemployment. “Real risks” to U.S. economic growth he identified include record low labor force participation of those ages 16 to 19, municipal debt, federal debt, entitlements, and rising energy prices. Despite the shale gas boom, “cheap natural gas won’t continue,” he said, because the United States needs to spend nearly $1 trillion on infrastructure to collect and transport it, which will put upward pressure on prices.

Addressing the conference’s focus on Latin America, Schenker said early expectations for that region’s GDP growth this year might be too optimistic, but he expects some growth and modest labor market improvements for the next few years. Brazil will be one of the region’s most important countries for recyclers, he said, with the potential for growth despite its inflation and bank policy issues.

Benchmarking surveys his firm conducted, one in the United States and Canada and the other in Latin America, revealed that—compared with Latin American recyclers—U.S. recyclers are less optimistic about future growth and more concerned about consolidation, shredder overcapacity, scrap supply, and low margins. “It’s a much rosier picture in Latin America on the processing side,” Schenker said, because the market is less mature.

Despite improving economic conditions, recyclers at the spring 2014 BIR meeting in Miami Beach worried about increasing regulation, low margins, excess processing capacity, and higher quality demands.