November/December 1995
So far, so good…The world economy set a firm if not vibrant backdrop for commodity markets as recyclers gathered this fall for ISRI’s annual series of roundtables. And the prognoses for most of the scrap-related commodities examined appeared positive moving into ’96.
By Jeff Borsecnik, Robert J. Garino, and Si Wakesberg
Jeff Borsecnik is an associate editor and Si Wakesberg is New York Bureau Chief for Scrap Processing and Recycling. Robert J. Garino is Director if Commodities for ISRI.
With the world economy relatively firm and scrap demand generally strong, commodity watchers had less to worry about than they have in years as they got together in Pittsburgh, Chicago, and New York City for this year's series of ReMA's September commodity roundtables, covering aluminum, copper, nickel and stainless steel, lead and zinc, precious metals, and glass.
Of course, they did voice concerns on other issues, such as price volatility, difficulties in international trade, and increasing quality demands. But for the most part, the experts noted a variety of positive factors influencing scrap markets-including growing demand for some scrap materials in emerging nations in Latin America and Asia, a boost in scrap supplies thanks to the relatively robust pace of manufacturing, and various political, social, and manufacturing pressures pushing recycling, which has helped a number of commodities take over a greater proportion of market share from their virgin competitors
ALUMINUM
The aluminum market, which has been up and down again in 1995, came in for an optimistic overview by representatives of both primary and secondary producers at the aluminum roundtable, held in Chicago on Sept. 21. The heavily attended session revealed big hopes for the metal in the long run—especially as it relates to the emerging markets of Asia and Latin America —though issues of price volatility marred the near-term outlook offered.
Aluminum Expansion Promising
In a regional look at the world aluminum market, Norman E. Wells Jr., CEO of Castech Inc. (Akron, Ohio), forecast that total Western World aluminum demand will rise 3.9 percent annually, on average, during the period 1993-2000, a boost from the 2.9 percent average growth per annum recorded between 1986 and 1993. "While this may seem like relatively modest growth," he said, "it actually means an additional 840,000 tons annually!"
Wells also projected average annual consumption growth over the period of a whopping 5.8 percent in South America, 5.3 percent in Asia , and 4 percent in Europe. North America , on the other hand, can expect only 1.9-percent annual growth in aluminum consumption, though this is up half a percentage point from the 1986-1993 period, according to Wells's numbers.
How will this aluminum be used? "As you would expect," said Wells, "there is accelerating growth in transportation—especially automobiles. Again contrasting the period 1986-1993 with 1993-2000, Wells forecast that the average growth rate for Western World aluminum use in transportation applications will be 4.5 percent per year during the later period, up from 3.9 percent in the earlier period. Automobile applications, among aluminum’s most prominent, are a particularly bright spot: Wells emphasized that by 2000, per-car aluminum use is projected to be 60-percent higher by weight over the 1994 level of 216 pounds per car. "The next frontier for aluminum sheet is hoods and exterior body panels," he noted.
Consumption in building applications, which rose 2.5 percent per year, on average, during 1986-1993, is expected to inch up to 2.7-percent annual growth between 1993 and 2000, Wells reported.
But Western World use in aluminum cans will slip from 4.3- to 3.6-percent growth per annum, he predicted. There’s good news for aluminum consumption in cans in other parts of the world, Wells noted. China, for instance, has enormous potential for future aluminum can consumption, he said, pointing out that its current consumption rate of only one can per person per year—which compares with a North American average of 365 cans per person per year and a European total of 52—is sure to grow. Another positive sign he identified was the construction of 23 new can plants in various parts of the world last year, representing a 10-percent increase in total can production. Nearly 70 percent of these plants were built in Asia and Latin America, he noted.
With overall consumption rising, scrap’s share of the aluminum market will also increase, Wells indicated, suggesting that primary aluminum will not be able to satisfy growing demand alone and that the economics of scrap use are likely to remain attractive. Plus, he predicted that legislation, including mandated recycling, will further push the use of scrap aluminum in the years ahead.
On the downside, Wells pointed to some of the clouds crossing aluminum’s bright horizon, including potential alumina shortages and threats from competing materials—which prompted him to warn, “Those of us in the aluminum sheet business must act in a manner which prevents competing materials from making substantial inroads into our markets.”
He also touched on the troubles raised by the volatility of aluminum prices on LME, noting that seven of the 12 months in 1994 saw price increases of more than 5 percent over the previous month. This led him to ask: “Do you think a purchasing agent can be successful in a marketplace with this kind of volatility? I personally don’t believe so.”
Secondary Aluminum Feelin’ Fine
In a presentation spotlighting worldwide growth of aluminum’s use in the automotive industry—upon which the secondary aluminum industry significantly depends—Richard Neufeld, president and CEO of U.S. Reduction Co. (Munster, Ind.), noted that “transportation has already passed packaging as the largest area of aluminum consumption and will continue to move further ahead in the next five years.”
Per-vehicle use of aluminum is expected to increase by 15 to 25 pounds every year between now and 2000, Neufeld said. This should add up to vast tonnages, he noted, pointed out that 50 million cars and trucks will be produced worldwide this year.
Neufeld declared that despite the heavier demand that will be made upon secondaries in the 1995-2000 period, there will be no shortage of scrap aluminum. “The worldwide supply of primary and recycled aluminum is now over 60 billion pounds annually,” he said, and by 2000 it should exceed 65 billion pounds, "of which 10 billion pounds will be above-ground scrap available in the United States ."
Looking at trends in secondary aluminum prices, Neufeld predicted that aluminum values, which leapt from 55 cents a pound to $1 in 1994, then slid back to 80 cents a pound in early September 1995, "will once again ride up to 90 cents a pound-plus by the end of the year." He added, "1996 will be a year of continued strength."
Neufeld also commented on several significant changes that have been taking place in the secondary aluminum industry. Among them: Customers now require implementation of previously unheard-of quality and statistical controls, many customers today circumvent secondaries by purchasing non-specification remelt secondary ingot, environmental regulations have become much more stringent, and many end-users want prices not just quarterly but sometimes one and two years forward.
The Changing International Aluminum Marketplace
In a broad look at the evolving world aluminum market, Barry Marshall, president of Hunter Douglas Metals (Homewood, Ill.), reported that European growth is slow andJapan is still "soft," though the country's primary consumption was actually up 2.3 percent for the first half of 1995. The rest of the Far East is showing "consistent" growth, he said, noting that although China exported approximately 150,000 mt of aluminum in the first half of the year, it also imported 250,000 mt—a jump of 125 percent over the comparable figure from last year.
Turning to the international market as a whole, Marshall discussed the many twist and turns aluminum has taken since the bullish beginning of the year. For one thing, he noted, some producers restarted sidelined capacity in mid-1995—reintroducing production that will eventually add 1 million mt to the marketplace—even though the terms of the memorandum of understanding among the major world producers are not formally scheduled to end until March 1996. Exports from the Commonwealth of Independent States, meanwhile, are flowing at a steady rate of around 2.25 million mt per year, he said.
In another twist, although premiums for aluminum around the world—including European billet and UBC prices—have declined, each day seems to bring forecasts of rising aluminum prices from analysts, Marshall said.
Investment fund involvement in the LME aluminum market has also added to the metal's confusing year, Marshall declared. He noted that LME brokers used to be pleased with the participation of the investment funds, which were credited with bringing liquidity to the market, but suggested even these enthusiasts may now be having second thoughts. But Marshall also said that the investment funds have probably not even invested 1 percent of their total in metals, and he predicted that a lot more fund activity in metal markets is likely, perhaps accompanied by more "violent" movement in prices.
Perhaps, he wondered aloud, it might be better if the LME did not exist—a suggestion he said he would have until quite recently dismissed as absurd.
Marshall also commented on the viability of the LME secondary aluminum contract, stating, "There are probably a number of others in this room who have tried hard ... to use it as a hedge vehicle to no avail."
Marshall closed by posing a number of key questions: With new offers being made by the major primaries to their canstock customers, will the market for prime aluminum and UBC’s become more stable and trade close to the ranges that would be set? IS the automotive sector going to make further requests for price stability and how will this affect the merchant supplier of prime or scrap? Finally, will the LME become even more volatile as each party hedges its own transactions?
Asia Dominates Scrap Export Interest
The telescope certainly is on Asia insofar as U.S. scrap aluminum exports are concerned.
China and Hong Kong together consumed 60,000 mt of U.S. scrap aluminum in the first half of 1995, Warren Rosenfeld, president of Calbag Metals Co. (Portland, Ore), reported, but it is Taiwan and Korea that are really making today’s scrap news. “From virtually no smelting capacity in 1984, Taiwan today has an annual capacity of 297,000 mt. As for Korea , a market for remelting aluminum which only began about eight years ago, it now has an appetite of 180,000 mt per year,” Rosenfeld said.
He contrasted this rapidly rising rate of scrap usage with the much more gradual development of the Japanese smelting industry. One reason for this difference lies in the tremendous rise in vehicle registrations in emerging Asian countries, he said, noting, for example, that in Bangkok , 500 new vehicles per day are hitting the congested streets.
Of course, Rosenfeld said, automobile manufacturing is not the final word for tracking aluminum consumption, but it provides a good road map—and a worldly one at that. "Today, remelting, die casting, and final assembly have become regionalized. The scrap may start in Portland , be melted in Taiwan , the ingot shipped to Thailand , and the die casting exported to Japan for final assembly."
In broad terms, Rosenfeld indicated that "the future of aluminum scrap consumption is bright in the Far East as the standard of living grows." And as the sophistication of manufactured consumer goods increases in the region, he said, there will be a need for high-value scrap aluminum, which will replace lower-grade items.
Managing Risk in Aluminum
Relationships in the world of aluminum are changing, Craig Tuckman, vice president of commodities for Bankers Trust Co. (New York City), stated in a presentation that focused on managing financial risks in a rapidly evolving industry.
Here's the way it used to be, he said: The producer moved its product to the fabricator, which then sold it to the consumer. Smelters, for example, sold to rolling mills, which sold to can companies or bottlers. The smelter sold fixed-price metal plus a premium and the result was a fixed margin over production cost, said Tuckman.
Today, however, it's different, thanks to the fact that suppliers have changed their risk profiles. For example, a rolling mill charges a fixed conversion margin, but this fabricator cost is linked to the underlying exchange contract on a "floating price" basis.
The key point, Tuckman stressed, is that the bottom line is linked to the LME. Whether you are a producer, consumer, or fabricator, he said, you've got to ask yourself, "If prices move, what happens to the bottom line?” He continued: "Physical deals can be as risky as any financial transaction. The impact on your bottom line that results from changing prices is your risk.”
Copper
"Upward still, and onward ..." This quote by James Russell Lowell could aptly be applied to the consensus opinions on the red metal's prospects voiced at the annual copper roundtable, held Sept. 20 in Chicago . Several of the panel's speakers pointed out, for example, that copper has performed well-beyond most experts’ projections for more than two years and it’s unlikely to suffer any sharp reversal in the near term.
At the same time, however, industry participants paid heed to the historic cyclicity and volatility that has always been associated with the copper. And this reality, tempered even the most bullish prognosticators at the event.
Thus, the key question on the minds of copper watchers at the time of the roundtable was whether copper’s top is near. Forecasts offered didn’t answer the question unequivocally, though most suggested price moderation is likely late this year and next. One expert with a scrap bent, however, was more bullish on the short term.
Supply-Demand Picture Positive
A review of published data on world and North American copper demand over the past several years reveals that actual reported consumption was far stronger than previously assumed, noted Michael K. Ashworth, director of metals management for Southwire Co. ( Carrollton , Ga. ). At the same time, he said, supplies of refined metal lagged.
These factors attest to copper’s “staying power,” Ashworth said, also emphasizing the red metal’s responsiveness to new technology in the world arena. Add it all up, he said, and it reveals that copper use is likely to grow steadily into the future.
But Ashworth also observed that along with copper’s resilience, periods of surplus and deficit will, nevertheless, continue to be a feature of the metal’s markets. He opined that these cycles are actually good for the industry because they force out aged, high-cost producers. “It’s one way this business sheds its old skin and moves forward,” he concluded.
Despite his confidence in copper’s future, Ashworth noted that Southwire is not planning to expand its wire and cable production because of fears that the industry will face overcapacity in the latter half of the 1990s.
From Deficit to Surplus
Looking at long-term trends, Arthur Miele, president of Phelps Dodge Sales Co. ( Phoenix ), covered 30 years of world copper fundamentals.
Following a relatively depressed period for copper usage during the 1970s and early 1980s, consumption has returned to a “healthy growth rate of 3 percent per year since the mid 1980s,” he said. New consumption records have, in fact, been set each year since 1985, despite recessions around the globe, he noted. Meanwhile, new mine production has lagged behind, creating statistical metal deficits during seven of the last 11 years.
Copper inventories, as measured in weeks worth of consumption, have subsequently fallen from 13 weeks’ supply in the early 1980s to just above four weeks at the end of 1994. Copper prices, he said, have "reacted accordingly.”
Matching estimated growth in world copper consumption of some 300,000 mt next year against scheduled new mine capacity of around 594,000 mt, Miele concluded that the world copper market will shift from a deficit of approximately 200,000 mt in 1995 to a "modest" surplus of 86,000 mt in 1996. Nevertheless, he stressed, this surplus only equates to 4.4 weeks worth of consumption, which is still below what he called the "equilibrium level" of six weeks' usage. Thus, he said, 1996 is still likely to be classified as a "tight" year for copper.
Echoing Miele's market observations at the roundtable, James Steel, assistant vice president of metals and energy for Refco (New York City), characterized the U.S. macroeconomic outlook as "a little more reassuring than even a few months ago,” which bodes well for domestic copper consumption in 1995 and beyond, he said.
On the other hand, Steel identified what he called the "first signs" that copper production in 1995 may be beginning to outstrip consumption. For the time being, however, the overall world copper market remains in deficit, he noted, with stocks totaling less than 1 million mt. He suggested that stocks will remain tight for the rest of the year, with the market finally turning into a surplus situation by the end of 1996. The following year is also expected to record a "small surplus," he said.
Translating these trends into price forecasts, Steel estimated copper values will remain relatively firm—between $1.20 and $1.30 per pound—for the rest of this year, but should fall to a range between $1 and $1.20 in 1996.
Scrap Picture Mixed
The past 12 months saw both "highlights and lowlights" from a copper scrap perspective, according to Daniel Gascoyne, president of Industrial Recycling Services (Canton, Ohio), who based his comments on an informal survey his company conducted of copper scrap industry participants.
His sources reported that scrap was generally available, and some new buying outlets have appeared. But there were also frustrations voiced, including wide price swings, another East Coast plant closure—Southwire's Gaston, S.C., refinery—generally tight margins, and limited export sales. He also noted apparently increasing quality demands from the consuming sectors, which he attributed to a normal, greater focus on quality issues by consumers during the mature phase of the business cycle. Summarizing copper scrap watchers' forecasts for the next year or so, Gascoyne offered more mixed news. On the plus side, he reported, scrap processors were generally bullish on the anticipated level of domestic manufacturing, expecting that scrap supply should not be troubling next year. But on the downside, he said, recyclers are voicing concerns over ongoing price volatility, thin profit margins, and "erratic" export activity.
Exploring that last trend more in-depth, Ulrich Leban, director of W&O Bergrmann GmbH & Co. (Dusseldorf), termed the scrap flow between the United States and Europe as "sporadic" during the 1990s and pointed a causal finger toward overall differences in economic activity as well as "drastic" changes in exchange rates.
Europe , especially Germany, is a net importer of metal, including scrap, Leban noted. Because of this, European countries are highly influenced by metal availability throughout the world, he said. As an example, he pointed to the opening up of the former Eastern Bloc countries, which has exacerbated scrap tightness caused, at least in part, by aggressive buying by the Pacific Rim nations. Explaining this scenario further, he reported that, despite tight scrap supplies in Europe, the Pacific Rim countries still look to the region for purchases due to "favorable tariff situations" that favor copper scrap over virgin material.
Both Gascoyne and Leban expressed optimism for international scrap trade over the near term. In fact, though Leban voiced concern over exchange rates and their likely effect on trade between the United States and Europe next year, he forecast positive business prospects in Europe "at least until the middle of 1998." As for the role of the Far East down the road, he said the growing region's role is "difficult to assess."
Gascoyne concluded with a prediction that copper fundamentals will remain positive. With technical factors worked in,, he said, copper has the potential to rally to $1.50 per pound before finally tapping out.
Nickel & Stainless Steel & Specialty Metals
The world stainless steel market is surging and shows evidence of continued strength and growth, according to speakers who examined the market’s fundamentals at the Sept. 13 nickel/stainless steel/specialty metals roundtable in Pittsburgh. And that trend is good news for nickel, ferrochrome, molybdenum, and cobalt, as well as stainless steel scrap, the experts agreed.
Stainless Sprints Along
World stainless steel production is expected to set a record in 1995, hitting an estimated 14.8 million tons—almost 13- percent above the previous high of 13.1 million tons recorded in 1994, and 27-percent higher than 1993's 11.6 million tons—stated Larry A. Pryor, executive vice president of AIOC Alloys Inc. (Sewickley, Pa.).
Taking a look at how key world regions played out, another speaker, Richard S. De Cesare, vice president of marketing for Thompson Creek Metals Co. ( Englewood , Colo.), reported that stainless production in Western Europe increased approximately 17 percent in 1994 and could expand another 6 to 8 percent in 1995. Japanese stainless production jumped 7 percent in 1994, he said, and is forecast to rise almost 13 percent this year. U.S. stainless production, meanwhile, rose 12 percent in 1994 and is expected to grow another 16 percent this year, according to the Specialty Steel Industry of North America (Washington, D.C.).
All of this growth can be attributed, in part, to the upturn in world economies in the past few years, stainless steel's gains in market share at the expense of other materials, and continued growth in per capita stainless steel usage, especially in the United States , Pryor noted. And these factors, along with new capacity being added in Europe, Asia, South Africa, and the United States, are expected to keep stainless production on the rise, he said.
John R. Wright, director of materials management for Washington Steel Corp. (Washington, Pa.), also discussed growing capacity, noting that world flat product melting capacity is forecast to rise from its 1994 level of around 13 million tons to about 20 million tons by 2000. Expansion will be particularly notable in Asia and Latin America , Wright asserted, but he also pointed to expected growth among U.S. flat-rolled product mills, which could increase their capacity by 735,000 tons in the next three years alone.
Looking specifically at cold-rolling mills, Wright said that U.S. producers are adding 290,000 tons of capacity, while Mexican cold-rolling mills are expanding by 55,000 tons.
These expansions, of course, are driven by prospects of continued growth in demand. Indeed, world demand for cold-rolled stainless steel is projected to exceed 8 million tons in 1995, up from around 7.5 million tons in 1994, with expectations that it will continue to grow to 10.5 million tons by 2000, Wright said.
Nickel Catches the Stainless Wave
Since about 67 percent of the world’s primary nickel goes into stainless steel production, surging demand for stainless steel has also helped revive demand for nickel, noted Stepahnie Anderson, director of market research for Inco Ltd. (Toronto). In fact, 1995 has been a banner year for primary nickel producers, "with high nickel price realizations and an ongoing focus on cost cutting contributing to strong profits and improved share prices," she said.
After rising 16 percent in 1994 to 774,000 mt, world nickel demand is showing strong growth again this year, perhaps climbing another 15-percent to 893,000 mt, Anderson said. (If this prediction holds true she noted, it will be the first time nickel has seen two consecutive years of double digit growth since 1982-1983.) As a result, nickel producers, “are scrambling to produce as much nickel as possible from existing facilities in an effort to meet the current demand,” she said.
Then recent strong demand for nickel scrap availability and nickel production shortfalls, has depleted LME inventories of the metal from a peak of 151,254 mt in November 1994 down to 63,552 mt in mid-September—equivalent to less than four weeks worth of demand. "Primary metal producers are completely sold out for this year and inventories are at a minimum," Anderson observed.
Driven by these factors, nickel prices rose to a year-to-date high of $4.68 a pound in late January, but this run-up occurred "in advance of fundamentals," Anderson asserted. This prompted a negative response from fund managers in February, which drove nickel prices down steadily through mid-year to a low of $3.05 in early May. Since then, however, nickel tags have largely rebounded and were hovering around $3.80 a pound in mid-September.
Nickel's demand and price prospects look promising for the next two years, asserted Anderson . Despite some predictions of a slowdown in industrial growth in 1996, she noted, "lower but possibly more sustainable rates of economic growth are being forecast, not recessionary rates." Also, though Russian nickel exports to the Western World are expected to continue at about 140,000 to 150,000 mt annually, nickel supplies in 1996 and 1997 will be relatively fixed and tight, she said, while stainless steel production and consumption increases are expected to keep nickel in high demand.
These factors will bring about a "steadily improving nickel supply-and-demand balance, contributing to a very favorable nickel price outlook," Anderson said.
Ferrochrome Faces Firm Prospects
Stainless steel accounts for at least 90 to 95 percent of demand for high carbon chrome and charge chrome, which means that "as stainless goes, so goes ferrochrome," said Larry Pryor of AIOC Alloys. As a result, "after approximately a year and a half of strong growth in the stainless market, the ferrochrome market is now feeling the benefit," he noted.
In particular, ferrochrome has seen "a dramatic run-up in prices in 1995," he said, noting that U.S. ferrochrome import prices have shot up from the high-30s-cent-per-pound level in 1994 to the high-70s-cent-per-pound level this year.
Regarding supplies, there was a net drawdown of 150,000 tons of ferrochrome stocks in 1994, but production increases in South Africa and elsewhere will create a 1995 market that is "only in balance," with supply and demand of around 3.25 million tons, Pryor predicted. Next year, the market could see a surplus, particularly during the second half of 1996, when new production is expected to come to the market, he said.
Then again, Pryor noted that because ferrochrome "competes to some extent with stainless scrap for the stainless steel market" and because "scrap is generally in short supply in a stainless upswing," there may be room for increased demand for ferrochrome. In fact, he said, the growth in stainless production in South Africa , China , and the C.I.S. countries, where scrap availability and collection are limited, will create "greater dependence on new units of ferrochrome." Of course, the ferrochrome-stainless scrap connection also works the opposite way, he added, noting that stainless scrap could displace 50,000 tons of ferrochrome in the market.
Looking ahead, Pryor projected "a price cycle with a lower top and bottom." In other words, he said, while ferrochrome prices are not expected to “reach the same high levels as in 1988,” they are also unlikely to "drop to the same lows as in the early 1990s." More specifically, free market prices in the fourth quarter of 1995 should average around 78 cents a pound and remain firm into 1996, he said, with "any downward movement only potentially realized during the second half of 1996.
Overall, Pryor observed, the ferrochrome market will "continue to remain tight during the first half of 1996 due to a lack of chrome ore supplies to Europe and China ."
Prognosis 'Healthy' for Moly Market
Like ferrochrome, molybdenum, as a component of stainless steel, has benefited from thee recent sharp increases in stainless steel production around the world, a trend that is likely to continue through the coming years, asserted Richard De Cesare of Thompson Creek Metals. "We do not see moly demand faltering this year or next year," he said, projecting Western World demand for molybdenum in 1995 to total 224 million pounds, an increase of 2.7 percent over 1994's 218 million pounds. He forecast that 1996 would see an additional 1.3-percent rise in demand to 227 million pounds.
Focusing on the three major moly-consuming regions of the Western World—the United States, Western Europe, and Japan—De Cesare noted that U.S. demand for moly hit 62 million pounds in 1994, with 1995 demand expected to be unchanged and 1996 consumption to taper down to 60 million pounds. Moly demand in Western Europe, which totaled 9 1 million pounds in 1994, should reach a new high this year of around 95 million pounds and inch up to 96 million pounds in 1996, he predicted. Japan , meanwhile, consumed about 38 million pounds of moly in 1994 and is expected to use 39 million pounds in 1995 and 41 million pounds in 1996, which would be a record for that market.
Turning to supply issues, De Cesare said that 1995 moly supplies of 230 million pounds will outstrip the 1994 total of 205 million pounds, giving the market a 6-million- pound surplus for the year. In 1996, supplies are expected to decline 2 percent to 225 million pounds, creating a deficit of 2 million pounds, he asserted. In sum, De Cesare stated, "We anticipate a continued healthy market for molybdenum next year with a close balance between supply and demand."
Cobalt Finds Its Balance
Throughout the 1970s and 1980s, there was "much, much more supply than demand" in the cobalt market. But in the 1990s, there has been "only just enough cobalt," asserted Bryce Clark, executive director of the Cobalt Development Institute Essex, England).
World production of cobalt declined 11 percent between 1992 and 1993-falling from 22,519 mt to 19,933 mt-but it rebounded 15 percent in 1994 to reach 22,983 mt, Clarknoted. Notably, this rise did not come from Africa , which has long been the world's number one cobalt producing continent, but which fell behind Europe for that distinction in 1994. In fact, in 1992, Africa produced 11,459 mt of cobalt, but by 1994 its total had slipped to 6,339 mt a 45-percent decline. Within Africa, Zaire—traditionally the single largest cobalt producer—saw its output plunge from 10,000 mt in 1990 to 6,625 mt in 1992 and 3,300 mt in 1994, Clark said. Zambia , another major African producer, has likewise seen its cobalt generation slide, falling from 4,600 mt in 1992 to 2,639 mt in 1994.
Other sources, in contrast, have increased their availability of cobalt supplies. European production, for instance, jumped 32 percent from the 5,437 mt recorded in 1992 to the 7,163 mt reached last year, Clark reported. And Russia boosted its cobalt exports from 2,500 mt in 1992 to 3,500 mt in 1994, while the U.S. Defense Logistics Agency escalated its sale of stockpiled cobalt from 420 mt in 1993 to 1,770 mt in 1994, Clark noted.
These supply shifts have occurred during a time of growing cobalt demand. World consumption of cobalt, Clark reported, has risen steadily—from 18,413 mt in 1992 to 18,645 mt in 1993 to 21,458 mt in 1994. By region, Asia (including China ) has been the largest consumer, with 1994 demand hitting 8,826 mt-a 19-percent increase over its 1993 consumption of 7,439, he said. Europe , the second-largest cobalt consuming region, used6,327 mt in 1994, also a 19-percent rise over 1993 figures, which totaled 5,297 mt, he noted. Cobalt demand in the Americas wasn't far behind Europe in 1994, with consumers there taking in 5,775 mt-8 percent more than 1993 demand of 5,329 mt. If cobalt demand continues to rise, new supplies will be brought to market through "a seemingly endless list of new cobalt containing projects," which could add 19,000 mt of supply by 2000, Clark said. In the near term, however, "the market is balanced," he concluded.
LEAD and ZINC
Prices for both lead and zinc have remained within a fairly narrow trading range this year—especially when compared with the other base metals traded on the LME-noted market observers participating in the lead/zinc roundtable held Sept. 21 in Chicago.
Program comoderator Bud DeSart, director of purchasing for GNB Technologies Inc. ( Atlanta ), pointed out that following a 5 1/2-month high reached this past June, LME lead values have held relatively steady at around $600 per mt, or about 27 cents per pound. This is particularly noteworthy, he said, as lead inventories held on the LME-have continued to fall, dropping 123,000 mt between the end of December and mid-September.
Zinc likewise has shown relatively little price movement over the course of 1995, despite a similar drawdown in its LME held stocks. Roundtable comoderator Larry Parkinson, vice president and general manager of Interamerican Zinc Inc. ( Adrian , Mich. ), observed that LME stocks have been reduced by some 37 percent since the start of the year, while overall world zinc consumption held firm through midyear. But prices have, so far at least, failed to react on the upside, he noted.
Consequently, both moderators wondered aloud whether these two important base metals were undervalued, and if not, why? Based on these introductory remarks and a further review of market fundamentals, the message from the session was clear: Look for higher lead and zinc prices ahead.
Lead's Sound Fundamentals
Western World lead consumption increased from just under 4.2 million mt in 1986 to 4.79 million mt last year, "the greatest level of lead usage ever," according to Lou Magdits, raw materials manager for Doe Run Co. ( St. Louis ). And this year, total lead consumption will be higher still, he said, pointing to a figure of 4.85 million mt.
The United States has led world lead growth since 1992, when the domestic market began to recover from what Magdits called a “consumption valley.” Indeed, U.S. lead use, propelled by automotive replacement batteries, has more than recovered from that valley: Last year’s lead usage increased by nearly 10 percent over 1993’s to hit 1.53 million mt, surpassing previous highs set in 1977 and 1978. This year, Magdits expects U.S. lead consumption to reach 1.46 million mt.
These strong U.S. growth rates, however, are a contrast to the declining lead activity seen in Europe and Japan in recent years, he said. Western Europe 's lead consumption, for instance, dropped nearly 15 percent over the past three years and has seen only slight improvement this year, Magdits noted, blaming political and economic upheaval in Eastern Europe for the decline. Japanese lead consumption has also fallen by nearly 15 percent from its peak levels, he said, pointing the finger at a drop in Japanese new car production as well as displacement of battery production from Japan to "lower cost areas such as Malaysia, Thailand, and China."
Turning to supply, Magdits reported that overall Western World refined lead (metal) production peaked in 1989 at 4.59 million mt. "It has declined modestly since then," he remarked, citing a drop of 140,000 mt between 1989 and 1994. Western World production this year is expected to reach 4.45 million mt, he said.
U.S. production mirrors and magnifies this decline, according to Magdit’s statistics, which show that primary domestic production plunged from548,000 mt in 1981 to approximately 335,000mt last year.
Although worldwide primary lead output has indeed slipped, secondary lead production continues to grow, he reported. In fact, he noted, while secondary metal supplied only 30 percent of the lead consumed throughout the world through most of the 1960s and 1970s, today its share is 50 percent. And in the United States , secondary sources supply 73 percent of total domestic lead consumed, Magdits reported.
Despite these increases in secondary production, they have not been enough to offset cuts in primary output over the last few years, he said. On the other hand, he noted, the effects of these declines have been mitigated by C.I.S. and Chinese exports as well as lead sales by the U.S. government through the Defense Logistics Agency.
Looking ahead, Magdits projected that secondary lead's share of the market will grow further, especially in Western Europe, due to the introduction of new spent-battery deposit regulations, expanding vertical integration by battery manufacturers, and reductions in existing and planned new mine production. These forces, he believes, will prompt more smelters to convert from ore-to scrap-fed operations, with the effect of increasing the demand for lead scrap in Europe .
The U.S. market, in contrast, has seen, seasonally at least, generation of scrap batteries expand faster than the ability to consume them, Magdits said. As a result, the domestic secondary industry has continued to see rationalization, he pointed out, and today there remain active only nine companies operating 17 plants.
In summary, Magdits predicted that relatively low lead supplies will remain a feature in the world market, with the Western World supply situation moving from the surplus of 1993 and the “modest” shortfall of 1994 to larger statistical deficits this year and next. Thus, the “mildly bullish” forecasts being offered for LME values of 30 to 35 percent per pound next year appear to be on target, Magdits suggested, and domestic premiums over the LME for primary lead “should remain at high levels.”
Electric Vehicle Promise?
Lead’s largest end-use market, the lead-acid battery, could be in for a big boost by way of electric vehicles, according to Mark L. Dockser, vice president of Solectria Corp. (Wilmington, Mass.), an electric vehicle manufacturer, who spoke at the roundtable on the lead battery’s prospects in this sector.
While admitting that electric cars will essentially remain a niche market through 1998, Dockser predicted a veritable demand explosion round 2000, resulting in significant market penetration—greater than 10 percent of the domestic market—by 2005. State mandates, he maintained, will pave the way.
Lead-acid batteries will remain the first choice among electric vehicle manufacturers for the foreseeable future due to their relatively low cost and recyclability, said Dockser. Eventually, however, new developments could threaten lead's dominant position, with the principal competition likely to come from nickel-cadmium, nickel-metal hydride, and lithium-polymer batteries. But, he said, "lead-acid will not face serious competition until after the turn of the century."
Currently, Solectria's most popular model is a converted Geo Metro, which is powered by lead and has a 50-mile range between charges and a price tag of $25,000 to $30,000. The car's batteries can be charged overnight, have a 12-to-18-month life span, and cost about $2,000 to replace, he noted. In addition, Dockser claimed, its operating costs are competitive with internal combustion engine-driven cars.
Zinc: ‘Just Around the Corner’
“Zinc’s day is just around the corner,” suggested Dan McNeill, vice president of Zinc metal for Noranda Sales Corp. (Toronto), following his detailed examination of current developments in the world zinc industry.
Zinc prices on the LME started off the year above 50 cents per pound and have since held within a tight trading range between 45 and 50 cents, he noted, saying this relatively “stagnant” zinc price has “masked” more constructive actual supply-demand fundamentals. He pointed out, for example, that LME and producer zinc stocks, which stood at 15 weeks’ consumption as of October 1994—a peak he attributed to C.I.S. and Chinese exports—have steadily declined. In fact, he said, while stocks are still “fairly high,” they are expected to end up registering a drop of some 500,000 mt between October 1994 and the end of this year.
Next year, McNeil predicted, the Western World will see continued drawdown of zinc stocks, with the stock/consumption ratio falling to three to five weeks’ consumption. At that level, the market will be vulnerable to sharply rising prices, he suggested, targeting 1997 and 1998 for this manifestation.
As for zinc consumption, McNeill placed Western World growth at 5 percent per year for 1994 and 1995, and forecast another 4-percent jump in 1996. Growth in U.S.consumption, however, will probably be only 1.6 percent next year, he said, noting that even so, the United States will have to import 900,000 mt of zinc metal to meet domestic demand.
Zinc production will rise only marginally next year, according to McNeill, but C.I.S. and Chinese exports will increase. The net result, by his estimation: a 1996 world market deficit of 344,000 mt, which will stimulate stock reductions by producers, consumers, and merchants during the year. This would then set the stage for steadily rising zinc prices over the next three years, he said, forecasting the LME price to average 53 cents per pound next year, 65 cents in 1997, and an "extraordinary" 75 cents in 1998.
A Gander at Galvanizing
The worldwide hot-dip zinc galvanizing industry has annual gross sales ranging between $850 million and $1 billion, according to Richard L. Brooks, president of Duncan Galvanizing Corp. (Everett, Mass.), who noted that the greatest concentration of these sales came from Europe, where galvanizing is clearly the process of choice for making long-lasting steel. The United States has lagged behind, he said, pointing out that Europeans use galvanized steel "probably 30 to 40 percent more than we do in North America."
The reasons lie in competitive cost pressures plus "abundant supplies of top-quality steels" in the United States, he said, which have retarded the financial and technical incentives that have boosted galvanizing in Europe. Yet, galvanizing appears to be steadily gaining favor on this side of the Atlantic , according to Brooks.
Turning next to raw material costs, Brooks stated that zinc represents between 15 and 40 percent of a galvanizer's costs. As a consequence, his firm uses a number of strategies to minimize exposure to price volatility, including use of LME zinc options, contractual agreements with suppliers, and unhedged metal held in inventory.
Brooks observed that volatility is also reflected in prices paid for ash and dross sold by galvanizers to scrap processors for recycling. He suggested, however, that greater price stability for the industry could be achieved if recyclers would "guarantee" the generators a price that would remain a constant percentage of the purchase price of zinc, which he said could also lead to greater zinc price stability overall. "Price stability at the back end of our process is just as important as the front end," he emphasized, though he did not offer any similar suggestions for suppliers of slab zinc.
PRECIOUS METALS
Bullish forecasts for gold and silver in 1995 haven't really played out so far, noted moderator Griff Martin, president of Martin Metals Inc. (Los Angeles), as he opened the precious metals roundtable in New York City on Sept. 21. And with the end of the year closing in, he said, "the prospect for $400 [per troy ounce (t.o.)] gold and $6 silver is fast dimming ... or is it?"
Many others at the roundtable wondered the same, and speakers suggested some answers to this and other questions about precious metal trends.
Financial Factors Limit Gold; Silver Stocks Slide
Addressing the issue of gold and silver markets, Ronald Spurga, vice president of ABN -AMRO Bank (New York City), first took a look at broader economic trends, particularly the "unexpected jump in industrial production in August—the best performance in eight months."
August’s performance was an encore to July's, he added, pointing out that these two successive months of industrial output growth suggest that inventory overhangs at manufacturers may be on the way out. Besides this sign that the economy is taking steady-strides forward, Spurga reported, are the forecasts of some economists who "have predicted that lower mortgage rates will continue to propel housing starts, in turn driving construction and the output of plumbing, heating, and lumber products"—thereby continuing the forward trend.
On the other hand, consumers didn't buy much in August, Spurga noted. Perhaps it was too hot to shop, he suggested, but then stated, "Given the absence of a clear sign that consumers are ready to spend, it's difficult to conclude that the economy is really booming."
So what does this economic picture mean for gold and silver?
"We at ABN -AMRO Bank are taking the chicken position that gold will tread in a $370-to-$415-an-ounce range over the next three months," Spurga said, identifying several key factors determining the market's direction. For one, if the economy overheats and interest rates rise, it will attract foreign investment, forcing the dollar to appreciate against the yen, he said. "As the yen slides, Japanese precious metal prices denominated in yen begin to soar. A falling yen raises the price of gold for Japanese investors, and even now Japanese investors and jewelers are buying less gold."
Another ingredient in the mix is new gold hedge programs instituted by mining companies, especially in South Africa , which "will lower the top end of gold's trading range," said Spurga.
For silver, Spurga offered a forecast of $4.50 to $6 per t.o. over the next three months. His explanation: "The world is not really short of silver, it just over-accumulates at various locations at various times ... but Comex stocks are now at their lowest level since December 1988"—down from 259 million t.o. last year to 152 million t.o. at the end of August. “We believe part of this shift reflects material being shipped ultimately to India , but India becomes extremely price-sensitive when silver goes over $5.60 per ounce."
Spurga noted that reports occasionally pop up of various funds and investors suddenly "rediscovering" silver. "Each 'rediscovery' may cause a temporary spike upward in the silver price, but then reality sets in and the speculators move on to a more promising arena," he said in closing.
Autocats Lead PGM Promise
The roundtable also featured a review of the market fundamentals affecting platinum-group metals (PGMs). Leading this discussion, Ellen Zadoff, North American market research manager for Johnson Matthey (Valley Forge, Pa.), emphasized the role of automotive catalytic converters in the platinum, palladium, and rhodium markets, pointing out that recovery of PGMs from autocats is on the rise, as is the PGM-content of the emission-control units. In addition, she reported that increasingly stringent emission standards in the United States are prompting manufacturers to increase PGM loadings. Plus, emission controls are spreading to other parts of the globe, boosting PGM catalyst sue in Argentina, Brazil, Mexico, and elsewhere, she noted.
On the downside, the job of purchasing scrap autocats—or, more accurately, of estimating their value—is going to get "a lot more difficult" because of the increasing variety of PGM loads on board, she said.
With this application information as a backdrop, Zadoff explored the overall market for platinum, which saw demand up 11 percent in 1994 to a record 4.1million t.o., according to Johnston Matthey figures. All demand sectors expanded, she said, noting that the most telling rises came from autocat and jewelry applications, which together accounted for about 75 percent of platinum used last year. The latter sector saw a boost from growing Japanese demand for platinum jewelry.
Platinum supplies also rose last year—by 3 percent—due largely to increased Russian exports, Zadoff said. “As platinum prices increased in 1994, the Russians increased sales,” she explained, noting that a large proportion of the Russian material apparently came from stocks, since the country’s production was reportedly less than half of its peak level reached in the late 1980s.
Another source of supplies came from recovery of spent autocats—a market segment that has, Zadoff reported, climbed steadily since 1985 to become a “very important” contributor to today’s overall supply. She cited several reasons for strong growth in North American autocat recovery: the scrapping of more post 1975 cars (earlier cars didn’t have catalytic converters); increased collection of post-1983 converters, which have higher PGM loadings; and the decrease in auto owners removing (and discarding) autocats from their cars—a common problem years ago, according to the EPA.
Zadoff added, “I think it’s important to say that we believe that there will always be a certain percentage of catalysts that slip through our system. Leaks can occur in a lot of places.” These include new U.S. vehicles stolen for export, a trend that reportedly affected about 350,000 in 1994; old cars that end up in back yards or move to Mexico which reportedly represents 5 to 15 percent of retired U.S. cars; and vehicles that are flattened, then shredded with converters intact. “In total, we estimate that 40 to 50 percent of all platinum originally put on cars is currently not recovered,” she said.
Switching gears to discuss palladium, Zadoff reported that demand rose by 13 percent last year, but supplies grew faster, at 23 percent. Russian supplies grew most of all—rising a whopping 38 percent—which as with platinum, she attributed to "a heavy drawdown of government stocks." South African palladium sales also increased due to stock drawdowns and some production increases, she said, noting further that palladium recouped from used catalysts was up 20 percent last year, led by U.S. and Japanese collection increases. The market result was a large surplus, she said. "But the price strengthened, leading us to believe that much of this surplus was held off the market by fabricators and investors."
Electronics is palladium's most important demand segment, she noted, and it rose 11 percent in 1994, led by use in capacitors. "Most of this growth is coming from newer electronic applications, such as mobile phones, fax machines, computers, and automotive applications," she said. Although palladium has suffered some substitution at the hands of nickel, this has been largely limited to low-end applications like toys and cassette recorders, a loss outweighed by the rapidly growing need for capacitors in general, Zadoff said. Plus, she explained, while the dollar-based palladium price has increased to near-record levels, the strong yen kept prices offered to Japanese electronic manufacturers well below the level considered a substitution threshold.
Autocat use of palladium grew even more significantly—jumping 35 percent last year to reach nearly 1 million t.o., thanks in large part to European emission rules, which essentially dictate use of palladium-rich catalysts, she said. North American palladium demand in autocats showed a more moderate increase, she said, noting, however, that further legislation, led by California , is likely to accelerate demand.
Catalyst demand pushed use of rhodium up in 1994 too, Zadoff noted. But similar to palladium, she said, supplies grew faster, both from mine production and recovery from late-model cars equipped with rhodium-bearing converters. The result: a surplus of 34,000 t.o., according to Johnson Matthey's figures. For 1995, it looks like exports fromRussia are "significantly less" than last year's, said Zadoff, but the effects of this are not yet clear.
Rhodium demand is expected to rise further in years ahead, she said, pointing to some state emission program rules that now test vehicles at speeds of up to 80 miles per hour, a strain that apparently requires increased PGM loadings, especially rhodium, in autocats.
Trends Have Refiners Struggling
When Ravi Nadkarni, vice president and general manger of Metalor USA Refining (North Attleboro, Mass.), spoke at the precious metal roundtable 10 years ago, he recalled, addressing this year's audience, "I saw three trends in the precious metal industry: shrinking margins for refining, a shakeout in the industry and in the refining segment, and new entrants into the business." These trends have indeed panned out, he noted, and "are still continuing today."
Nadkarni pointed to an interrelationship among these trends, suggesting that industry changes and realignments have resulted from shrinking margins. Beyond excess capacity, the problem can be traced to the early 1980s he said, when prices for gold, silver, and PGMs were at historic highs and the industry was changing its pricing structure—relying more on "metal accountability" rather than treatment charges for payment terms. "A reliance on treatment charges insulates the refiner from fluctuations in metal prices or metal content, while a reliance on metal accountability has the opposite effect," he explained, so when prices swung again, refiners were pinched, and slim margins have frequently plagued them since.
These have also been far-reaching, he noted. Almost every company in the high-grade refining segment has been affected, he said, adding that the picture is much the same in the low end segment, with many of the larger players now out of the game, especially in the United States . "Thus, much of [the scrap] flow is now essentially out of the U.S. , either to Canada or Europe ." As for the future, Nadkarni said, "While restructuring on the manufacturing side is almost complete, it is very much an ongoing story on the refining side."
Nadkarni also addressed several newer trends and their effects on the recycling of precious metal-bearing electronic scrap. First, he noted, the precious metal content of electronics continues to fall. It is already at "such a low level" that processing a lot of electronic scrap, including circuit boards, can only be justified "if it is the lowest-cost environmentally acceptable disposal strategy.”
A second notable shift affecting precious metal recovery Nadkarni identified relates to sampling methods. There traditionally been two approaches to sampling, he said: One involves processing the whole lot to produce sample bars that are then used for settlement, while the other, only a sample of the lot is processed, giving this method “quite a few cost savings.” The full-lot approach is considered more reliable for sampling precious metal-rich scrap, he explained, pointing out that with today's leaner electronic components, however, sampling small batches should produce accurate results.
Another pressure on electronics recycling Nadkarni identified is the potential for international rules to ban trade of precious metal-bearing scrap. "Ten years ago, I anticipated a problem in this area, but even in my worst nightmare, I did not anticipate the Basel Convention and its potential implications for our industry," he admitted, callingBasel implementation "a battle between common sense ... and way-broad definitions of what is waste and what is recycling." Unfortunately, he said, "common sense appears to be losing, at least, temporarily.
In addition, Nadkarni discussed what he called “an insidious force” in some parts of the industry today apparently undertaken in the effort to counteract low margins: “the ‘marking down’ of assays and/or weights by generating what are euphemistically called the ‘eyeball assays’ so that the refiner unofficially expropriates metal that belongs to the customer.” To ensure against this, he encouraged precious metal recyclers to determine the metal content or their material before shipping it for refining.
Glass
Both the glass-container and fiberglass industries are looking to boost their supplies of consistent, clean glass cullet, reported speakers at the Sept. 20 glass roundtable inChicago . And though their processes and products differ, the two industries have similar needs and problems related to glass recycling, the roundtable revealed, especially when t comes o securing sufficient supplies of scrap glass that meets specs.
More Better Cullet
In a team presentation, two representatives of the Glass Packaging Institute ( Washington , D.C. ) covered cullet issues from a container maker's perspective: Clifford Klotz, vice president of government and environmental affairs for American National Can Co. (Chicago), and Jerald Bannister, director of recycling/public affairs for Owens Brockway Glass Containers ( Toledo , Ohio ).
"You can supply something the glass container industry demands," Bannister told the audience. "We need more quality post-consumer cullet. Our plants aren't getting enough."
Glass container makers have dramatically increased their use of cullet over the last decade, he noted, identifying the drive to recycle as a response to several factors. For instance, Bannister pointed out, not only is cullet generally less expensive to purchase than the virgin materials it can replace, but, because scrap glass melts at a lower temperature than the virgin mix, recycling saves energy and extends furnace life. As a further incentive, he said, "The public, our customers, and the government expect us to recycle more."
The problem is, "we are having a difficult time increasing our use of cullet because not enough quality material is available," Bannister stated. Following up on this remark, Klotz explained, “To the glass industry, quality comes down to four words: color-sorted, contaminant-free.”
The first requirement, he noted, has pushed many glass manufacturers to accept only cullet that has been sorted into the three major bottle colors: clear (also known as flint), amber and green. Blue glass, which has seen a recent surge thanks to the growing popularity of mineral water and other “new age” beverages, he said, as a rule should be included with green glass unless present in large volumes. In any case, he advised recyclers to check their buyers' preference in sorting this material.
Although mechanical processes are being developed to automatically color-sort glass, no process is yet cost-efficient, Klotz noted. As a result, he said, glass makers are in favor of public recycling programs that color sort glass at curbside.
As for contaminants, Klotz pointed out that, for glass packaging manufacturers, anything that is not soda-lime glass—which is make from sand, soda ash, and limestone—is a contaminant. Ceramics, crystal, lab glass, heat-resistant cookware, and light bulbs—all contain different ingredients and, if accidentally introduced in new container glass production, could cause not only faulty containers, but also damaged furnaces, he explained. Stone and metal are also particularly worrisome contaminants, Klotz said.
While cullet beneficiation processes that turn scrap into furnace-ready feed attempt to remove contaminants, and such processes are improving, "there is not yet any proven technology to efficiently remove ceramic or stone once it has become mixed with glass," said Klotz. Therefore, keeping contaminants out at step one of the process is the key to ensuring quality.
Bannister touched on ways recyclers can manage these quality issues, beginning with the basic need to keep each color of glass containers in a separate bin. And, he said, "You must have a concrete pad so stones and gravel do not get mixed with your recyclables. Storage of glass on the ground or on asphalt is not acceptable." Furthermore, he advised glass recyclers to inspect incoming material carefully and simply reject loads containing contaminants.
Taking precautions to avoid contamination should extend to shipping as well, Bannister said, noting the need to inspect loads and the tarps that will be used to cover the loads prior to shipment. As a related matter, he pointed out that while crushing glass can help maximize shipping weights, glass buyers may be wary of glass crushed to small because it could conceal contaminants.
Turning to market issues, Klotz reported that there are 69 glass container plants in the United States , but most buy their cullet from third-party regional beneficiation plants rather than directly from municipalities and scrap processors. No matter who’s doing the buying, however, he said, "In virtually every area of the country, clear glass is in short supply. And in many areas, our industry cannot get enough amber glass." Even demand for green glass, which has long suffered an imbalance due to vast numbers of imported wine, beer, and water bottles, is improving as domestic manufacturers fold more green cullet into amber batches and foreign container makers try to recover more material in the United States , Klotz noted.
That's good reason for scrap recyclers to get into glass, Bannister suggested, noting, "Potential sources of glass may be right under your nose and you never realized it. Present customers who supply you with other recyclables may also be interested in adding glass bottles and jars if they know you will accept [them]." Restaurants and bars in particular can provide a "mother lode” of glass, he said, pointing out that these sources would be likely to collect the material if they knew their local scrap recycler would buy it. “But the biggest potential for glass collection comes by tying in with your local recycling programs,” he noted.
One factor that could discourage would-be glass recyclers is the simple fact that scrap glass does not command big-ticket prices, said Bannister, noting that its chiefcompeting material is sand, one of the most abundant materials on earth. But he suggested that glass is a relatively stable commodity for which there is dependable, ongoing demand.
As to whether glass provides a worthwhile opportunity for individual recyclers, "a great deal of your success ... will depend upon your proximity to a processor and the cost of moving cullet," he said, explaining that scrap glass is typically shipped by truck, although rail may also be an option. For some, the distance will be too great; but for others, glass could present "a new profit center," Bannister said.
Start-up information on glass recycling, as well as details on local public sector developments and assistance in promotion is available from the regional offices of the Glass Packaging Institute, Bannister noted in closing.
Fiberglass Makers Get Into Gullet
"For many years, the fiberglass industry avoided the use of scrap glass," said Robert Vernetti, project manager of the building insulation division of Schuller International Inc. ( Denver ), and one of a pair of fiberglass industry speakers who addressed the roundtable. The supply was variable, the quality generally unknown, and no detailed specifications existed, he explained.
Thus, Vemetti said, fiberglass makers figured, why take on the burden of these technical problems? "In fact," he added, at times some fiberglass manufacturers did not even reuse their own scrap glass."
The situation has changed since then. Because energy is a major cost in fiberglass production and cullet use saves energy, the energy crisis of the 1970s pushed some firms to reconsider scrap glass as a feedstock, explained Joe Kaplan, a manufacturing support engineer for Owens-Corning Fiberglas corp. ( Toledo , Ohio ), which began to use “purchased cullet” for the first time in the mid-1970s. The company's consumption of scrap glass has increased steadily since, he said, and now accounts for 20 to 30 percent of its glass use. In fact, he reported, the manufacturer expects to consume 330,000 tons of purchased cullet this year.
The recycled-content mandates of the 1990s represent the next major influence pushing fiberglass makers into recycling, the speakers said. For example, Californiaimplemented rules in 1991 requiring 10-percent recycled content in insulation, a figure that rose to 30 percent this year, Vemetti noted. And in 1994, he added, the EPA instituted minimum recycled-content rules for insulation purchased by the federal government. Meanwhile, public pressure to recycle has added incentives to manufacturers eager to be—and be perceived as—responsible environmental stewards, said Kaplan forthrightly: “The final reason why Owens-Corning uses cullet is marketing. It is ‘in’ from a marketing perspective (as well as many others) to be as ‘green’ a company as possible. We want to be environmentally sensitive and obtain some marketing advantage by touting our environmental friendliness.”
Of course, both speakers noted, cullet use can also trim raw material costs for fiberglass makers.
"Now that we accept the reasons to recycle—mandates, possible economic benefits, and a positive public image—the technical hurdles must be overcome to fully capitalize on this program," Vemetti said.
Putting Cullet to Use
Today, Owens-Corning uses mostly flat-glass cullet, such as window glass, and "would probably use even more if it were available, but the market is such that most of the available sources of flat glass cullet are utilized, basically sold out," said Kaplan. "Container glass cullet is more readily available."
Sizewise, Owens-Coming accepts two different particle ranges, he noted: l 1/2 inch and those 12-to-100 mesh. (The two sizes correspond to two different types of material handling systems employed by the company, he said.) Schuller, meanwhile, prefers to purchase cullet in a -12 mesh size for reasons associated with material handling and easy blending with other ingredients, Vemetti said.
Neither company processes, or beneficiates, its cullet in-house, the speakers reported, pointing out that their companies prefer to focus on their core business and rely on outside expertise for beneficiation. As a result, Kaplan noted, delivery is a key issue. "We maintain very low inventory levels of raw material in our facilities. We depend on our suppliers to get the raw materials that we need to us when we need them."
Of course, the fiberglass makers also rely on their cullet suppliers to ensure that the glass meets quality specs—which is no easy trick. "We use a fairly low-cost grade of cullet," Kaplan said. "But our specifications, especially the chemical specifications, require a fairly high degree of attention and processing. As a result, we have somewhat of a conflict that has been obvious to us for the last several years: Our cost structure suggests use of the lower grades of cullet, but our specifications and other criteria require a highly consistent and clean material. Very few processors have been able to provide the material we need at a cost that makes sense for us to utilize it."
Ceramics, stones, and heat-resistant cookware present problems to fiberglass makers just as they do for glass container manufacturers, he explained, noting that in addition to failing to melt and possibly damaging furnaces, these contaminants can plug holes in the "spinner" during "fiberizing."
Consumers of flat glass also face contaminants in the form of wires and metallic coatings from automobile windows and the like, Kaplan noted, and Vemetti pointed out that several metals are particularly troublesome. Aluminum, for one, he explained, acts as a reducing agent, making green glass slightly amber, changing temperatures, and causing process inefficiencies. Lead foil, meanwhile, is "a poison to the platinum components in our process and can cause hot glass to be dumped all over the factory floor," he said, noting that iron, steel, copper, and brass can also drill leaks in furnace bottoms.
Added to the list of troubles are potential contaminants like plastic rings and labels, which can pollute and cause color and chemical changes, and moisture, which can complicate material handling and make extraction of other contaminants more difficult, Vemetti said.
Because of these issues, the future of glass recycling via fiberglass is clouded, said Vernetti in conclusion. "There is enough demand for recycled material in the marketplace ... as long as supply, quality, and cost needs are met. As a fiberglass manufacturer, we applaud the efforts of recyclers to meet our needs today. The progress over the last three to four years is amazing. However, if the quality and quantity issues are not resolved more quickly than in the past, there will not be much of a future in this recycling activity." The future, he said, depends on cooperative efforts between recyclers and their consumers.
So far, so good…The world economy set a firm if not vibrant backdrop for commodity markets as recyclers gathered this fall for ISRI’s annual series of roundtables. And the prognoses for most of the scrap-related commodities examined appeared positive moving into ’96.