Absorbing the zorba

Many operators of auto shredding plants have their backgrounds in the iron and steel scrap sector. Nonetheless, most have invested heavily in the past two decades to harvest and then upgrade the nonferrous scrap fractions of their shredder output.

By volume, aluminum-rich zorba remains the largest nonferrous, mixed shredded metal grade emanating from shredding plants in the United States, and price movements on the grade quickly can affect the bottom lines of metal recyclers.

The Washington-based Institute of Scrap Recycling Industries (ISRI) specification for zorba indicates it is “predominantly” aluminum but may also contain copper, nickel, stainless steel, tin, zinc, lead and magnesium.

The grade generally is not smelter-ready, meaning its destinations are most often either highly automated and technologically advanced specialty processing facilities in North America or overseas destinations where the sorting is (most often) undertaken by hand by laborers. In other cases, smelter operators can choose to add front-end systems to upgrade the material themselves.

At any given time, several factors combine to determine which type of destination will be more cost-effective. Before the end of this decade, a new factor could cause a dramatic change in the market.

The classification game

As with any other scrap grade, zorba is not a uniform product and—as with nearly every other scrap grade specified by ISRI—what it should consist of ultimately must “be subject to agreement between buyer and seller.”

Randy Goodman, a nonferrous metals trader with Greenland (America) Inc., based in the Atlanta area, says that beyond its metallic content percentages, zorba also can be defined by the size of the metal pieces comprising it.

If one divides zorba into three sizes—large, small and fines—Goodman says, the sizable buying market in China has evolved to treat these three subgrades differently.

All buyers in China, Goodman says, like the large fraction because it is the easiest to sort. However, he comments, “The smelters became the sole buyers of the large zorba material after they made large investments in sizing equipment and heavy media equipment. They were then able to eliminate 80 percent of their sorting laborers and are able to make furnace-ready material with mostly mechanized sorting.”

The next-size-down “small” fraction also has its buyers, he says, because “it can still be hand sorted but has two to three times the amount of [high-value] red metals in the mix.” Many of these buyers operate yards in the Guangdong Province of south China.

As the labor shortage has become more acute in south China, processors there are finding that the presence of copper and trace amounts of precious metals can help retain workers. According to one south China-based recycler, who prefers to remain anonymous, some mixed metals processing yard owners have decided to allow workers to pocket and essentially “skim” some red metals and precious metal pieces as a sort of ad hoc bonus, as long as that will prompt them to keep showing up for work.

The fines fraction does not yield these opportunities for hand sorters and thus has moved into different channels. In China, Goodman says, “The fines are exclusively the domain of the water table [density separation] yards.” He continues, however, “With Green Fence and National Sword, there has been a significant crackdown on water table yards without proper permitting (which is almost all of them). Many have been put out of business, but others are still operating.”

Goodman’s comment points to a trend that could be poised to bring widespread disruption to the zorba market: China’s regulatory attitude toward imported scrap materials.

A sorting technology provider, who also wishes to remain anonymous, says Shanghai-based Sigma Metals, one of China’s largest secondary aluminum producers, has shifted much of its sourcing to domestic Chinese scrap.

An April 18, 2017, pronouncement from China’s central government, and the swirl of rumors that has followed it, likely has China’s other major zorba buyers also considering what their options might be if China imposes a sweeping ban on formerly welcome scrap materials.

Regulating behavior

China’s central government has reviewed and approved a prohibition on imports of several types of yet unidentified scrap materials, according to the Brussels-based Bureau of International Recycling (BIR).

In an alert summarizing the announcement that was sent to its members, the BIR says the ban is being positioned as part of China’s “reformed solid waste import management plan.”

At ISRI2017 in late April in New Orleans, metal recyclers expressed concerns about which grades of scrap might be on the list.

Follow-up conversations between Recycling Today and traders and processors based in south China have identified mixed and shredded motors and unprocessed wire and cable as grades that could be affected soon—possibly by 2018.

In the first half of 2017, the National Sword initiative being undertaken as a cooperative effort by several Chinese government agencies has focused on plastic scrap, quickly and dramatically pinching the flow of containerized shipments into China.

By early April 2017, the China Scrap Plastics Association was reporting that some 5,000 containers of plastic scrap were stuck in the port of Hong Kong, unable to gain clearance (or affordable clearance without an exorbitant Customs fee) into the People’s Republic of China.

Metals recyclers say they are greatly concerned an equally grim scenario could someday confront them.

As of mid-May 2017, zorba remains on the move from North America to China, with major China-based buyers, including the Ye Chiu Group and Delta Aluminum, continuing to purchase the grade, according to the technology provider.

Discussions at ISRI2017 in April and at the BIR World Recycling Convention in May are likely to lead to delegations representing these groups (and government and industry allies they can recruit) to convince China that a sweeping ban is bad policy for at least three reasons: 1) It is a protectionist measure that runs counter to China’s ambition to attain World Trade Organization (WTO) market economy status. 2) It will cause hardship not only for recycling entrepreneurs and subsidized Resource Parks in China but also for upstream manufacturers of aluminum, brass and even automobiles and building products. 3) It will sour relationships with secondary raw materials suppliers who can choose where they sell their highly sought-after commodities.

Goodman is not convinced China intends to enforce a ban that will include mixed metals imports. “My thought is that China is doing what it thinks is needed to bring its environmental issues to the forefront,” he comments. “But China will not, in my opinion, cut off its nose to spite itself. They need the aluminum units. It is a vital part of their manufacturing sector. It is my opinion that you might see other items in the ‘class 7’ category [such as shredded motors] banned.”

Along with pricing changes to aluminum, copper and stainless steel, uncertainty in the largest export market likely will affect the way shredder operators calibrate their downstream nonferrous sorting systems throughout 2017 and beyond.

“My thought is that China is doing what it thinks is needed to bring its environmental issues to the forefront. But China will not, in my opinion, cut off its nose to spite itself. They need the aluminum units. It is a vital part of their manufacturing sector. It is my opinion that you might see other items in the ‘class 7’ category [such as shredded motors] banned.” – Randy Goodman, Greenland (America) Inc.

Techniques for the times

Aluminum pricing has been relatively stable this decade, though pricing and demand factors can affect where advanced sorting will take place to make the purest aluminum product possible.

Likewise, price movements in copper and nickel can affect how intensively shredding plant operators seek to isolate the maximum amount of copper or create a nickel and stainless steel-heavy zurik grade on-site.

Goodman says if a shredder yard has invested in induction sorting equipment to produce a zurik grade, it should run it in all market conditions. “Shredder operators who have modern induction sorting systems should always be using them,” he states. “If you invest a couple of hundred thousand dollars on these machines, you need to use them.”

He lists several reasons for his position. “Operators who turn them off often don’t ever run them well again,” Goodman says. Some zorba buyers may also act as a bad influence. “Those that listen to the ‘buyers’ that tell them not to run their [induction sorters] have bought the ‘snake oil.’ They will never get the full intrinsic value of that material that they should have received if they ran their [downstream systems].”

Goodman concedes one counterpoint: “The caveat is that there are a lot of older sensors out there that demand more maintenance than makes it worthwhile, and those yards might make the decision based on maintenance costs.”

Zorba that is not exported from the U.S. most often makes its way to specialty sorting facilities. These can be run by large scrap companies that operate multiple shredders or by independent specialty processors, such as Michigan-based Huron Valley Steel Corp.

Additionally, secondary aluminum alloy producers, such as Kentucky-based Audubon Metals LLC and Minnesota-based Spectro Alloys Corp., run their own separation processes upstream from their melt shops.

Regarding this segment of domestic zorba consumption, Goodman says, “The secondary aluminum smelting business in the U.S. has been very good for the past couple of years. One of the largest commodities that these smelters buy is twitch, which comes from the heavy media plant operators who use zorba as their feedstock. Therefore, they have been aggressively buying zorba for the past couple of years.”

In a sector where “scrap is bought, not sold,” shredder operators may consider the ongoing chase for auto bodies and inbound material as likely to remain the most time-consuming challenge when it comes to navigating the zorba market.

However, if China’s large-volume buying is scaled back, even the combination of domestic demand and emerging export destinations (See the sidebar, “Sorting Winners from Losers,” on page 57.) is unlikely to ease the disruption if a sudden import barrier is put in place by China.

For recyclers preferring a disruption-free 2017 and 2018, ideally the mixed metals shipping channel between the U.S. and China will remain navigable.

The author is editor of Recycling Today and can be contacted at btaylor@gie.net.