Can-Do Attitude

Evermore Recycling LLC, Nashville, Tenn., was formed in 2009 as a joint venture between two of the world’s largest consumers of used beverage containers (UBCs), Atlanta-based Novelis and Pittsburgh-based Alcoa. According to a press release issued by Novelis and Alcoa announcing the formation of Evermore, the independent company “is designed to create value by increasing efficiency, building stronger supply relationships and increasing recycling.”

Evermore is focused on acquiring UBCs, with a goal of working “to increase the quality of UBCs and decrease freight costs, inventory and administrative costs while generating other cost savings through more effective supply chain management.”

John Woehlke was selected as general manager of Evermore Recycling. Woehlke previously served as manager of business planning for Novelis beginning in 2003. In that position he was first focused on light-gauge products and then on can sheet.

Woehlke spoke with Recycling Today about the origination of Evermore Recycling and the company’s goal to improve the UBC recycling rate as well as its objectives of improving UBC quality while decreasing freight costs. 
 
Recycling Today (RT): How did Evermore Recycling originate?

John Woehlke (JW): Evermore originated in 2009 when both Alcoa and Novelis recognized a variety of inefficiencies and deficiencies existed and seemed to be growing in the UBC system.

RT: How is the company structured? What does Novelis’ slight majority interest in Evermore mean in concrete terms?

JW: Evermore is a limited liability company domiciled in Delaware. Novelis is a slight majority owner, and additional information regarding Evermore’s governance structure may be available from either Novelis or Alcoa.

RT: Please explain how a recycler might go about working with Evermore. Must recyclers meet any specific criteria to work with the company?

JW: We encourage all suppliers to contact their respective territory managers. The Evermore Web site (www.evermorerecycling.com) lists each territory manager and his or her contact information.

All recyclers are required to meet qualification criteria, including quality and other standards. Supplier locations previously qualified at Novelis will remain qualified at Novelis. Suppliers previously qualified at Alcoa remain qualified at Alcoa.

We are also going through a cross-qualification process for high-quality suppliers at Novelis and Alcoa to be cross-qualified at both. Middle-tier quality suppliers at one customer will require additional qualification to ship to the other. New suppliers go through initial qualification, just as they would have.

RT: Do you have examples of other criteria that you’re looking at beyond quality?

JW: Beyond quality there is also reliability. We have to look at how good the supplier would be in fulfilling their shipments.

RT: Do you feel the quality of UBCs collected for recycling has decreased in recent years? If so, what are the factors contributing to this decline?

JW: The quality of UBCs has declined in recent years, in line with the growth of single-stream recycling. The commingling of large amounts of nonmetal materials, such as paper and plastic, inherently means some contamination carries into UBCs, because sorting is rarely 100 percent effective.

In general, the MRF (material recovery facility) UBC segment represents a markedly lower value proposition and separate tier.

That being said, Evermore has some MRF supplier locations that have better quality than some deposit locations, so high quality can be achieved at MRFs.

Typically we see that a combination of automated equipment and downstream manual sorting, combined with high supplier standards, achieves really good quality.

I think what concerns me about some MRFs is that they prioritize revenue maximization over quality. It is all about total revenue throughput.

I can’t argue with someone trying to maximize revenue, but quality affects material value. What we would prefer to see would be something like wider gaps between eddy currents and deflector plates and then having the fallout material run through a second pass.

I think in addition to difficulties associated with single-stream recycling, high commodity values have, at times, led to lower quality. That is definitely secondary to the single-stream issue. There is always a risk when material value increases because quality is a little less of a focus. Some companies have exhibited less of a sorting propensity.
I think some of it may also be that when material value is high, and mills downgrade lower quality metal, such penalties are not a sufficient economic incentive because revenue is still higher than historical levels. But when commodity values are low, quality discounts have a bigger impact on revenue.

The first and biggest structural part is having a focus on material quality and not just throughput. The second part is that when commodities get really high like aluminum and copper and nickel are today, there is a little lapse in focusing on the quality because suppliers are much more profitable at high material revenue prices. I don’t think the second part is necessarily solely a supplier issue as much as often an individual recycler issue—the people who bring in cans and other scrap metals for recycling.

RT: How does Evermore intend to use freight optimization to help its suppliers?

JW: Optimizing freight is important in reducing the structural costs for recycling UBCs. The software and methodology are somewhat proprietary, but essentially, with more locations, Evermore can choose destinations and apply load tendering that minimizes freight cost more efficiently than both companies were capable of achieving individually. This optimization helps Evermore become the most efficient alternative for suppliers.
Excess costs, whether freight or other costs, are bad for suppliers because they inhibit the ability of consumers to offer higher value.

Both freight optimization and direct purchasing help Alcoa and Novelis offset the rising costs of labor, health care, energy and other costs.

RT: In what ways do you expect Evermore and recyclers and processors to benefit from this direct relationship?

JW: A lot of the same reasons apply with the prior answer about how reducing structural cost is good for the entire system. In addition to that, direct relationships also strategically align the two most core participants in the supply chain, collectors and consumers.

RT: To what extent have recyclers or officials expressed concern about the formation of Evermore from a market share dominance standpoint? How does Evermore respond to concerns about market share dominance and the potential for an anti-competitive environment?

JW: Evermore was founded and operates on strong pro-competitive tenets:  creating increased efficiency, building stronger direct relationships, improving quality and increasing recycling. All of these core tenets are in the best interest of suppliers.

RT: Has anyone raised concerns related to market share dominance?

JW: I am not aware of any.

RT: Evermore is originally beginning with brokerage services. Do you expect the company will add processing capacity as well?

JW: I don’t know if I would call it brokerage. Brokerage implies sales to parties other than Alcoa and Novelis, whereas this is purchasing solely for Alcoa and Novelis.

But I would expect some natural growth in processing capacity to be along the lines of a cleaning facility. Equipment downtime is very costly for mills, so a cleaning facility coincides with what I think is perhaps the industry’s greatest need—improved quality.

RT: How will you determine if you add a cleaning facility and what kind of time line would you follow?

JW: We would look at the quality ratings the mills generate for the suppliers and decide if there was enough volume to warrant a cleaning facility. At this point, I would say there probably is. But we would need to look at how much it would cost to build and whether it would pay itself back. I would say that we would probably make such an investment assessment within the next 12 months. If we invested capital, the lead time from breaking ground to completion is probably less than 12 months.

RT: How does Evermore plan to help reach the aluminum industry’s goal of increasing the UBC recycling rate to 75 percent?

JW: Most of the consensus is that the recycling rate is at 50 percent. I think recycling rates are tough to pinpoint to an exact number. I differentiate manufacturers’ reclamation rates from the post-consumer recycling rate. When you think about the post-consumer rate, it is typically lower than the manufacturers’ reclamation rate because the U.S. is a net importer of UBCs.

When I think about increased recycling as it pertains to the manufacturers’ reclamation rates, in the short term, Evermore plans to broaden its supply chain in North America and globally.

Relative to increasing consumer recycling rates, changing consumer and commercial behavior is a tremendous challenge and rests more in the medium- to longer-term window. It is one that requires significant joint efforts and multiple approaches in order for all stakeholders to be successful.

Shared responsibility includes the entire value chain, from consumers, to recyclers to mills to can makers and beverage companies as well as government. Some early stage activities are underway to assess common interests and shared funding.

Evermore’s specific role will be more tailored toward continued education, sponsorship of collection initiatives and the improvement of the recycling infrastructure, both through investment and collaboration.

John Woehlke serves as the general manager of Evermore Recycling, Nashville, Tenn.