Ferrous

Coaxing more scrap across scales and into processing facilities remains the biggest challenge for many recyclers, who are eager to take part in markets that remain profitable.

The high pricing of the last two years has helped spur equipment purchases to boost productivity at some locations, and the investments are paying off—as long as enough feedstock can be acquired.

"Generation is slowing down a little bit," reports one Midwest recycler. But he then notes that the high scale prices for not only ferrous scrap but aluminum and copper as well are keeping peddlers and small dealers active.

"Scrap still comes out of the walls when prices go up," he remarks. "We’ve had a sheriff thank us because people are hauling up things that they or someone else dumped in creek beds years ago."

The downside of attractive scale prices has been the worldwide increase in the theft of metals from construction sites, abandoned buildings and any number of other places (including sewer covers and power lines), as well as an increase in armed robberies at scrap yards. (See "Book ’Em," starting on page 230 of this issue.)

In the Western United States, a shredding plant operator notes that while structural steel from demolition and construction projects can be found, competition for auto bodies, appliances and other forms of scrap to feed his shredder is fierce. "Not question about it, it’s tough to find enough scrap right now. You’ve got to really work," he says of the current situation.

What the year will bring in terms of industrial scrap generation also holds some mystery. As happens in the early part of each year, automotive sales and production figures are being watched closely by recyclers who take in auto-related stamping and machining scrap. There are fears in some parts of the country that a consumer shift away from SUVs and large pick-ups will prove harmful to scrap generation levels at some once-thriving production plants.

If the average vehicle size becomes significantly smaller in a short span of time, that will not only generate less scrap, but would likely result in a reduction in some grades of steel produced in the domestic market, as well.

Such a situation could strike a balance in the overall market, but it would nonetheless have an impact on recyclers at specific locations—especially if the vehicle shift results in market share gains for some producers stronger in the compact car category (such as Honda and Toyota) over others who have been bigger players in the SUV segment, such as GM and Ford. (For more on this subject, see "Southern Migration," starting on page 68.)

While automotive trends catch the attention of recyclers domestically, on the international front the state of the Asian steel industry will remain critical. The demand for melting stock in China remains impressive. In 2005, that nation imported some 1.5 million tons of shredded scrap from the United States, according to U.S. Commerce Department figures.

In terms of percentage growth in this export market, India is emerging as an important destination. Its 2005 volume of ferrous shred imported from the United States jumped to 460,000 tons, up by some 250 percent from the 2004 figure of 130,000 tons.

Overall, the early returns on 2006 are positive. Recyclers may be wondering for just how long such demand and pricing can continue, but there is also a sense that as long as Asian economies are growing at warp speed, scrap will be a wanted commodity.

(Additional news about ferrous scrap, including breaking news and consuming industry reports, is available online at www.RecyclingToday.com.)