ISRI Show Sets New Standards in San Francisco

The 1998 ISRI convention, held in San Francisco, came at a time when the recycling industry seems to be in the middle of some significant changes.

A host of dynamics continues to affect the scrap recycling industry. New mini-mill startups are creating added demand. Some of the new mills have spurred adjacent processing yards. Others have caused processors to ship to wider coverage areas or are helping spur demand for scrap substitute materials.

The collapse of the Asian market also was an area of concern for many scrap companies, and was an area of significant discussion both in the hallways, on the exhibit floor and in several sessions.

With these changes afoot, this year’s program broke a number of records. According to Evelyn Haught, ISRI’s director of public affairs, the meeting had 157 exhibitors, a sharp increase from the previous year’s exhibitor total.

Attendance also set a record, according to Haught. "This year’s meeting had 3,400 plus registrants. We have never done that well before," she says

It’s not only the sheer number of registrants that was impressive, according to Haught. She notes that the feedback on the evaluation sheets distributed has been excellent. "I don’t know how we are going to top this show."

Workshops and seminars covered during the three-day program cut across many of the hot-button subjects of the day, including the merger mania that seems to be gripping the recycling industry

An issue of top interest for scrap recyclers continues to be the consolidation and merger activity that has been surging over the past several years. The topic was addressed in a session titled "Consolidation – More than a Trend." Paul Higbee, managing director for BT Alex Brown, a consulting and financing firm headquartered in New York City, explained to the standing-room only crowd that changes in the scrap metal recycling industry would continue over the next several years.

"There is no shortage of sellers," Higbee noted.

Backing his opinion that the scrap metal industry is changing, he delved into the changing face of the scrap metal recycling industry as acquisitions and mergers have created a whole new group of companies. These companies are not only changing the landscape of the ferrous scrap industry, but are reducing the number of companies involved in handling scrap metals.

Further, he expects to see the mergers continue for the next several years. One thing that has occurred is that the marketplace has narrowed, with the top five scrap ferrous processors presently controlling 28% of the market, according to Higbee.

Another session that had a sizable turnout was one covering transportation topics. This session offered views from participants in the trucking, barge, and rail industry, all forecasting where they felt scrap metal markets were heading.

The consensus from the speakers is that continued pressure on the ferrous scrap industry will be reflected in greater attention being paid to the transportation segment. This area will offer a key opportunity for processors to keep down costs and remain competitive.

At another session, Mike Mattia, ISRI’s director of risk management, covered the steps companies should take to ensure that their employees are not injured on the job. Through interactive discussions with attendees at the session, Mattia highlighted the difficulties of running a safe operation. While it’s possible, many of the points Mattia discussed might force executives to think far more proactively than in the past.

One of Mattia’s strongest points was that despite all warnings and direction, some employees would still perform tasks that are dangerous.

Other sessions focused not so much on the day-to-day scrap operations, but took a longer view of the business world. In a session on hiring and maintaining employees, especially in a climate of low unemployment rates, Rob Heneman, an associate professor of management and human resources at Ohio State University, Columbus, sketched out a variety of ways for employers to recruit and retain employees.

Networking and working with employees is one suggested step to keeping staffing levels up. Heneman especially stressed the benefits of working with existing employees to increase staffing levels. Employees are able to give a more accurate portrayal of the company, compared to someone who is has no day-to-day connection to the company.

John Correnti, president and CEO of Nucor Corp., Charlotte, N.C., offered attendees some thoughts from the perspective of a ferrous scrap consumer.

Correnti presented a list of guidelines scrap processors can follow as they work with Nucor, which operates eight mills consuming more than 11 million tons annually of ferrous scrap or scrap substitutes. Among the tidbits of advice from Correnti:

•Be reliable

•Don’t "play games" with ferrous scrap grades

•Ship on time

•Keep an eye on quality and tramp elements; "copper to us is the kiss of death," Correnti says of Nucor’s chemistry requirements

•Take part in efforts to ferret out radioactive scrap; "it’s big bucks for a steel mill for cleanup, not to mention the lost production," Correnti notes.

Among predictions made by Correnti: "By the year 2000, I think 50% of the steel—at least in the U.S.—will be made in the electric arc furnace. By the year 2020, 70% will be made in electric arc furnaces." He also expressed hopes for steel single-unit residential construction framing as a potential growth market.

The steel mini-mill executive also trumpeted the resurgence of the U.S. steel industry over the past decade. "Ten years ago the American steel industry was fat, dumb and stupid [compared to its Japanese and German counterparts]. Today, that is no longer true."

In the months ahead, those in the scrap and recycling industries will face a plethora of legislative issues. In his presentation, "What They Don’t Know Can Kill You," Joel Blackwell, Issue Management Company, Cornellius, N.C., told members how to influence their elected officials. One of the most powerful ways, noted Blackwell, is through a spontaneous letter. The letter should be positive, not negative, according to Blackwell.

Blackwell recommended writers make the letter personal and emphasize how a particular issue affects the constituency. He discounted the value of petitions and computer-generated letters as ways to influence elected officials.

BEFORE YOU SIGN ON THE DOTTED LINE

If a scrap company holds a steel mill harmless, then the scrap company can become liable for injuries and damages even if they aren’t the processor’s fault, said Danette Buckley, claims litigation counsel, CNA, Chicago, in her talk, "Read Before You Sign: What You Need To Know About Contracts and Insurance." Buckley noted that, when things go wrong, "hold harmless" agreements can be extremely costly for scrap companies.

Buckley pointed out that there are three basic hold harmless agreements. The broad form puts the scrap company at greatest risk. Essentially, the scrap company agrees to assume all liability for a consumer, such as a steel mill.

"Courts discourage this type of agreement as it is contrary to public policy," said Buckley. "There is no incentive for the consumer to do things in a safe, responsible manner."

Under the intermediate form, the scrap company can still be held liable for acts that weren’t its fault. Although this type of hold harmless agreement is less expansive than the broad form, it still is not the preferred one for scrap companies. That falls to the limited form. Under this type of hold harmless agreement, the scrap company typically is only responsible for acts that are directly its fault.

Speaking before a packed house, Lloyd T. O’Carroll co-publisher of "The O’Carroll Aluminum Bulletin," said that the Asian crisis had bottomed out and things should improve in the months ahead. (Now if only Japan would cooperate and get its financial house in order.)

O’Carroll noted that the U.S. auto industry – cars and light trucks – is still a driving force in this country behind aluminum demand. He emphasized that the automobile component of aluminum may increase from 250 to approximately 400 pounds in the next five to ten years.

There also was a session on the impact the economic problems in Asia are having on the paper markets. A host of speakers pointed out in statistical and anecdotal evidence of softened Asian demands for recovered fiber. However, most feel that demand for scrap paper from Asian countries will return as Asian economies improve. A host of new mills have been opened up within the past several years.

"We believe that the outlook for the stainless steel industry remains fundamentally very attractive, perhaps more attractive than any other metal commodity," said Christopher Plummer, managing director, Feronomics, Inc., West Chester, Penn. Plummer noted that they are on the verge of a major influx of new melting capacity in North America over the next several years.

Prices for stainless steel scrap, however, may drop. The environment for stainless scrap could even be severe, noted Plummer.