Calm on the surface

From the viewpoint of many nonferrous scrap recyclers, 2013 was one of the more stable years in terms of commodity pricing and availability, and markets in 2014 started out in much the same way.

However, by the second half of 2014, pricing volatility had reintroduced itself into the market, with copper and nickel prices in particular reacting to different influences in the global economy.

The period of stability seems to have been reflected in Recycling Today’s updated list of the 20 largest nonferrous scrap processors in North America. The list, based on nonferrous processing volumes in 2014, includes 19 of the 20 companies that appeared on the list in early 2013, when firms were ranked by their 2012 volumes.

Wise Recycling, Baltimore, has edged out Shapiro Metals, St. Louis, for the 20th spot on the latest edition of the list, making it the only new entrant.
 

In stable condition

Responses from processors disclosing their 2014 volume remain confidential, but the figures Recycling Today received were on average higher than those for 2012.

To what extent this means North America’s largest scrap companies have been able to consolidate their market share is a key consideration.

Several of the companies on the list are powerhouses in one or more regions of the United States or Canada and as such could be carving up a larger slice of a market pie that has not grown in size. (This topic is explored further in this issue’s cover story “Punching Above Their Weight,” starting on page 54 of this issue.)

Another reason these companies have trended toward growth could be because the size of the overall pie was bigger in 2014 compared with 2012.

As measured by two of the largest volume types of nonferrous scrap—aluminum and copper—statistics maintained by the United States Geological Survey (USGS) indicate this figurative pie may have grown, but only a little.

According to USGS, smelters, fabricators, foundries and other consumers of aluminum scrap devoured some 4.4 million metric tons of aluminum-bearing scrap in 2014, converting more than 3.6 million metric tons of that into new aluminum.

That compares with 4.25 million metric tons of aluminum-bearing scrap consumed in 2013, representing a 3.5 percent increase year to year. Consumption in 2012 was 4.3 million metric tons, thus falling in between the other two figures.

Similar USGS figures for copper-bearing scrap also point to a slightly healthier domestic market for the material in 2014 compared with the year before. Whereas U.S.-based refineries, foundries, brass mills and ingot makers consumed 745,000 metric tons of copper scrap in all of 2013, after the first 10 months of 2014, they were on pace to consume more than 763,000 metric tons—a 2.4 percent increase.

However, that volume gain was negated by a smaller export market. While U.S. shippers sent 450,000 metric tons of copper-bearing scrap to overseas consumers in 2013, they were on pace to export just 427,000 metric tons in 2014. The decline of 23,000 metric tons of copper-bearing scrap exported more than offset the additional 18,000 metric tons of consumption within the U.S.
 

Not in lockstep

Processing volume figures submitted by scrap companies in North America trended upward in 2014 compared with 2012, but by no means did all companies report identical growth percentages.

The fastest riser on the list was Upstate Shredding/Ben Weitsman, Owego, New York. The company moved up seven spots (from 18th to 11th) on this year’s list relative to 2013’s list. The company’s climb was based on 139 percent growth in its nonferrous scrap processing volume between 2012 and 2014.

Upstate Shredding/Ben Weitsman aggressively has been buying smaller firms in the past two years, including:

• Murtagh Scrap Handling, Rome, New York, which Upstate Shredding announced in December 2014;
• Eastside Metals & Recycling Corp. of Fort Ann, New York, in July 2014;
• Brant Auto Parts of Irving, New York, in March 2014;
• Jack’s Recycling of Mount Morris, Pennsylvania, and Capitol Scrap of Albany, New York, which Upstate announced in January 2014;
• Hornell Waste Material Co. of Hornell, New York, September 2013; and
• Reamer Recycling, Ithaca, New York, which left New Jersey-based Metalico, and Valley Recycling of Allegany, New York, in the summer of 2013.
   

The company has not shied away from greenfield expansion or upgrades of existing facilities either:

• Upstate Shredding announced plans December 2014 to build a heavy media plant at its Owego shredder facility at a cost of $15 million.
• In December 2013, Upstate announced that it had purchased a Wendt Corp. M6090 shredder and downstream sorting system for its scrap yard and port facility in Albany. Upstate Shredding opened the facility in August 2013.
• Upstate announced that it purchased a new Wendt Corp. shredding plant for the Ben Weitsman scrap yard in New Castle, Pennsylvania, in June 2013.
   

More growth may lie ahead for the Upstate Shredding/Ben Weitsman if efforts made by CEO Adam Weitsman bear fruit.

In early 2015, Weitsman announced his intention to gain a controlling interest in Metalico Inc., Cranford, New Jersey, which ranks 15th on this year’s list. Weitsman bought Metalico shares at the market price (around 58 cents at press time), aggregating a 12 percent stake in the company. In late February, he offered 78 cents per share for outstanding shares of Metalico’s stock.

In response, Metalico’s board of directors announced it had retained an investment banking firm to “conduct a thorough evaluation of the company and advise its board on the alternatives for Metalico’s future, including continued independence as a public corporation, combinations or joint ventures with suitable partners or investors, sales of assets and a sale of the company, including an analysis of the offer made by Weitsman.”
 

Uncertain prospects

As is always the case in the scrap recycling industry, and as investment advisors are obligated to warn, past performance is no guarantee of future results.

Several of the largest scrap recycling companies have performed admirably in what often has been a difficult market since the financial system meltdown of 2008, but few recycling companies are growing as aggressively as Upstate Shredding.

As noted earlier in this article, former industry consolidator Metalico has hired an investment banking specialist to consider its options for the future.

Many of the industry’s other publicly traded firms have said in quarterly reports during the past two years that margins were tight and profits were difficult to accrue. Sims Metal Management, with joint headquarters in New York and in Sydney, had a net loss of $89 million in fiscal 2014. Companywide sales revenue declined 0.9 percent compared with the previous year.

In his August 2014 comments accompanying the results (The company’s fiscal year ended June 30, 2014.), Sims CEO Galdino Claro said gains the company enjoyed in some divisions “were partially offset by lower earnings from the e-recycling (Sims Recycling Solutions) businesses in the U.K. and North America.” He added that softer earnings in Sim’s North America metals recycling business were affected by weak volumes associated with atypically severe winter weather in the second half.

The first quarter of fiscal 2015 for Commercial Metals Co. (CMC), Irving, Texas, ended Nov. 30, 2014. In its statement reviewing the quarter, CMC says, “Nonferrous shipments increased 5 percent, however a decline in average nonferrous selling prices more than offset a decline in average nonferrous material costs, which added additional pressure to average nonferrous metal margins compared to the first quarter of fiscal 2014.”

The difficult task of processing and selling nonferrous scrap for a profit will continue to give North America’s largest nonferrous scrap processors all the work they can handle in 2015 and beyond.

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