A World of Metal

In 1972, less than 10 years after Recycling Today magazine was founded as Secondary Raw Materials, a global think thank called the Club of Rome caused alarm with a report titled “The Limits to Growth.”

The report was intended as a warning about population growth and the Earth’s finite natural resources, and it included models offering scenarios of when certain metals or minerals might be depleted. Some of those scenarios had copper, zinc, tin and gold on a virtual endangered list, possibly being depleted before 2000.

These models and scenarios have subsequently been criticized for not considering the ability of mining companies to locate new reserves as well as having not taken into account the considerable impact of recycling.

In the 50 years since this publication was founded in 1963 and the 41 years since “The Limits to Growth” was issued, the world’s metals industry has grown dramatically. Playing a major role in that growth has been a scrap recycling industry that has served to collect metals before they can be landfilled and then process and ship them anywhere in the world where metals producers can turn them into new products.

 

Through the Decades Despite several waves of industry consolidation, most of the larger scrap recycling companies in the U.S. can trace their roots back to the 19th or early 20th century. The David J. Joseph Co., now owned by steelmaker Nucor Corp., Charlotte, N.C., traces its roots back to 1863. In that year, recent immigrant Joseph Joseph opened a hide and fur trading business in Cincinnati. Two decades later, in 1885, Joseph and his brother Samuel switched from hide and fur trading to scrap metal recycling. The Joseph Joseph and Brothers Co. began supplying scrap to a growing metals industry, operating near the Ohio riverfront. After Joseph’s death, his son David J. Joseph became manager of the company’s scrap operations and in 1921 renamed his firm the David J. Joseph Co. (DJJ). His son David Joseph Jr. also joined the company and subsequently become president. After having been owned by a Dutch holding company for several years, DJJ was acquired by Nucor in 2008. “Today, we’re one of the world’s largest scrap brokers and recyclers, with more than 65 scrap recycling facilities and 13 brokerage offices worldwide,” the company states on its website. One of the largest remaining privately held scrap companies is Alter Trading Co., St. Louis. Alter traces its roots back to 1898 and is currently managed by Robert S. Goldstein, the fourth generation of the Goldstein family to act as the company’s president or CEO. “Our basic mission has not changed: We deliver quality products and exceptional service to our customers and suppliers,” the company says on its website.

A Hidden Opportunity
Many of the people in North America processing and trading scrap metals in 2013 are descended from grandparents or great-grandparents who identified the opportunities in recycling long before most Americans had any awareness of scrap’s role in the economy.

The final decade of the 19th century and the first two decades of the 20th century witnessed a tide of immigration into the United States. Among the new arrivals to the U.S. were Jewish immigrants fleeing political turmoil and a history of persecution in eastern and central Europe.

Whether these Jewish immigrants settled in densely populated neighborhoods in the Northeast or they moved inland, they found that their adopted nation also was capable of denying them opportunities. Some, whether because few other avenues were open to them or because they saw it as an opportunity, began to collect discarded metal and prepare it for resale to mills, smelters and refiners.

Jewish immigrants were not alone in pursuing scrap collection, as they were joined by Italian, Irish and other immigrants in the endeavor. But in nearly every city and region in America, a Jewish entrepreneur is likely to have created a scrap company with a legacy in place in the form of a multigeneration business that is still operating today or an up-and-running scrap yard that traces back to such a family business.

As America’s economy flourished in the 1920s, many of these entrepreneurs were able to buy land, hire employees and begin investing in the earliest scrap processing equipment.

The Great Depression of the 1930s was as difficult for scrap recyclers as it was for most other Americans, but as the world and then America armed itself for war at the end of the decade, the scrap industry assumed a prominent role as a patriotic contributor to the war effort.

Posters and scrap collection campaigns urged Americans to part with pots and pans and anything else made of metal that they could spare, as every item collected helped to build the battleships, airplanes and ammunition that would help America’s troops defeat its enemies.

Feeding Steel's Furnaces
The years following World War II are remembered largely for economic growth, as soldiers and sailors returned home, started families and bought houses, cars and appliances that kept America’s factories humming.

The devastation wrought in so many other parts of the world also yielded export opportunities for America, including its scrap industry.

As Europe and Asia rebuilt, American scrap metal helped feed furnaces, smelters and refineries as they came back online. Unfortunately, the world remained at war as well, as the U.S. military remained engaged in the Korean War and then the conflict in Vietnam. As well, U.S. arms makers churned out weapons for the U.S. and its allies as it prepared for what would be a decades-long Cold War.

The 1950s and 1960s produced several different business cycles, and export destinations ebbed and flowed depending on which nations were installing new metals production capacity.

In 1963, as Secondary Raw Materials began publishing, ferrous scrap processors often prepared their shipments with one or two regional mills in mind or they engaged the services of a broker if they were near enough to a deep water port to sell to the export market.

Don Zulanch began working in his family’s Dayton, Ohio, scrap business in the early 1960s, and in 1968 started working for Cohen Bros. Inc., Middletown, Ohio, where he became a senior vice president and ferrous scrap buyer and seller.

Aluminum recycling gained greater attention in corporate board rooms in the 1990s.

From his operating base in Ohio, Zulanch says exporting was not a consideration throughout most of his career. “In my early days in the business, I never heard of export. Export was sending scrap from one state to the next one,” he quips. “India? China? Turkey? Where were these places? Honestly, I did not export or know about it until the last 10 years.”

The steel mills and iron foundries of Ohio, as well as those in the adjacent states of Pennsylvania, Michigan and Indiana, meant that in the 1960s and 1970s ferrous recyclers in the Great Lakes region had little need to ship scrap very far.

However, the domestic market for ferrous scrap was about to change starting in the late 1960s and into the next several decades, thanks to the growth of scrap-fed electric arc furnace (EAF) steelmaking in the United States.

From the late 19th century into the 1960s and ’70s, steelmaking in the United States conjured up images of sprawling integrated mill complexes. The dynasties built by industrialists in America’s northeast featured blast furnaces at the heart of their operations and by the 1960s were operated by a handful of large operators that included U.S. Steel Corp. and Bethlehem Steel.

Among the first companies to invest in EAF steelmaking in the U.S. was one that descended from automaker REO (Ransom E. Olds). By the 1960s, the former REO was a conglomerate called Nuclear Corp. of America and its CEO was F. Kenneth Iverson.

Iverson and the team he would assemble staked the company’s future on scrap-fed EAF steelmaking in the late 1960s and early 1970s.

The renamed Nucor Corp., based in Charlotte, N.C., began building its first EAF mill in Darlington, S.C., in 1968. By the time Iverson stepped down as CEO in 1995, Nucor was operating several EAF mills and was on its way to becoming America’s largest steelmaker.

Throughout the 1970s, ’80s and ’90s, Nucor was soon joined by other EAF steelmakers who combined to greatly increase the domestic demand for ferrous scrap and caused it to flow into states such as Arkansas, Indiana, Texas, Alabama and the Carolinas. (More on the role of mills, foundries and other scrap consumers can be found in the story “Journey’s End,” starting on page 68.)

Scrap flows also changed dramatically from 1963 to 2013, as manufacturing’s geographic center shifted away from the northeastern U.S. to the South (as well as to Mexico) and off-shoring to Asia increased.

Scrap recyclers who had formerly had access to steel clips and stampings shifted their attention to obsolete scrap generated at demolition sites and to the automobiles and appliances discarded by the American public.

Along with the increased demand for ferrous scrap brought about by the EAF revolution, the focus on auto and appliance recycling provided a further boost to the spread of the auto shredder as a processing technique. (More on the development and spread of auto shredders can be found in the feature starting on page 44 and more on the closer ties between the ferrous and nonferrous scrap industries can be found in the “Associated for Good” story starting on page 82.)

Increased industry revenue and attention also brought about waves of consolidation, as a combination of entrepreneurs willing to engage in a broader region and investment bankers with a desire to build multinational scrap companies engaged in the sometimes hectic pace of acquisition.

Not all of these consolidation efforts worked as planned, but as of 2013 most of the 10 largest scrap recyclers were publically traded companies.

As auto shredding and consolidation grew as trends, scrap recyclers steeped in knowledge of one side of the business became more familiar with the other sectors. While the ferrous and nonferrous sectors had often been separate in many ways, they were increasingly coming together.

Running Up the Numbers Since it began publishing as Secondary Raw Materials in 1963, the writers and editors who have worked for the magazine now known as Recycling Today have reported on a metals industry that has changed significantly. Among the statistics that help paint that picture: In 1963, electric arc furnace (EAF) steelmaking was used by a handful of alloyed steel producers. In 2011, EAF furnaces in the U.S. consumed 44.5 million tons of ferrous scrap, according to ISRI. Secondary copper production in the U.S. dropped from 383,000 tons in 1963 to 153,200 tons in 2011, according to the USGS (U.S. Geological Survey). Nonrefinery copper scrap generated in the U.S. was 500,000 tons in 1963 and rose to as high as 955,000 tons in 2000, according to the USGS. In 1963 less than 600,000 tons of secondary aluminum was produced in the U.S., accounting for 28 percent of aluminum production. In 2011, more than 3.1 million tons of secondary aluminum was produced, accounting for nearly 64 percent of overall aluminum output.

The Mine Above Ground
Nonferrous scrap recycling has a history in the United States that is equally as long and rich as the ferrous sector’s, following a separate but sometimes similar path.

Many of the immigrants or other founders of scrap companies soon faced a decision whether to specialize in iron and steel processing or to focus on copper, aluminum and other nonferrous metals.

The scrap iron business generally involved a larger parcel of land, heavier equipment and dealing with a specific set of industrial scrap generators and consuming steel mill customers.

Early nonferrous recyclers often had some of the same street-peddler origins but branched off to concentrate on red metals, aluminum, lead and zinc.

Larry Sax, who began working full time for his family’s Boston nonferrous scrap firm J. Sax & Co. in 1958, says in that region a lot of dealers had small plants located near each other and they often focused on a particular metal. “People had a niche and didn’t necessarily get active in much beyond their niche,” he comments.

In the early 1960s, nonferrous scrap dealers and brokers could ship to a variety of red metals producers who melted copper and brass scrap, including brass mills, ingot makers and secondary smelters and refiners. Sax says at that time New England was considered “brass alley” because of the number of brass mills located there.

In the 50 years Recycling Today has been publishing, as metals producers consolidated and often moved their mills or smelters to other states or other parts of the world, nonferrous dealers and traders adjusted to survive.

Nonferrous recyclers increasingly found themselves part of an industry that placed an emphasis on careful attention to continuously changing pricing, trading in a wider range of metals and alloys that needed to be correctly identified and having the ability to search globally for the right smelter, mill or refiner to maximize the margin on each trade.

Sources of nonferrous scrap have changed considerably as well. Fifty years ago, nonferrous dealers such as J. Sax & Co. had the potential to call on customers generating considerable amounts of clean, industrial scrap.

“At one time, there were companies making, say, knives or tableware and scrap at equal ratios. For 1 million pounds of knives produced, there were 1 million pounds of scrap,” Sax remarks. Another common occurrence: “There were screw machine shops using brass rod that would generate 70 to 75 percent scrap. A lot of screw machine houses might break even on their product sales but get into the black because of the scrap.”

Eventually, “stamping and screw machine technology became more computerized and more about precision,” notes Sax, and, “the better technology or methods generated less scrap.”

Material substitution also cut into nonferrous scrap supplies, as plastic began replacing nonferrous metals in any number of applications, including tubing and piping, toys, interior automotive components and household items such as clothes hangers.

Sax gives the example in New England of Gillette replacing what had been brass handles on their razors with plastic.

For dealers in many parts of the United States, this was coupled with manufacturing capacity that was consolidating, moving south or west or leaving the country.

Red metals recyclers increasingly tailored their businesses to serve contractors and peddlers who brought materials in across the scale in smaller and more mixed loads.

Another path chosen by some was to concentrate on wire and cable, materials that are rich in copper (or aluminum) but require additional processing steps.

Kansas City, Mo.-based scrap metal recycling firm Mallin Bros. Co. Inc. started in 1928 with Harry Mallin, on a horse-drawn wagon, purchasing scrap materials such as bottles, rags, magazines, copper, aluminum and scrap iron from residents.

Jeffrey Mallin, current company president and the third generation of the Mallin family to run the company, credits his father Larry for having made a correct strategic decision in the late 1960s. “My father was so forward-thinking in his approach to processing wire,” reflects Mallin. “He created a special niche for our company in the recycling industry that has been very successful.”

As of 2013, utilities, wire manufacturers, electrical contractors and other recyclers make up the majority of the customer base that generates scrap wire for the Mallin Brothers operation.

Throughout the United States, other metals processors have similarly invested to process wire and cable and create clean, high-value copper chops from the obsolete wire and cable generated in their market regions.

The red metals grades being produced have, on average, traveled increasingly longer distances during the 50-year history of Recycling Today.

A combination of materials substitution, overseas competition and seemingly unattainable emissions requirements caused the production of secondary copper in the United States to plummet in the 1990s and 21st century from its peak of more than 610,000 tons in 1980.

By 2006, just 151,000 tons of copper was made through secondary production methods, and production has stayed in that range subsequently.

The decline in domestic red metal scrap demand occurred along with the emergence of a red metals industry in China that was growing by historically large leaps and bounds.

Initially, recyclers in California and nearby states benefitted from the surging demand in China, as it soon became a much better logistical proposition to export red metal scrap rather than send it via sometimes expensive rail or truck journeys to other parts of the U.S.

By 2005, nonferrous recyclers almost anywhere in the United States were likely to be loading containers full of copper scrap that would be making the trans-oceanic voyage to China.

The flow of red metal scrap exported from the United States reached a level of 1.2 million metric tons in 2011, according to figures from the Institute of Scrap Recycling Industries Inc. (ISRI). The exported red metal scrap in 2011 had a value of $5 billion, notes ISRI, with $3.5 billion of it shipped to China.

Few figures do a better job than that of summarizing the growth of the recycling industry in 50 years and the increasingly global nature of the business.

Standing Apart Like other commonly used metals, stainless steel has proven highly recyclable and its scrap has flowed through recycling facilities for decades. Despite its widespread use, and the use of the word “steel” in its name, the metal has sometimes defied classification as either ferrous or nonferrous. Depending on the grade, stainless steel can be up to 90 percent iron, so it’s certainly “ferrous” in the strictest sense. However, for operations and trading reasons, it is not meant to be mingled with other types of steel. Most stainless grades can’t be moved with a lifting magnet. Because of the nickel and chromium alloying materials, stainless scrap also is unwanted at steel mills and iron foundries. And finally, again because of the nickel content, stainless scrap is priced differently from carbon steel scrap, often pegged to the price of nickel. For all of these reasons, the stainless and alloyed steels markets have largely been served by a set of companies specializing in these materials. Multinational firms like ELG Metals, Cronimet Corp., and Keywell LLC, as well as regional companies specializing in alloyed steels, can consider themselves to have a foot in the ferrous and nonferrous sectors. The name of a trade group for these metals, the Specialty Steel Institute of North America, Washington, D.C., perhaps provides the best guidance: This category of metals for both producers and recyclers is a specialty endeavor.

Aluminum Catches Up
Aluminum became a widely used metal much later in history compared with copper or iron and the alloys made from those two metals.

While the Bronze Age and the beginning of the Iron Age predate the birth of Christ, the Roman Empire and the Magna Carta, aluminum was not identified as an element until 1808 and was not produced on an industrial scale until the 1880s.

Like the two well-established metals, aluminum quickly proved itself recyclable. The USGS lists 1913 as the first year it recorded secondary aluminum production in the U.S., with a modest start of 4,200 tons.

In the ensuing century, secondary aluminum production has been through its ups and downs along with the economic cycle. The 2011 production figure of 3.11 million tons, however, demonstrates the decisive upward trend of aluminum scrap consumption.

The energy and resource efficiency of secondary production is clear when comparing the USGS figures for primary aluminum production to secondary.

When Recycling Today got its start in 1963, more than three times as much primary aluminum was produced in the U.S. compared with secondary aluminum. In 2001, secondary aluminum output surpassed primary production for the first time. And in 2011, secondary output was 3.1 million tons and primary output slightly less than 2 million tons.

The aluminum industry’s growth has been spurred by the metal’s use in a wide variety of applications, including transportation, aerospace, building products and packaging.

Dealers and brokers who chose to specialize in aluminum had to scrutinize or analyze inbound material to ensure it was properly identified by grade, with minor chemistry differences often carrying major implications for consumers of the material.

More than 45 aluminum scrap grades can be found in the ISRI “Scrap Specifications Circular,” with various grades referring to extrusions, siding, beverage cans, castings, foil, turnings and wire.

The volumes of these types of scrap have followed changes to the manufacturing sector, materials substitution and household consumer preferences, as well as changes to processing methods.

The cast of consumers also has changed greatly during the past five decades, with once prominent company names like U.S. Reduction, Wabash Alloys, IMCO Recycling and Commonwealth Industries having disappeared from the scene in that time.

Many of the secondary smelters that had been operated by these companies are now part of Aleris International Inc., based in the Cleveland area.

Although aluminum recycling’s cast of characters has changed several times in the past 50 years, the 3 million tons of aluminum scrap collected in the U.S. in 2011 demonstrates that the metal itself continues to play a starring role in the scrap industry.

Scale and Status
The collection, processing and sale of aluminum, along with red metals and iron and steel, have helped the scrap metal industry achieve its current size and scale. The role of these activities in conserving resources and energy and reducing carbon emissions has also helped it attain a better image over the years.

Zulanch says his work in the scrap industry was difficult to explain, even to family members, when he first entered the business because the scrap industry was to most observers largely indistinguishable from the “junk” business.

“After my kids were born and as they went to school, they really, really did not know what I did,” he comments.

It was not until his oldest daughter was a senior in college, says Zulanch, that he saw an opportunity to explain. “She had to do a report on, of all things, recycling. I took her to our shredder and she did a full report with pictures and samples. It opened her eyes and her classmates’ eyes; it was a great experience.”

Sax says that while it could be an uphill battle when talking to people unfamiliar with scrap recycling, “From day one I always stressed the importance of our industry.” He says the industry plays an important role in “the conservation of natural resources and as a help with the balance of trade for the U.S.A.”

ISRI, in its “Scrap Yearbook 2012,” describes the U.S. scrap recycling industry as “a sophisticated, capital-intensive industry [that is] recognized as one of the world’s first green industries while serving as an economic leader, job creator, major exporter and environmental steward.”

In 2011, recyclers in the U.S. collected and processed some 74 million metric tons of ferrous scrap and 9 million metric tons of nonferrous scrap, overseeing a level of activity, engaging in global trading and using technology that would have been difficult to fathom in 1963.