Rust To Riches

The Midwest usually provokes images of farms and factories. However, not too long ago this part of the heartland suffered an identity crisis, picking up nicknames like "rust belt" for its aging steelmaking and manufacturing infrastructure.

Today, the region is healthy and vibrant. Steel mills are running at full speed, new manufacturing plants are being built, and firms that once fled the region are now moving back for reasons such as low taxes and utility rates, and a mature transportation network. Ports are bustling, and cities and towns are prospering due to availability of jobs and a low cost of living.

As the region’s economy goes, so does its recycling and scrap markets. Leading the charge in the Midwest are the steel plants. The region has the largest concentration of facilities in the U.S. According to the Directory of Iron and Steel Plants 1995, published by the Association of Iron and Steel Engineers, Pittsburgh, there are roughly 150 iron and steel plants in the Midwest, with the majority in Illinois, Indiana and Ohio. And more mills are coming on line in the region, such as one in Delta, Ohio, by North Star Steel BHP Co., Minneapolis, and another one in Montpelier, Iowa, by IPSCO Inc., Regina, Saskatchewan.

IPSCO officials say they chose the Iowa site because of low transportation and electric power costs. Scrap supplies are expected to be drawn from further east, generally in competition with other electric furnace producers and integrated producers.

"The market is very strong for ferrous in this area," says Harvey Jacobsen, vice president of Jacobsen Iron & Steel, Chicago, Ill. "Most of our supply is from industrial manufacturers and we see no shortages in sight. As you know, the price of ferrous increased about $15 to $17 per ton from January to July, so that is good. We have no problem finding a market for our scrap because there are a multitude of mills and foundries in this region."

Bob Garvey, president of North Star Steel, with five recycling operations in the Midwest and a new mill coming on line in Ohio soon, adds that demand for scrap steel in the region will be higher when the new mills in the area are operational.

"Some mills have restarted and new mills are coming on line," he says. "There will be a lot more demand, and the transportation infrastructure is definitely there to move the materials." However, gondola car availability is still a major concern for scrap processors in the region.

Some sources in the area say that there will be an increase in demand of about 2 million to 3 million tons of ferrous scrap by 1996 because of new capacity coming on line. "There is not any more scrap being generated, so you will see some robbing-Peter-to-pay-Paul situations happening," says one industry observer.

Others say the scrap metal market in the region has already gone haywire. "There are a lot of mavericks going around right now paying whatever they need to get ferrous scrap," says one broker. "And the lack of price indexes in the region has not helped either. We don’t know what the price of scrap metal is selling for from state to state or city to city. There used to be a benchmark price, now there isn’t one anymore. You can have two mills in the same town with two different prices. It can be very frustrating."

Bill Heenan, president of the Steel Recycling Institute, Pittsburgh, doesn’t see a lack of steel scrap in the region affecting the mills. "We already ship more than 10 million tons of steel scrap overseas, and the only reason why it is shipped to Pusan, Korea, and not Gary, Ind., is because the transportation costs are cheaper," he says. "When the demand increases in the Midwest, you will see some of those overseas shipments being diverted."

Processors in the area are reporting that even autos are becoming scarce and the prices have gone up. Some states are trying to keep the flow of scrap steel by encouraging the collection of alternative materials such as appliances. According to the Steel Recycling Institute, Pittsburgh, the average appliance contains about 75 percent steel.

"Recycled appliances are a good source of quality scrap for our industry," says Cole Tremain, vice president of industrial relations and public affairs for LTV Steel, Cleveland, and a member of the Ohio Steel Industry Advisory Council.

The market for paper in the Midwest mirrors the national market, with recent skyrocketing prices followed by a price downturn as some mills take extended downtime, change grade furnishes to take advantage of lower-priced grades and halt purchases.

Robert Mendelson, Donco Paper Supply, Chicago, says that the paper market in his area has peaked and prices are coming down. "There is currently more supply than demand around here, and that is with all grades of paper," he says.

"The mills in the area are shutting down, some even without making an announcement," he continues, "and that has caused the flow of recovered paper to back up. Those of us in the paper business all knew that as fast as the price of recycled paper feedstock went up, it would eventually come down, and that’s what we are seeing now."

Mindy Solomon, executive director of the Illinois Recycling Association, Chicago, feels that the regional area paper market is doing okay, despite the slowdown. "There are some new mills in the state, and companies like Weyerhauser Recycling are coming into the area, and I think that will help," she says. "Demand for paper right now is slowing, but that is intentional. The mills closed in July to bring the prices down, and I think they have accomplished that."

Solomon does not dispute that the paper availability, especially in the Chicago area, is good, and she says when that city’s blue bag program is in full force by the end of the year, there will even be more paper available. "The Chicago Recycling Ordinance that was enacted in January 1995 has helped as well," says Solomon, "and office recycling programs are contributing greatly."

In Iowa, Mick Barry, general manager of Weyerhauser Recycling, and president of the Iowa Recyclers Association, both in Des Moines, Iowa, says that all markets are doing fine in his state. "The Cedar River Paper Mill, Cedar Rapids, Iowa, is doing very well and currently needs all grades of paper," he says.

Whenever there is a significant jump in paper prices there will be a correction, says Barry, and sometimes the correction is needed. "Anytime there is a big jump in prices, we, as recyclers, should be concerned that we are not pricing ourselves out of the market," he says. "We don’t want a situation where the corrugated box is more expensive than the material it is carrying."

For other materials, such as glass and plastic, markets are fairly stable. Most of the action of late has been in the plastics market as prices shot up at the end of last year and stayed strong until this summer. Then, the bottom started to fall out for high-density polyethylene as more virgin material capacity came on line. And even the polyethylene terephthalate demand has eased. According to Alan Logan, plastics marketing manager for Ensley Corp., Canton, Ohio, which moves significant amounts of HDPE and PET monthly, the price of HDPE was just bid up too fast. Now, there are many companies left with inventory that was bought at the higher prices and has to be sold at a lower price. Currently, he says, the market is just not there for recycled HDPE. PET prices, on the other hand, should remain relatively stable.

However, there are companies that are looking for more plastic to recycle. For example, Barry says that a new partnership between Image Industries, Armuchee, Ga., makers of carpeting from post-consumer plastic, and a recycler in Iowa could divert much of the plastics in the region for Image to support its operations.

Also, Proctor & Gamble, Cincinnati, says it will be using more recycled HDPE now that prices have come down. And in Illinois, two plastic lumber companies, Eaglebrook Plastics and Envirowood, need a lot of the post-consumer material, according to IRA’s Solomon.

"We also have two glass manufacturing plants nearby that are using the recycled cullet," she says. But Barry sees that market tightening and the supply slowing, not because of any region influences, but simply because fewer products are being packaged with glass.

Diane Mellinger, president of the Association of Ohio Recyclers and a principal associate at Waste Alternatives in Mt. Vernon, Ohio, says that all markets are doing reasonably well. In her view, there are two key issues facing the state today. The first is updating Ohio’s recycling goals from 25 percent to 50 percent (in the industrial sector only).

Another problem Mellinger sees deals with a need for an "intermediate structure" with some commodities, like paper. "We are doing very well at the collection end, and the end users really want products with recycled paper content, for example, but there is a problem in the middle – getting the post-consumer material to the processing facility."

In rural areas, recycling efforts are also meeting success. Illinois counties are under an order to reduce waste by 25 percent, and many are already achieving that goal. Solomon says that is possible because many rural counties have put in the effort. In addition, the Recycling Cooperative of Illinois, a non-profit organization based in Champaign, along with several private companies, are working in the southern half of the state to help smaller communities with their programs.

As for post-consumer collection in Iowa, Barry says it is the rural counties and small towns that are the ones leading the way.

Barry adds that there are some curbside collection programs in the countryside, although he jokes that "there aren’t any curbs" out there.

As in other Midwest states, Ohio officials report that recyclable collection in rural areas is doing well.

And also contributing in rural and less populated areas are colleges and universities, many of which have their own recycling collection programs.

The author is managing editor of Recycling Today.