Supplement -- Aluminum Recyclers Look to Joe Six-Pack

Picture Joe Six-Pack at home on his couch. Joe’s a responsible guy and likes to recycle almost as much as he likes to watch baseball and drink beer. He knows that for every aluminum can he recycles, he saves enough energy to run his television set for three hours. With enough of Joe’s friends recycling cans, will a bunch of extra-inning games have an effect on UBC recycling rates?

That’s hardly likely. But there are many in the industry who are bullish on the prospects of getting the UBC recycling rate up from the current 60%-66% range where it has fluctuated and closer to 75%.

The Aluminum Association Inc., Washington, endorsed a 75% recycling rate goal for used aluminum beverage cans. They are banking the success of the program on a strategy to re-energize consumer interest in recycling. One of the key components of the strategy will be to focus on aluminum’s value. Aluminum is the most valuable recyclable packaging material—worth as much as 10 times the value of other used packaging—and that value ensures that the demand for UBCs is stable and virtually guaranteed.

"The aluminum can is the only recycled beverage container that consistently covers its own recycling cost—communities from coast to coast rely on the profits earned from aluminum to help pay the costs of other recyclables," association president David Parker says. In 1996, the industry paid out about $1.08 billion to recyclers for their used aluminum beverage cans.

The recycling challenge was made to the industry a year ago by Brian Sturgell of Alcan Aluminum Ltd., Montreal, during his remarks at The Aluminum Association’s international exhibition and conference. Parker says he is ready to tackle the 75% recycling rate goal. "We heartily endorse this challenge," he said.

Even if the 75% goal is met, things could get tight for recyclers. While he predicts that the market will see more recycling in broad terms, consultant Ed Pchola, Marco Island, Fla., is concerned about the amount of consolidation that has been going on in the industry. "The major mills and producers have become more efficient and recovery is higher, so there is less scrap generated. What is generated is used in-house," he points out.

"Downstream, the secondary smelters, with their low margins, will have less scrap available and they will not be able to pay the higher prices," Pchola says. "I think there will be some tough times ahead for the scrap business."

"Recycling rates for UBCs dropped last year," confirms Nick Adams, director of statistics and economics for The Aluminum Association. "But people did not stop recycling." He notes that the Russians were dumping aluminum into the U.S. market at prices below domestic scrap. The overall market was quite depressed. What actually happened, Adams believes, is that the material was held by dealers anticipating better days down the road.

"We generate our statistics based on what is melted. We may not get all of those cans back for some time," he continues. "The recycling rate will continue to go up and down because inventories are hard to predict."

However, Adams is not overly concerned about the reported dip in last year’s UBC recycling rate. "It has nothing to do with recycling," he says. "It has everything to do with the Russians needing cash."

Many in the market would agree with that assessment.

"Right now I’m optimistic," says Solomon Hirsh, vice president of Aluminum Recycling of Warner Robins, Warner Robins, Ga. The company is located in mid-Georgia, not far from Robins Air Force Base. "Things are going good for the base and that pretty much tells what will be happening in this area," he says.

Like many other recyclers, Aluminum Recycling of Warner Robins faced some serious belt tightening at the end of 1998 and early in 1999. Now, Hirsh sees light at the end of the tunnel. "As long as we’re over the rough spot at the start of the year, I think things will continue to improve," he says. He points out that things were tough across the board with many big companies going under, but the family-owned company managed to avoid some of the buyout-related miscues that other companies made.

A look at the most recent figures from the U.S. Geological Survey, Reston, Va., puts the situation in perspective. The 1998 draft numbers from USGS show primary production of aluminum at 3.7 million metric tons—the highest it has been in recent years. In 1994, that figure was 3.3 million and in 1997 it was 3.6 million. However, the total value of the material in 1998 was roughly $5.3 billion dollars. That is down substantially from the 1997 figure of $6.1 billion, and not too far off the $5.2 billion realized from the much lower 1994 volume. When the primary market is hurt like that, the recycling market is sure to get beat up as well.

The picture in the export/import market reflects the domestic trend. The U.S. imported 453,814 metric tons of scrap valued at $573.8 million in 1997. In 1998, that figure dropped to $571.7 million worth of aluminum scrap even though the volume of material imported rose to 500,604 metric tons.

The dollar value of exports actually rose from $405.8 million in 1997 to $452.6 million in 1998, USGS figures show. That was realized on slightly higher volume, with 337,525 metric tons going offshore in 1997 versus 428,247 in 1998. That is about a 12.5% drop in the unit value of the material shipped.

BUILDING NUMBERS

There is no doubt that the aluminum industry, as a whole, does a great job of recycling. While our friend Joe Six-Pack is proud of his contribution to the cause, his employer down at the construction site or at the auto plant is doing an even better job.

"We figure that we essentially get back 100% of the manufactured new scrap," Adams says. Corporations that manufacture from aluminum have known for years that they can reduce costs by recycling scrap. Auto makers, aircraft builders and new can stock producers gather their material and literally auction it off to the highest bidder. This is one area that is not necessarily market driven. The companies know their material has good value and they are looking for the highest possible price on the material.

Many can companies have relationships with their can sheet manufacturer to return the stock to the sheet manufacturer in consideration for reduced price on future purchases.

Building demolition is another high-recycling business. As a former demolition worker, Adams knows that "the demolition guy has a big incentive to reuse or recycle as much of that building as possible." The question is how long the aluminum material will be tied up in a structure as curtain walls or in other uses.

Post-consumer scrap is a bit of a different story. Adams figures that when Joe Six-Pack finally gets rid of the family car 90% of the auto scrap comes back. The auto dismantlers have a sophisticated system in place, actually developed with help from the steel industry, to dismantle and collect material. Here is another area where it is difficult to get accurate figures.

Since the cars being scrapped typically are eight to 15 years old, they contain less aluminum than today’s vehicles. While the amount of aluminum in the cars has increased, it is difficult to pinpoint just how much aluminum comes from the "average" scrapped auto.

Extrusion scrap (from doors, windows and similar uses) is also a high-percentage recycled business. "Manufacturers live off remelt and they buy scrap to make new billet and extrusions," Adams says. White goods and siding often are included in the mix. This is where the statistical process begins to hit snags.

Because the making and recycling of goods ranging from aluminum siding to license plates are not closed-loop systems, it is difficult to get a handle on the recycling rate.

NEW TECHNOLOGY

"Lightweighting," the process of reducing the bulk of products ranging from cars to beer cans, has made significant inroads in the aluminum industry.

In the mid-1960s, the rule of thumb held that a single can weighed about an ounce. In 1974 it took 23 aluminum cans to make one pound. Today, aluminum beverage cans are lighter and it takes nearly 32 cans to make up a pound, so a single aluminum can weighs about one-half of one ounce.

Coupled with some other factors, that trend actually makes Pchola a bit uneasy. "The aluminum beverage container is under pressure from other materials," he says. Plastic and glass still are major competitors. "Steel is not going to roll over and play dead, either," he predicts.

He notes that the U.S. market for aluminum cans has basically been flat in recent years. Europe is showing minor growth, although the picture in Asia and especially South America is better.

$240 MILLION LOST?

If recyclers were feeling that aluminum was not profitable earlier in the year, they should talk to grocers, who often serve as the point-of-collection for beverage containers. The Kentucky Grocers Association and the soft drink industry funded a University of Kentucky (UK) study that says a proposed bottle bill in that state would cost grocers $240 million a year in lost grocery sales.

Keep in mind that, historically, the grocery industry has been vocally opposed to bottle bills, and most store operators prefer not to be a mandated part of a the recycling infrastructure. This study was commissioned in reaction to Kentucky HB-371 which is under review by the General Assembly’s Container Deposit Task Force. In addition to projecting lost grocery sales, the study said a mandatory container deposit law would also cost $40 million in lost earnings annually to workers and might kill 2,200 jobs, cost the Commonwealth of Kentucky $12 million annually in lost tax revenue, cost county governments up to $30 million a year to operate redemption centers. The research was conducted by the UK Center for Business and Economic Research. Are their claims believable?

According to Christy Applestein with the Food Marketing Institute (FMI), Washington, Kentucky’s 48 border counties would suffer the most because consumers would do their shopping in neighboring states to avoid higher prices.

FMI does not appear to be opposed to recycling—just to the requirement of having recycling coordinated by its members. Meanwhile, government groups like the Anchorage Recycling Center, Anchorage, Alaska, remind consumers that tossing away an aluminum can wastes as much energy as pouring out half of that can’s volume of gasoline. That does not sit well in a state still well aware of the Exxon Valdez oil spill. The Council also points out that recycling one aluminum can saves enough energy to keep a 100-watt bulb burning for almost four hours.

LONG-TERM NEED

Based on facts like those, it is obvious that aluminum recycling is here to stay, simply because it is such an efficient way to obtain aluminum. Researchers figure that recycling aluminum takes only about 7% of the energy required to produce the metal from its ore if one adds up the energy required to mine and transport the aluminum ore versus the energy required to collect, sort and transport scrap aluminum to a recycling facility. In the UBC market, it takes 95% less energy to make new aluminum from used cans— 20 recycled cans can be made with the energy needed to produce one can using virgin ore. Today, more than 50% of a new can is made from recycled aluminum. An aluminum can recycled today will be back on the grocery shelf in about 60 days.

Trivia fans will recall that the first all-aluminum beverage can appeared on grocery shelves in 1963. Recycling UBCs followed in 1968 in California. One million pounds of aluminum cans were recovered that year, an amount that is melted in about four hours today.

Commercial recycling is well established and profitable. Used aluminum beverage cans are the most recycled item in the U.S.— 64% of the 99 billion cans produced in 1996 were recycled. It is in the area of other consumer items that there is still room for improvement. While the majority of America’s aluminum is being recycled, according to the Ohio Department of Natural Resources Division of Recycling and Litter Prevention, more than one million tons of aluminum containers and packaging (including UBCs, TV dinner trays and aluminum foil) are thrown away each year.

Aluminum represents less than one percent of the nation’s municipal solid waste stream. Other types of aluminum, such as siding, gutters, storm window frames and lawn furniture, can also be recycled.

But Pchola looks at life cycle analysis on aluminum products as a distant prospect. Even with the extra aluminum going into autos and other manufactured products, he notes it will be years before any of that material comes back for recycling.

Adams says he believes the key to increased recycling rates into the 21st century is education. "The American public likes to throw things away rather than recycle," he says. "There has to be a lot of money involved before some people will recycle."

DOWN THE ROAD

Primary production of aluminum remains strong. Despite consolidation and buyouts, there was not much real difference in the overall capacity for primary production of aluminum in the United States. In 1997, USGS put that number at 4,202 thousand metric tons. In 1998 it was 4,204 thousand metric tons.

"The future may be getting stronger over the next few months," says Hirsh. "The way things look now, we should see slow, steady moves upwards." He says he does not think that things could get much worse than they were early in 1999.

"I’m not looking for a big jump," he cautions. But he sees reasons for optimism in the broader economy as many aluminum-using companies make cutbacks in overhead to allow them to move ahead with production.

Today, about 40 billion UBCs are going into landfills each year—even though there are financial incentives to recycle. Will enough of Joe Six-Pack’s friends join him in recycling so the industry will hit that 75% UBC can recycling target?

"Certainly, 75% recycling of UBCs is not an outrageous figure—if we can educate consumers," Adams says.

While the obsolete scrap numbers may improve in the 21st century, that could be largely due to better reporting mechanisms and not more material being recycled. There are a lot of people in the secondary recovery business. While the government statisticians do their best, observers like Adams feel there is a sizable under-reporting of that section of the scrap market.

"We think recovery is greater than what is reported," Adams says. He notes that there are four main sources for foundries. While it is relatively easy to measure primary metal and secondary material, it is tough to get a handle on the amount of material imported by any of the 1,100 foundries in the business. There are 150 extruders who buy scrap. "They don’t report their numbers to anybody," Adams notes. Because aluminum is easy to buy and easy to process, it is difficult to track the recovery numbers at the many smaller operators. Yet, those firms do enough business to have an impact on the bottom line.

The battle to increase recycling rates eventually will be fought by winning the mind of Joe Six-Pack. Whether at the home or on the job, whether for UBCs or for industrial scrap, the future still revolves around convincing Joe, his buddies and his boss that recycling is profitable and necessary.

The author is an environmental writer and Recycling Today contributing editor based in Strongsville, Ohio.