Sustaining Scrap Superyards

Scrap yards come in all shapes, sizes and types; however, some have grown beyond the realm of mainstream processing to become scrap superyards. These yards have established themselves as models of efficiency, processing huge amounts of scrap metal at a breakneck pace for consumption domestically or abroad.

Now, with consolidation tightening up the scrap industry, these superyards are poised to reap the benefits as more scrap passes through their facilities than ever before. Some smaller scrap processors, seeing the writing on the wall with new mills coming on line, are positioning themselves to join the ranks of the super scrap yards in order to better take advantage of future opportunities.

"The recycling superyard is a reality," says Marc Schupan, president of Schupan & Sons, Kalamazoo, Mich. His company is mainly involved in aluminum processing, but is expanding into full-service recycling by handling ferrous scrap and other commodities. "With profit margins so thin, and the competition and consolidation taking place in this industry, larger yards are emerging that can simply process material more efficiently."

"There are about 10 to 15 mega-yards in the United States," says Alan Ratner, executive vice president of Sims Metals, Richmond, Calif. "We operate one of those yards ourselves on the West Coast. Schnitzer in the Northwest, Southern Scrap in New Orleans, the old Hiuka yard in Long Beach that is now operated by both Birmingham and Mitsui, Camden Iron & Metal and Naporano in New Jersey are just a few mega-yards I can name off the top of my head."

Chaparral Steel, Midlothian, Texas, which processes in excess of 80,000 tons of ferrous scrap per month, reportedly has the biggest yard in the U.S. But due to the exclusive arrangement of that yard with the company’s mill, many consider that a captive site.

Other superyards include Cozzi Iron & Metal, Chicago; Miller Compressing, Milwaukee; and Prolerized Schiabo Neu, Jersey City, N.J./Queens, N.Y.

Skirting the edge of superyard status is Ferrous Processing, Detroit; OmniSource, Ft. Wayne, Ind.; and Prolerized New England, Everett, Mass.

Some in the industry say that any yard with a heavy-duty shredder is near or at superyard status. Currently, there are more than 215 heavy-duty shredders in the U.S., and more are on the way.

"We are seeing increased interest in the heavy-duty shredder, and particularly in our largest model Megashredder," says Tony Morgan, president of Newell Industries Inc., San Antonio. "Our largest shredder has a 120-inch-diameter hammer swing and can process up to 300 tons per hour."

The benefit of operating a larger shredder is that the electrical costs go down with each ton processed, according to Morgan. Because these shredders can process large quantities, "an operator can get very good efficiencies," he says.

"Some of these shredders are going into areas where there is not a heavy population, so they need to pull material from a wider area," Morgan adds. "Therefore, they need a network of yards to keep the flow of scrap moving."

In addition to a heavy-duty shredder, some other characteristics of the superyards include a wide range of cranes to move material, numerous ferrous and nonferrous balers, and several scales. Also, many of the superyards have heavy media separation plants to treat shredder fluff.

"These facilities have made an enormous investment, not only in equipment but in other areas, such as environmental compliance," says Ratner. A heavy-duty shredder, for example, can cost up to $10 million.

Another significant characteristic is that superyards generally are located on deep water ports and have access to a wide range of transportation options.

However, being in certain locations and having particular types of equipment do not necessarily mean facilities are superyards, according to Danny Rifkin, executive vice president of OmniSource, Ft. Wayne, Ind. "I think there are yards that have high volumes, but they must also focus on cost compression. They have to operate as efficiently as possible, and may be driven solely by a single consumer."

OmniSource has 18 locations in the U.S. and its biggest operations are in Ft. Wayne and Toledo, Ohio. Those two operations process about 30,000 tons a month a piece of ferrous scrap.

Even though the trend toward consolidation in the industry will favor larger scrap yards, some in the industry don’t feel that consolidation was a major contributing factor to the superyards being created in the first place.

"I don’t think consolidation has created bigger yards – they already existed," says Gary Schnitzer, executive vice president and general manager of Schnitzer Steel Products Co., Oakland, Calif.

Ratner agrees, pointing out that most of the superyards were created by corporate visionaries who saw opportunities at hand and capitalized on them. "These yards did not start as recycling superyards – they were built to this level," he says.

While many of the superyards grew due to their capacity to process and export material, there are some other factors that play into the equation.

"These yards also have to be located in an area where scrap is plentiful," says Ratner. "I don’t think you’ll find a superyard too far away from where scrap is being generated. The other main consideration is to have a workforce capable of running the yard."

To stay on top of their game, scrap superyards have to move an incredible amount of scrap to survive. These yards have several scrap purchasing departments to target various scrap markets. "We have scrap coming in from many sectors, including auto hulks, appliances and corporate accounts," says Rifkin. "We have to keep the scrap coming."

These yards also have a dedicated support network of dealers and peddlers and a network of yards. Some superyards have chosen to buy as many feeder yards as possible to ensure a steady scrap supply, while others have developed a network with other independent yards.

"The concept of many smaller yards feeding into a larger yard is not uncommon today," says Schupan. "Take our company, for example. We send material from our other yards to our Elkhart facility because we have a faster baler in Elkhart." 

From time to time, the company also sends materials to larger scrap yards instead of directly to mills, depending on the economics of the situation. "If we can add value to the scrap cost effectively, then naturally we do it ourselves," says Schupan. "But sometimes the economics are such that another yard can add that value at a lower cost – say $25 a ton, where it might cost us $35 a ton. Then it makes more sense to move the material on to the larger yard."

Schupan hears the talk of consolidation in the industry, but he doesn’t think that having superyards means that the little yards have to disappear. "They are needed – they have the established relationships in their community," he says. "I think what is happening is that the smaller yards are behaving more like true feeders. The big boys are getting bigger, and they need metal to move. You need the smaller yards to help pull out the scrap."

Consolidation in the industry is a definite trend and yards need to grow to control supply, adds Rifkin. "Acquisition is one way, and having a network is another," he says. "I don’t think that it would be efficient to eliminate the smaller yards. The collection process would simply be inefficient because the small yards marshal the scrap."

Some see the trend eliminating the middle-sized yards altogether. "I think what we are going to have in the future are superyards supported by feeder yards, with the middle being wiped out altogether," says Fred Rocchio, executive vice president of development and technology for Birmingham Steel, Birmingham, Ala. "It certainly seems to be moving in that direction."

Control is the buzzword for many scrap processors as they look to secure scrap supplies. "I think there is more pressure now on processors to secure scrap supplies and to find innovative ways to do so," says Irwin Sheinbein, director of marketing for EMCO Recycling Corp., Phoenix. "There will be more joint ventures with auto wreckers, for example, to secure auto hulks, and generally a more cooperative effort between the two industries."

EMCO, although not quite at superyard status, is the result of the consolidation of three family operations and is currently under the umbrella of Metal Management Inc., a scrap management company out of Chicago. EMCO has one main yard, three feeder yards and six other processing facilities. The company processes about 12,000 tons of ferrous and 3,000 tons of nonferrous a month.

Handling large quantities of scrap material is both a blessing and a curse, says one large processor. "Large yards like ourselves are dependent on the large scrap flows, and if that flow is slowed, equipment goes idle and efficiencies go down."

But smaller scrap dealers point out that the fear of the scrap flow slowing is shared by scrap processors of all sizes, not just superyards. "It’s something that you live with every day," says a dealer.

Also, there are challenges associated with handling large staffs and dealing with trade unions. Other major challenges for larger yards include paving, fencing, screening, security, environmental compliance, proximity to residential and commercial uses, and large fixed overhead costs which can "bite hard when intake falls," according to Schnitzer.

Transportation can also be a factor when scrap yards grow. "A processor has to ask, ‘How far can I reach out (to get scrap)?’" says Sheinbein. "You can only go out so far before it is cost prohibitive to process scrap. So, basically there are two directions a company can follow – grow each yard as a profit center with major processing capabilities, or rely on a network of feeder yards."

The major advantages of operating a superyard come from being able to achieve economies of scale, adds Schnitzer. "Also, larger yards have the ability to consolidate and hold material for market reasons."

There are some companies looking to achieve superyard status, but scrap superyards are not built in a day. "It is simply too capital-intensive to go out and attempt to process large qualities of material on a whim," says Rifkin. "You have to have something to build upon, and you can’t be a big yard simply because you want to be one."

Currently, there are several companies interested in building superyards. For example, Keywell Corp., Chicago, says it is turning its Baltimore scrap yard into a mini-superyard, and has plans to turn its Pittsburgh yard into a super processing site.

"The sites are not so much a function of acreage, but more of a function of equipment," says the company official. "In other words, having the right processing equipment to increase volume and efficiency."

Ben Weitsman & Son Inc., Owego, N.Y., is also striving for superyard status. Weitsman currently has four feeder yards and is in the process of buying four more. The company is also installing a heavy-duty shredder at its main location.

"We need to grow in order to better compete in this market," says Adam Weitsman, vice president of the company. "We need to pull out more material to feed our shredder and to support the new mill capacity that will be coming on line."

To do this, Weitsman says that it is necessary to add the additional yards that will be "positioned on the periphery of major geographic areas, but will not be in direct competition with existing competitor yards," he explains. The company also has more than 600 roll-off containers that it uses to get scrap.

When the Weitsman shredder is installed, the company expects to triple its ferrous tonnage to 30,000 tons a month. In addition to the shredder, the company has ferrous balers, shear-balers, shears and 14 cranes.

While ramping up for the expected increased demand, Weitsman has added railsides at its facilities to enhance its ability to transport the scrap to the Midwest where the new mills are coming on line, or to the East Coast for export.

Other processors that has recently added, or are planning to add heavy-duty shredders are Ferrous Processing & Trading Co., Detroit, Zalev Brothers, Windsor, Ontario, and Birmingham Steel. Zalev’s new shredder is scheduled to be operational by February 1998, and Birmingham is looking to install its shredder somewhere in the Midwest.

"The mega shredder is a quantum leap in metals recycling," says Dean Zalev, chairman and chief executive officer of the company. "We will be one of only a handful of recycling operations in North America to operate a plant of this magnitude."

The Zalev shredder installation is part of the company’s long-term growth strategy, and Maxwell Zalev, president of the company says that "this is an exciting time to be involved in our industry." He points to processing scrap more efficiently and being able to process a wider range of scrap as the two main reasons for the shredder installation.

Birmingham’s shredder was bought via a recent bankruptcy and it can produce more than 70,000 tons of shred per month.

Overall, Ratner sees more scrap superyards popping up worldwide. "It is definitely a trend that is not specific to the U.S.," he says.

"With the new mills scheduled to come on line, you are starting to see companies like ourselves position themselves to handle more scrap," adds Weitsman.

Still, quality is what really matters, according to Schnitzer. "I haven’t seen all the scrap yards around the world, but I have seen some big ones," he says. "It isn’t the size, but the quality that creates success."

The author is managing editor of Recycling Today.