You’ve been chopped

The geography of the wire and cable scrap processing sector is undergoing rapid changes with the advent of restrictions and bans on baled wire scrap imposed by the government of China.

Some wire and cable scrap collected in the United States continues to head overseas, with several recycling companies formerly based in China having moved their wire processing operations to nations such as Malaysia, Thailand and Vietnam. Additional processing capacity also has been added in Hong Kong and Taiwan. All these destinations combined, however, are unlikely to have the same ability to import and process as much wire scrap as what had formerly headed to China.

Existing wire chopping firms in the U.S. are evaluating how much (and what types of) additional material they may want to accept, while other scrap processors research whether the time is right to invest in an automated wire processing system.

Huntington Beach, California-based Copper Recovery processes wire and cable using equipment it manufactures in Europe and sells to the global market. The firm also represents a handful of European recycling equipment manufacturers in the U.S.

The company’s Beau Janzen has helped manage Copper Recovery’s California plant and has spent many years working with scrap companies that are researching the wire processing sector. His responsibilities include working with processing firms to determine whether they should enter the wire chopping arena and, if so, how they should equip themselves to participate in the competitive sector.

In the following interview, Recycling Today Senior Editor Brian Taylor asks Janzen to examine some factors that go into a company’s decision as to whether and how to enter the wire processing business.

Recycling Today (RT): At what monthly level of volume should scrap dealers consider doing some of their own wire and cable processing on-site?

Beau Janzen (BJ): For our smallest hand-fed unit, Phoenix, you need to be moving about 30,000 pounds per month of ICW (insulated copper wire) for a reasonable payback period. Phoenix offers the capacity to process up to 120,000 pounds per month. This capacity is based on processing five days per week, running the machine seven hours each day with 12 AWG (American wire gauge) and Romex (residential branch) type of wire in the 70 percent yield range.

RT: Is there an automation “chain” a smaller recycling firm should consider, such as starting with a stripper or a smaller chopper?

BJ: Every scrap yard should own a good-quality, high-performance stripper. They are often one of the first pieces of equipment a cable processor purchases, but once you get smaller than pinky finger size wire, you are just spinning your wheels.

In my opinion, any cable recycling machine smaller than our expandable Phoenix model has so many processing restrictions [and] compromises in materials, parts and construction that must be made to meet a price point, they are not practical machinery for the American scrap metal recycling dealer market as a long-term capital investment, which often becomes the primary profit center of many yards. Smaller machines are more suitable for large electrical companies with homogeneous and simple material streams.

RT: How can recyclers determine which types of wire and cable can be chopped and separated cost-effectively? Has this changed with barriers in china?

BJ: We can advise very accurately about production throughput levels depending on the different material types and mixtures since we are also a processor ourselves. This information is critical to the calculation. Since every yard purchases material at different prices, has different overhead costs, etc., it is really down to purchasers to calculate their specific processing costs in the end. Otherwise, for quick and dirty calculations, we advise using 5 cents per pound as a comprehensive processing cost for our equipment. This includes the cost of the machine, operator, floor space, depreciation, parts, cost of money, etc. The equation has changed, and it favors processing in-house.

RT: How can copper price volatility affect return on investment for wire chopping operations?

BJ: Margins will shrink as prices decrease, even if your purchasing price is reduced accordingly. Copper is a commodity and fluctuates like every other commodity, albeit a bit more volatile than most. Historically, prices rise overall, and the customer will have this equipment for the next 20-plus years. It makes no sense to base a long-term capital investment on the short-term movements of a commodity. Depending on the term you choose for the argument, I think the margins are overall very steady and money can always be made by processing if you buy right.

RT: are there any end markets for wire and cable jacket materials?

BJ: Currently, there are no known end markets for ICW tailings. Some customers have managed to find some outlets [that] will take the material for free versus paying for landfilling. If somebody out there has an outlet for this stuff, please contact us—we know where it all is.

RT: do you know of any risks that have caused wire processors to leave the sector?

BJ: We do not have many examples of unsuccessful processors as our customers. The few that have abandoned processing have all been father-and-son ventures where disagreements forced them apart. Otherwise, if you are successfully trading now, adding processing will only increase your profitability.

RT: What advice would you give to customers with concerns?

BJ: Training is where it all starts. From there, service and support are the next key factors in running a successful wire chopping operation. Make sure you choose a manufacturer [that] is knowledgeable, communicative and has processing experience themselves.

One of the biggest problems we see is employee turnover. The original trainee will depart, and nobody else knows how to run, service and maintain the equipment. During initial training, it is advisable to train multiple people on operations and maintenance, including company principles.

This turnover issue is why we offer all of our customers free training here at our facility. If you have a new operator, send him down and he can work side by side with our operator while we are processing, and he can get all the factory training [he needs] to be successful. It’s only an airplane ticket, hotel and some food.

Beau Janzen is with Copper Recovery, which is based in Huntington Beach, California. More information is available from www.copperrecovery.com.