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Domestic
shredders starving for feedstock
Today, a large steel shredding plant equipped
with the latest available downstream nonferrous technology can
easily represent a capital investment of $20 to $25 million dollars.
To operate one profitably, the owner needs a consistent flow
of raw material. Hopefully, a supply that comes from not too
far away and closely matches the capacity of the machine during
hours of operation.
This steady stream of material pays for the
labor and overhead costs associated with running the shredder.
The expense of acquiring scrap and transportation are the other
major factors in the profitability equation. That explains why
shredders are habitually hungry for scrap. Keeping them satiated
is a year-round, never-ending job and the primary focus of management.
It has been particularly tough for shredders
in a slowly recovering economy, but there are optimistic signs
that recent increases in new vehicle sales will yield more old
bodies for the shredders. From November 2009 to November 2010,
total United States light vehicle sales (passenger cars and light
trucks) were up 16.9 percent.
Liberal government incentives designed to
encourage purchases of the new crop of electric vehicles entering
the market in 2011 are also likely to drive greater numbers of
older vehicles to the scrap yard. While overall domestic manufacturing
has been slowly recovering since the financial crisis, it remains
weak. In many areas of the country, manufacturers are generating
less industrial scrap and some shredders are suffering from constricted
supply.
“Currently, flow to our shredder has been
steady, but feed material is one of our continuous challenges,”
said a facility manager at Alter Metal Recycling. He’s referring
to their 5,000 hp Texas Shredder that consumes 100 tons per hour.
“We are generally trying to be creative and are constantly looking
for new sources. Every little bit helps. If there’s a new source
and someone comes up with a proposal, you look at it and try
to make it work. Waste facilities are now separating trash streams
as much as possible. The scrap you may get from a waste separation
stream or cleanup is not going to be prime scrap, but it certainly
has value and the shredder will get out the metals.”
Alter is one of the largest scrap metal processors
in the country with offices and processing plants across the
central United States. “Feedstock is always a challenge, but
our company has an extensive network of yards, so this facility
is not dependant solely on the inbound customer base at this
location,” he added.
While many companies are keeping their shredders busy, others
are starving for raw material.
Metso Recycling-Texas Shredders, along with its European sister
company Metso Lindemann, has one of the world’s largest bases
of installed shredders and metals processing equipment. Scott
McGlothlin, vice president of operations for Metso Recycling-Texas
Shredders is in close contact with the North America shredder
industry. “Many larger shredders are hungry for supply. There
are not a whole lot of locations where a 300 ton shredder is
justified because they cannot get enough material to feed them.”
There are, of course, always exceptions, but it generally appears
that the North American market is saturated with shredder capacity.
“The supply of feedstock is not really there to handle the number
of shredders in North America. Many of the emerging markets around
the world are adding new shredding plants, but in the United
States, it is more replacing, consolidating and upgrading than
new greenfield plants,” said McGlothlin.
Industry experts say there are approximately 300 shredders in
North America doing over 3 to 4,000 tons per month. More than
200 tons per hour is considered in the mega-shredder range.
“We are not going to see another shredder boom like we saw four
or five years ago. Over the past 15 years or so, we’ve gone from
about 200 to about 300 shredders in the States,” said McGlothlin.
He noted a number of recent trends:
•Tightness of supply is driving shredders to maximize the profits
on the material they buy which has led to the rise of large investments
in sophisticated systems to recover more nonferrous metals and
copper wire. There are also many research and test projects exploring
the value of the remaining waste.
•Shredders are using extra profits from increased recovery of
nonferrous metals and other materials that they had been throwing
away to buy more raw scrap.
- Shredders are buying more feeder yards to better ensure
supplies of raw materials.
- Feeder yards are looking to buy smaller shredders that
process 2,000 to 3,000 tons per month. (McGlothlin mentioned
an increased interest in 2,000 hp shredders that average 40 to
50 tons an hour).
- Shredder operators are going farther away to acquire supply
and dealing with more baled material to reduce transportation
costs from distant feeder yards. And while transportation costs
are eating into profits, a steady diet of cost-saving bales will
lower throughput and eventually take a toll on various drive
components.
“For most shredders, there’s a certain volume they can get fairly
easily at a reasonable price, but once they get past that volume
they have to start going farther away to markets with more buyers
and higher prices,” McGlothlin concluded.
Adam Weitsman, president of Upstate Shredding-Ben Weitsman & Son,
sees the future of shredding this way: “There will be fewer shredders,
but bigger facilities of the ones that are left standing.” In
Owego, New York, Upstate currently operates a 6,000 hp, 200 ton
per hour shredder that is being upgraded to a 10,000 hp machine
that will handle 400 tons per hour. In November, the installation
began on the new Riverside Engineering model M-122 auto shredder.
To maximize current recovery and prepare for increased volume,
Upstate has already invested heavily in its post-shredding line
with the latest nonferrous recovery equipment.
When asked what he is doing to ensure supply for the added capacity,
Weitsman answered, “We’re buying feeder yards and increasing
the size of our trucking fleet.”
Upstate already had a good feeder yard system in place with another
location in Owego and facilities in Binghamton and Ithaca, but
a year ago it started a series of acquisitions starting with
the Matlow Company, that was renamed Ben Weitsman of Syracuse
as an additional feeder yard. In November, that location held
a gala customer and community appreciation day that featured
a barbeque, entertainment and prizes. It drew over 1,200 visitors
to the yard. Many brought scrap for a one day bonus pricing promotion.
In July, Upstate bought the Weinstein Scrap Metal Corporation
in Jamestown, New York. In August, it acquired Liberty Scrap
Metal in Liberty, New York, and in October purchased Towanda
Iron & Steel in northeastern Pennsylvania.
Weitsman told us that he is continuing to look for acquisition
opportunities as part of the company’s growth strategy. He is
looking to provide 4,000 tons per day for the shredder and says
that he is not finding it difficult to acquire supply to feed
his shredder or to fulfill customer orders. “There has not been
a shortage of vehicles, either,” he said. For 2011, Upstate expects
to process 800,000 tons.
While some operations are thriving for now, it remains to be
seen just how long the saturated domestic shredder market can
continue to operate before the combination of growing competition
and shrinking supplies leaves their voracious machines starving
for work.
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