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.”

The past 15 years have seen approximately 100 new shredders installed domestically.

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.