Metal shredders face stiff competition
Big metal shredders capable of munching cars, trucks, whole engine blocks and most anything else fed into their mouths are phenomenal feats of engineering costing millions of dollars each. Operating at full capacity, under ideal market conditions with advanced nonferrous sorting technology they can be huge money-making machines. But now, it appears, there are too many mouths to feed and not enough raw scrap to go around. Industry sources say that many shredders are running at 50 to 70 percent capacity. Some large shredders sit idle. But, as always, there are exceptions.
According to the Institute of Scrap Recycling Industries (ISRI) there are now more than 340 large metal shredders operating in North America, up from the roughly 120 shredders in the 1970s. And, more shredders come on line every year, many smaller, but some bigger, more powerful and more efficient than ever before.
Frank Goulding, vice president of ferrous sales and marketing for Newell Recycling in Georgia discussed market conditions in his area. Newell is the largest scrap processor in the state with 8 feeder yards, and 3, 120 x 104”, 6,000 hp shredders.
“The challenge is there are a lot of shredders that have entered the marketplace since 2008 and the amount of obsolete scrap suitable for shredding has leveled off. The pie is still the same size, but the shredder operators are getting a smaller piece of it. And, the price for that scrap has gone up significantly. So we are facing margin squeeze, meaning we are buying fewer tons for more money with a lower gross profit.”
Goulding knows his business. Since joining Newell in 1979, the company has grown from 40 employees to over 600 today. He currently serves as chairman of the ferrous division of ISRI, is a chairperson on their shredder committee, and sits on their board of directors.
“As far as the ability to sell our shredded product, demand is good,” Goulding continued. “We haven’t had any issues selling our scrap into the market. The mill buyers are able to buy the same tons as prior to all these new shredders coming into the market. They just buy it from more producers.”
Goulding reported that his shredders are running at roughly 60 percent capacity. They are focusing on lowering cost of production, trying to lean-out the cost of operating shredders and getting down the cost per ton. Newell is focusing on labor and practices, managing energy, looking at wear parts, evaluating equipment they are using to feed and support the shredder, looking downstream at other ways to separate metals and recovering more nonferrous from the residue.
“What we’ve done is better manage the time of shredder operation. We’ve tried to incorporate operating the shredder into one shift so that the production shift is also the maintenance shift and we’ve fine-tuned our practices.”
“It’s a challenge keeping them fed. As far as acquisition of materials, we just try to be price competitive and provide good service in the hope we satisfy our suppliers so that they are happy and comfortable doing business with us. It becomes a game of not only price, but good customer relations,” Goulding said.
Mike Marley has over 35 years’ experience in the metal industry. He has been reporting ferrous and nonferrous scrap prices since 1977, first for Iron Age, followed by American Metal Market and then World Steel Dynamics. He recently joined MetalPrices.com, an online prices and data reporting service, as a ferrous market specialist.
In a September speech at ISRI’s Ferrous Roundtable in Chicago, Marley said:
“Moderate summer weather brought out a lot of old scrap. Scale prices have been lowered by some shredders, but how much of a damper that will be is questionable. Peddlers and smaller dealers may hold material off the market…and then come back. Even with the reductions, they are still getting pretty good prices. That’s because there is still a fierce competition for feedstock in some markets and plenty of auto wreckers and other suppliers who are ready to play one shredder off against another.”
More recently, American Recycler interviewed Marley to get his further views on the shredder situation. “Overall, there are a couple of problems that shredders are facing these days. One is competition for feedstock. The whole makeup of the shredder industry has changed in recent years. Most people look at it as mostly a scrap industry entity where you have a shredder and a scrap yard and that’s it, but it’s not really that distinct anymore.”
“You now have a handful of North American steel mills that run their own mega-shredders. Those operate as cost-centers, not profit-centers. That gives them an advantage in terms of the prices they are able to get for material like junk cars, appliances, or anything that is shreddable. Many of these big, powerful 10,000 hp shredders can also tear apart a lot of heavier and thicker steel like quarter inch plate. Mill owned shredders operating as cost centers have a real buying advantage and can offer the highest prices without many of the costs associated with operating an independent shredder and scrap yard. In other words, they don’t necessarily have to show a profit and rarely, if ever, have freight expenses since those costs are part of the buying price.”
“Then, you have other levels. Some scrap companies have independent company shredders that operate on a steel mill property, or right next to one. They have an advantage. And then you have the guys that are out there competing with each another. If located in a metropolitan area where there may be several shredders, they are the ones that are at odds with one another competing for feedstock.
Marley reported that the automotive wrecker and junkyard businesses are also changing with the growth of chains of automotive secondary parts suppliers. “They sell the car bodies to the shredders, but the problem today is that many of these bodies are pretty much stripped down of components that are easily sold like catalytic converters, copper wire, aluminum, stuff like that. That’s a loss for many shredders. Steel mills don’t particularly like copper, aluminum or other residual elements, but shredders have managed to eliminate a lot of that from their shred because they have invested heavily in advanced downstream systems which filter out and recover a lot of nonferrous. Nonferrous has become a key element in revenue stream of shredders, the profit margin for many.”
Marley also pointed out that while most shredders seem to be operating below capacity, there are aggressive shredders that are operating as actively as possible, and some running 24/7 producing up to 50 thousand gross tons of shred per month.
To determine current trends in shredder equipment, American Recycler spoke with Riverside Engineering. Riverside Engineering, based in San Antonio, Texas, designs and builds shredder systems for ferrous and nonferrous operations, and owns the trademark “MegaShredder.” They supply rotors, castings, electronic controls and automation systems as well as provide engineering consulting services and installations. Rusty Manning, director of sales for Riverside shared his views.
“I would say that domestic demand for new shredder installations has plateaued and the expanding markets are in nonferrous separation. Over the past several years we’ve developed a line of low cost M-Series shredders that are very efficient and profitable for our customers. The shift has gone away from the big machines to medium and smaller sizes. We are working more in niche markets for certain products whether it be for nonferrous shredding or for specific markets like sheet iron, tooling scrap or bushings. The days of buying everything and just throwing it all into a shredder are becoming less and less. We are much more focused on maximizing the customer’s revenue and profit by being concerned about what’s in their waste product and extracting every bit of nonferrous material.”
Manning said that the demand for new mega-shredders is low because the market is fairly well saturated. As these mega-shedders wear themselves out the demand will be to replace parts, keep them operational or upgrade downstream technology for increased nonferrous recovery. “Someone graduating from a little shredder to a huge mega-shredder, a 122” class machine, I don’t see that happening so much.
“One of the things that we’ve done is teamed up with a company in Greeley, Colorado called Andersen Sales and Salvage where we are offering a new industry product called IQASR. This machine uses a patented air-flow separation technology that allows nonferrous materials to be more easily extracted by eddy current magnets, sensor sorters, color sorters, and optical sorters. Our IQASR allows the concentrated nonferrous material to have singularity, which helps these nonferrous separation technologies do their job much better. That’s where we’re focusing our engineering and marketing efforts,” said Manning.
Wendt Corporation is a third-generation, family-owned company located in Buffalo, New York that designs and builds automobile shredders and metal separation systems. They are the largest supplier of automobile shredding equipment and nonferrous recovery and separation technology in the U.S.
American Recycler News called on Mark Ridell, their northeast regional sales manager for Wendt to find out what’s happening from his perspective.
“There is absolutely a trend in the last two years where we’ve really seen an aggressive shift from the older philosophy that bigger is better. Because of the need for big shredders to have feeder yards spreading out anywhere in a radius of 100 to 200 miles these shredders are facing ever increasing costs for transportation and labor. That model is being revaluated and there is interest in being smarter geographically with smaller shredder builds that service 2 or 3 feeder yards, rather than 8 or 10 feeder yards supplying 1 large shredder.
“With our new shredder builds, the expense to get into the business is much smaller, the footprint required is smaller and with the unique design of our Model M6090 it eliminates the need for a shredder building as well as yards of poured concrete for support piers. Sixty inch refers to the diameter of the rotor and 90” is the width of the shredder to accommodate car bodies. This system sits on a concrete pad as opposed to requiring all the work previously necessary. And the cost for the M6090 can run as low as $600,000 to a $1,000,000 depending on site specific conditions and options.”
Ridell is also sales-service director at Wendt for international business and said he is busy fielding 15 to 20 inquiries for the M6090, both domestically and internationally.
As competition increases for scrap to shred, shredders are paying more and more for raw scrap and looking for ways to trim operating costs. With shrinking margins on shredded ferrous, everyone is working to squeeze out as much profit as possible from nonferrous stream and pay less for residue disposal. Of course, shredders still have to concentrate their primary mission…making good, clean shredded ferrous for the mills because that’s what they demand to make their recycled steel.