Upping the Ante

The Institute of Scrap Recycling Industries Inc. (ISRI), based in Washington, D.C., has once again upped the ante at its Annual Conference & Exhibition, which had record attendance April 6-10 in Las Vegas. More than 5,700 attendees spent a good part of the week discussing markets and trends as well as perusing the latest products and services from exhibitors during the event. Representatives from several dozen countries took the opportunity to network with scrap recyclers from North America at the convention.

"ISRI has spent years building attendance models based on industry and registration trends, and our strongest model showed attendance expectations of around 5,300," Chuck Carr, vice president of member services for ISRI, says. "None of them suggested the 5,762 attendees that ultimately registered."

Along with record attendance, the event also enjoyed a record number of exhibitors, with more than 200 companies showcasing their products and services in the exhibit hall.

During the opening Chair’s Breakfast, ISRI Chair Frank Cozzi presented Lifetime Achievement Awards to Robert Goldstein, chairman and CEO of Alter Trading, St. Louis, and to the family of the late Si Wakesberg, a long-time editorial staff member of the association’s Scrap magazine.

In his opening remarks, Cozzi took the opportunity to highlight the history of ISRI, from its formation through the merger of the Institute of Scrap Iron and Steel (ISIS) and the National Association of Recycling Industries (NARI) through to the accomplishments that have occurred during his time as the association’s chair, including the growth in ISRI’s membership and the creation of the Congressional Recycling Caucus.

During the Chair’s Breakfast, guest speaker Malcolm Gladwell also offered his thoughts on the concept of historical "tipping points," which can seem inconsequential at the time, but often have profound and lasting impacts.

The programming during the convention included traditional commodity-focused sessions for ferrous, copper, aluminum, nickel and paper, as well as sessions on some more topical areas of interest to the industry, such as consolidation, safety and scrap metal theft.

Although electronic media and information transfer has put limits on paper consumption in North America, the fast-growing global economy continues to make recovered fiber a valuable commodity. In a session at the ISRI 2008 Convention & Exhibition, two recyclers and a railroad representative touched on the challenges associated with serving secondary paper markets.

Kevin Duncombe of California-based Western Pacific Pulp and Paper noted that while Chinese ports had invested in improvements, U.S. ports showed severe strain from under-investment. In California, this under-investment was combining with air quality laws to make ports difficult places in which to operate. Additionally, a 13 percent drop in imports combined with a 17 percent boost in exports meant scrap paper exporters were facing dramatic reductions in container availability and sharply escalating shipping rates, according to Duncombe.

Additional cost pressures included an increase in diesel fuel costs in California from $2.74 per gallon in early 2007 to $4.03 per gallon as of early April, making it more expensive to get containers to the port as well. Among potential solutions noted by Duncombe were the use of alternative-fuel vehicles and the proposed construction of a maglev rail-to-port system in Southern California.

Recovered fiber broker Ranjit Baxi of J&H Sales International Ltd., based in London, remarked that more than 180 million tons of recovered fiber was being shipped annually to paper mills worldwide, with Asia importing some "5,000 40-foot containers every day." Outbound shipping costs from Europe had escalated even higher than what American recyclers were experiencing, according to Baxi.

Duncombe and Baxi each urged increased dialog between North American and European recovered fiber exporters as a way to ensure that shippers did not "play" one market off the other.

On the ground in North America, Steve Potter of CSX Rail, based in Jacksonville, Fla., urged recyclers to consider shipping more by rail as a way to avoid highway congestion and lost time when shipping by truck. He also pointed to the fuel efficiency of railroads as a reason why rail transportation should continue to grow in cost efficiency. One gallon of diesel fuel carries a ton of freight 423 miles by rail, Potter says. "If 10 percent of truck freight moved to rail, that would save 1 billion gallons of fuel [each year]," he adds.

A slowdown in the United States economy used to mean a likely drop in demand and pricing for steel and ferrous scrap. With the economies of East and South Asia becoming the predominant producers and consumers of these commodities, however, scrap recyclers in North America are taking part in a new market.

In a session at the ISRI convention, attendees heard from speakers across the steel and ferrous scrap spectrum who offered reasons why there is no longer a link between a slower U.S. economy and a dropping scrap price.

Steel industry analyst Aldo Mazzaferro of Goldman, Sachs & Co., New York, remarked that even with the economic slowdown, "U.S. steelmaking is short of capacity" to serve the domestic market, which is why steelmakers are charging $1,000 per ton for hot-band and $850 per ton for rebar.

American steelmakers are producing at about 90 percent to 92 percent of capacity, so "there’s really not much else to squeeze out of U.S. mills," according to Mazzaferro. Additionally, the weak dollar is not making the U.S. a preferred market for imported steel, meaning "essentially there is a bidding war for imported steel."

John Harris, a metals buyer for ArcelorMittal based at one of its Canadian locations, said scrap dealers in the U.S. are benefiting from the weak dollar. "No steel is coming in here, [and] scrap is leaving at a faster rate because it’s a good buy anywhere in the world."

Long-time shredding equipment supplier Alton Scott Newell Jr. of The Shredder Co. LLC, Canutillo, Texas, offered a prediction that the world will remain "materials short" for some time, meaning recyclers will continue to experience healthy demand for their products.

While steel industry consolidation is taking hold, Newell is less certain that the scrap industry can consolidate in the same way. If steelmakers are buying scrap assets with the premise that they will be able to obtain scrap at a lower cost, he warned them that this "doesn’t work."

During the session’s question-and-answer period, addressing this topic, analyst Mazzaferro said, "When steel mills buy a scrap company, they aren’t buying a scrap mine. They still have to buy the scrap [continually]."

And Jeremy Sutcliffe, managing director of Sims Metal Management, also questioned to what extent the mill companies could affect pricing. "Water finds its own level, and scrap prices find their own level—it will be whatever it will be," Sutcliffe said.

Americans who worry about the U.S. trade deficit might be surprised to learn that the recycling industry in the United States is exporting at a level that is straining the shipping network. In a session at the convention, recyclers heard just how much trade conditions have changed from shipping industry representatives.

As scrap export markets ramped up earlier this decade, recyclers benefited from an abundant availability of shipping containers at a low rate. These containers would otherwise wait in the United States for a long time to be refilled or even leave the country empty. This circumstance began changing late last year.

"In general, places like Memphis or Chicago [are] low on containers right now," said Mario Bruendel of the Newport Beach, Calif., office of freight forwarder Fr. Meyer’s Sohn North America, "and carriers are increasing their rates." Bruendel cited the weak dollar as having caused not only a booming export market, but also a decline in containerized imports.

Greg Dixon of the Staten Island, N.Y., office of ZIM American Shipping, confirmed Bruendel’s remarks and added another key observation: When shipping lines saw forecasts indicating that America’s consumer economy was slowing down, they repositioned containers to serve the European market.

"Last October, we began to realize at ZIM that a couple things were happening," said Dixon, referring to "stagnant" shipping levels from China to the United States. "Based on that, we re-deployed more equipment and services for the China-to-Europe routes," he explained, noting that the container redeployment level may have been as high as 35 percent of capacity.

In a separate session, attendees learned from attorney Jeffrey O. Moreno of Thompson Hine’s Washington, D.C., office that recyclers who shipped by rail had new options to appeal their rates through the Surface Transportation Board (STB).

ISRI’s safety motto, "Safely or not at all," was a prominent theme in the association’s convention programming. From 2001 to 2007, 340 accidents or injuries were reported, according to Willis Corp., which provides the RecycleGuard insurance program for the recycling industry. Most driver injuries occur from slips and falls from truck cabs and containers, being struck by or caught between objects and manual handling of scrap, Tom Herod, ISRI’s transportation safety/training manager, said during the driver safety session.

Herod explained the setup of the ISRI Safety Transportation Program, which was unveiled at the show. ISRI describes the program as a multi-focused strategy designed to educate members on the requirements and best practices of an effective fleet safety program.

According to the ISRI Web site, the program provides ongoing support to members through various education and training elements, including:

While the 2008 ISRI Convention & Exposition was officially the largest convention in the association’s history, attendees of next year’s convention can expect to see some changes, despite the familiar venue.

"The 2009 convention will be in entirely new space within the Mandalay Bay Resort and Casino," Carr says, noting that the change will provide the association with more room for educational programs and networking events as well as a larger exhibit hall.

In 2009, the ISRI Tire Recycling Business Summit, which is presently held in conjunction with the Commodities Roundtable Forum, will join the ISRI Convention & Exhibition.

The 2009 ISRI Convention & Exposition will be in Las Vegas at Mandalay Bay Resort and Casino April 26-30.