The export market has helped somewhat, providing demand and stronger pricing for zorba. However, demand for traditional secondary grades, such as painted siding and aluminum extrusions, appears to be largely on a spot basis off the West Coast, a source with a wholesale processor in that region says. He adds that export pricing for this material is “not wonderful.”
When it comes to the zorba being generated by auto shredding plants in the U.S., a source with a processor that operates a number of yards based primarily in the Midwest says U.S. and export pricing is disconnected. “The export price is much stronger and has been trending upward for the last few months,” he says. “The domestic market is stagnant or not buying much if any.”
China’s zorba buying and its aluminum scrap buying from the U.S. in general decreased over the last year largely because of the 50 percent tariff the country levied on U.S. aluminum scrap imports in April 2018.
The effect of the tariff can be seen in overall aluminum scrap imports from the U.S. to China. In November of 2017, China imported 75,400 metric tons of aluminum scrap, according to the United States Geological Survey (USGS), and a total of 745,000 metric tons for the year through November. By November of 2018, the most recent month for which figures were available at press time, U.S. exports of aluminum scrap to China fell to 38,300 metric tons. The year-to-date figure through November was 462,000 metric tons, according to the USGS.
However, according to trade data reported by the Institute of Scrap Recycling Industries (ISRI), Washington, other markets more than made up for the drop-off in Chinese demand. Total U.S. aluminum scrap exports rose 12 percent last year to 1.76 million metric tons, ISRI notes, with increases in shipments to Vietnam (672 percent), India (174 percent), Malaysia (228 percent), Indonesia (104.5 percent) and Taiwan (129.5 percent) helping to more than make up for the decline in Chinese buying.
Outside of Southeast Asia, Brazil increased imports of U.S. aluminum scrap by nearly 2,130 percent, ISRI notes. That country went from importing 293 metric tons of this material in 2017 to 18,260 metric tons in 2018, according to data from the U.S. Census Bureau and U.S. International Trade Commission.
The Midwest-based processor says his company has been shipping its zorba to India and various Asian countries. “India has been a much bigger buyer of zorba in particular over the last six to eight months,” he adds.
Additionally, the company has been exporting certain secondary and mill-grade scrap that it normally would sell domestically, though he declined to provide additional details on the specific grades.
The source based on the West Coast says other traditional overseas destinations for aluminum scrap also have been soft. South Korean markets for aluminum scrap have “eroded,” he says, while Japan is purchasing material, though only on a spot basis.
Chad Kripke, vice president, risk management region, for the aluminum trading firm Kripke Enterprises Inc., Toledo, Ohio, mentions the harsh weather that hit the Midwest in February, adding that it slowed the flow of material into yards.
The processor based in that region also mentions the frigid temperatures the Midwest experienced in February and their effect on production in that region. “February was a terribly hard month for most of the Midwest because of the weather.”
He adds that peddler traffic decreased a “decent amount,” reducing the amount of scrap available. “There’s not as much of a glut.”
He continues, “A lot of the consumers have metal bought. On paper, their needs are filled. But everyone’s generation is a lot less than they have anticipated, so I think we are working through that glut. And some consumers are having to go out on the spot market and having to pay higher prices just to get prompt metal in because the material they bought just isn’t showing up—more so on the mill side than on the secondary side. But, in general, scrap is much tighter than it was.”
The West Coast source says buyers of aluminum scrap in his region are not purchasing the segregated alloys that they normally would, with one consumer saying it is bought out through mid-April.
Kripke says operational issues at some consuming facilities created a bottleneck in the market that pent up supply and widened spreads. However, he says he sees things starting to normalize, with a clearer picture likely to emerge in the second or third quarter.
However, he sees a considerable issue with the oversupply of automotive stamping scrap available on the market, adding that the impact this situation is having on the market can’t be stressed enough. “It’s like drinking through a fire hose,” Kripke says.
Kripke says the aluminum content in vehicles is increasing with every model year, but there is no place to consume these high volumes once they enter the scrap stream.
“A lot of this mixed alloy 5000, 6000 auto sheet has found its way into the MLC (mixed low-copper clips) stream,” he says. “If you’re a sheet mill, for example, and trying to make 3105 or 3004, alloys with lower silicon and magnesium and high manganese, and you put this stamping scrap in there that has 1 to 1.5 percent silicon or 5 percent magnesium in it, you can only blend off so much of that,” Kripke says. “You can’t make vanilla cake with chocolate cake batter.”
Greg Wittbecker, a Pittsburgh-based aluminum industry analyst with CRU Group, mentioned this issue in a December 2018 webinar hosted by the Aluminum Recyclers Council (ARC), Wauconda, Illinois. “When you get into the automotive segment, that’s where you see some constraints in people being able to absorb this tremendous increase in automotive-related scrap,” Wittbecker said. “The difficulty that is involved with the automotive alloys is that some of these alloys are more or less scrap friendly, so to speak. In other words, different mills have higher or lower capabilities of absorbing these scraps when they come back from different OEMs (original equipment manufacturers).”
The processor based in the Midwest says whatever aluminum scrap his company buys, it’s able to sell, shipping most orders within 30 days. “The mill side is harder; the secondary side is easier.” He says some extruders and mills are further out with their delivery dates, but “not so far out that we would stop buying.”
Kripke and the Midwest-based processor mention the historically wide spreads on secondary scrap grades relative to London Metal Exchange (LME) prices. “There is a lot of pressure on ingot prices at secondary smelters,” Kripke says, adding that spreads have widened between 5 and 10 percent in the last year.
The processor based in the Midwest says we’ll see more of the same as the year progresses. “Some items will be tough to sell that are tough to sell now,” he says, but he doesn’t foresee a further degrading of the market. Instead, he says, “Talk of a glut will go away,” and conditions will normalize.
Kripke says once the domestic market gets over its “hangover” from 2018, as long as the economy and factory production remain strong, “the market will normalize, and you’ll start to see more competition for some of these [grades].”
Thomas Modrowski, president of Braidy Atlas, seeks to bring disruptive change to the aluminum industry.
Earlier this year, Braidy Industries Inc., headquartered in Ashland, Kentucky, appointed Thomas Modrowski president of Braidy Atlas, its subsidiary that has plans to build a $1.6 billion aluminum rolling mill in Ashland. In this new role, Modrowski is tasked with overseeing mill completion and integrated aluminum sheet production for Braidy Atlas, a greenfield aluminum rolling mill that plans to serve the automotive and aerospace industries by providing lightweight sheet aluminum.
Modrowski has nearly 40 years of experience in aluminum and steel processing, as well as experience with greenfield construction in the steel industry. He says he is looking forward to this “once-in-a-career opportunity to build a best-in-class operation from the ground up.”
For Modrowski, constructing this plant is an opportunity to eliminate “inefficiencies, customer frustrations, quality concerns and unnecessary cost drivers by design and from day one of operation.”
He is joined in this task by “several lifelong metals industry veterans” who he says are eager to “set a new standard for the industry.”
Modrowski adds, “With all of the rapid changes in the markets, it’s a great time in the metals industry to be nimble and disruptive.”
Thomas Modrowski (TM): At Braidy Atlas, we believe a greenfield aluminum rolling mill is long overdue. The youngest in the U.S. was built 35 years ago. The oldest was built roughly 99 years ago. The equipment layouts operating in facilities simply cannot efficiently meet the high demand of today’s automotive customers.
Throughout their careers, our experienced team has collectively processed and shipped millions of tons of carbon steel and aluminum sheet product destined to make hoods, deck lids, doors and other automotive outer body panels. Our facility has been designed utilizing the team’s collective experience to eliminate the inherent issues found in the older facilities of our competitors.
TM: We sought to qualify over 24 sites at the beginning of this endeavor. Ashland, Kentucky, became an easy choice, providing incredible transportation logistics to our target customers and positioning us to be the leader in closed-loop recycling.
In addition to favorable existing conditions and facilities, including an excess of available advanced manufacturing workforce candidates and a community college system fully capable of providing the required training, we have received local and state support for our vision. In fact, we had nearly committed to another site when Gov. (Matt) Bevin began his communication with Craig Bouchard, our CEO.
After our first visit, and once we were presented with the numbers, especially concerning the employable base of advanced manufacturing workers, it became a clear choice for us. Ashland is the right home and presents us with over 20 competitive advantages, including access to water, rail and land transportation, favorable utility rates and a very warm and welcoming community that has invested in our success from day one.
TM: We’ll have about 1.7 million square feet under one roof. This will be the 13th largest building in the world—as big as two pentagons.
German mill builder SMS is providing both the hot-strip mill and the two cold-reduction mills, as well as the ingot preparation machines, roll shop, material handling automation and recoil line.
Austrian manufacturer Ebner is providing our melting/casting machines through its subsidiary Gautschi, as well as all heat-treating equipment, including hot-strip mill reheat furnaces, batch annealing shop and both CASH (continuous annealing solution heat) lines.
We have taken no technology risk, as all of the equipment is successfully in operation somewhere in the world, and both companies are recognized leaders in their fields of expertise.
TM: We have designed the facility to provide the widest fully processed sheet available at 104 inches. The facility has a designed capacity of 500,000 tons of hot roll and 300,000 tons of fully finished cold roll. We’ll be producing 3000x, 5000x and 6000x series alloys, with the capability on our CASH lines to produce 7000x series.
Additionally, with our recently acquired company incubated at Northwestern University, NanoAl, we anticipate delivering material strengths 20 percent greater than those currently available.
Additionally, our technical team, born out of MIT (Massachusetts Institute of Technology) and located in Massachusetts, has been working on technologies that have the potential to refine various scrap sources, including UBCs (used beverage containers), further distancing us on the quality/cost curve from our current competition.
TM: We have begun discussions with a broad spectrum of potential partners, including those in scrap collection and processing. All scenarios demand a local presence with the ability to provide molten aluminum to our cast house.
TM: We don’t disclose the names of our prospective customers. That said, we have nonbinding MOUs (memorandums of understanding) or binding take-or-pay arrangements from a domestic and international base of roughly 20 top OEMs (original equipment manufacturers) and large service centers exceeding the capacity of the mill. We are currently planning to size those commitments to the designed capacity of the mill.
TM: NanoAl has cracked the science of nanocrystalline strengthening technology as applied to aluminum applications, specifically.
With this technology, our partner, one of the world’s largest wire and cable companies, is already producing high-performance aluminum wires for a number of conductor applications.
At Braidy Atlas, we’re tasking them with producing versions of super- aluminum for rolled sheet products that are 20 percent stronger than what is available today.
In addition to making aluminum sheet metal stronger, NanoAl’s technology is able to make aluminum products that conduct electricity and heat better to operate at higher service temperatures. All of this would make for a seismic shift in the landscape of light weighting and high-performance applications for sheet aluminum.
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The LME ferrous scrap contract saw increased activity in 2018, while the new Nasdaq contract has started gaining attention.
Exchange services and brokers who have a stake in ferrous scrap trading contracts can look back on 2018 as a year when activity and interest in using the contracts as a hedging tool grew considerably.
Backers of the Nasdaq Futures Exchange (NFX) and London Metal Exchange (LME) contracts remain optimistic that ferrous scrap processors, brokers and mill buyers are on a path to using hedging as a risk minimization tool the same way buyers and sellers of nonferrous scrap metal use such contracts.
While there are reasons to be optimistic, ferrous scrap trading advocates also tell Recycling Today more positive momentum is needed before hedging is entrenched in the steel and ferrous scrap industries the way it is in the nonferrous sector.
The contract offered by New York-based NFX was just launched in the first quarter of 2019. John Conheeney and Mike Frawley of New Jersey-based World Steel Exchange Marketing (WSEM), which seeks to develop and support the NFX Midwest Shredded Scrap Steel Futures Contract, say time is needed for a community of steel futures traders to develop.
“Acceptance of new futures contracts takes time,” Conheeney says. He adds, however, “We have broad interest across the entire ferrous industry developing in these contracts.” In addition to offering its Shredded Scrap contract since January 2018, NFX also launched a hot-rolled coil (HRC) steel contract in December 2018.
Collateralized financing and referencing of LME prices in physical contracts are two key trends that could change the scale of the ferrous scrap derivatives market in 2019.
In 2012, the Chicago and New York Mercantile Exchange organization (COMEX and Nymex) introduced a contract for prompt or busheling scrap tied to Fastmarkets AMM Midwest Index pricing. As of early March, the busheling contract showed zero volume traded the previous day and a limited amount of open interest. A companion heavy melting steel (HMS) contract showed zero volume and zero open interest.
Subtracting the somewhat dormant Nymex contracts, the London-based LME thus has a first-mover advantage with its LME Steel Scrap contract, launched in late 2015. The contract is tied to Platts obsolete scrap pricing for import shipments purchased by Turkish buyers.
Alberto Xodo, vice president of sales with the LME, says 2018 proved to be a breakout year for the contract. “In 2018, we saw traded volumes of LME Steel Scrap reach around 5 million metric tons, roughly double the previous year’s volumes.”
Xodo says he sees positive momentum in the nature of conversations with current and prospective clients in terms of how they view hedging ferrous scrap.
“If we look at the annual accounts of certain large recyclers, four or five years ago they would have mentioned a desire to manage steel price risk that was frustrated due to the lack of a suitable instrument,” he says. “If we look at the most recent accounts of the same companies, the mention of such a tool not being available has been removed. Potentially [it’s] just a simple omission, or perhaps it is a sign indicating they have been dipping their toes and started managing steel price risk on the LME.”
He says recyclers have been “much more inclined to embrace the LME Steel Scrap futures in the earlier phases” compared with mill buyers. However, Xodo adds that “a number of steel mills have begun testing use of the LME Steel Scrap contract and also have expressed the view that once liquid markets to hedge both inputs and outputs become available, risk management will become a real strategic option for their businesses.”
Backers of steel and ferrous scrap futures contracts report that a common objection they hear from potential customers involves a lack of choices in such contracts. That objection may be starting to recede, in part because of two more London Metal Exchange (LME) contracts being introduced in the first quarter of 2019.
The LME’s two additional steel futures contracts—for North American hot-rolled coil (HRC) and for HRC destined for China—debuted March 11. The additions mean steel producers and ferrous scrap traders will have 13 contracts based in either North America or the United Kingdom to consider using. (This includes seven contracts offered by the Chicago and New York Mercantile Exchange organizations, COMEX and Nymex. Only two of those contracts—one for HRC steel and the other iron ore—experience significant activity.)
North American scrap processors, steelmakers and export brokers now have choices, so what are they choosing between? John Conheeney and Mike Frawley of New Jersey-based World Steel Exchange Marketing, say those two contracts provide several advantages. “The NFX Fastmarkets AMM Midwest Hot-Rolled Coil Index is priced daily, and we believe provides a superior sense of the market than the competition’s index, which is a look-back price,” Conheeney says.
Alberto Xodo, vice president of sales with the LME, can point to the longer track records of the LME Steel Scrap contract, introduced in 2015, and its Steel Rebar contract, also introduced in late 2015. He says 5 million metric tons of volume was traded using the LME Steel Scrap contract in 2018.
This is more than double the trading volume of 2015 through 2017 combined. Xodo is optimistic use of the two increasingly well-established contracts by sellers and buyers of ferrous scrap and steel rebar will grow.
New York-based trader and consultant Nathan Fruchter of Idoru Trading Corp. says prodding processors or mill buyers to try contract trading can require patience.
“I have suggested plenty of times to recyclers to dip their toes in the water; it usually falls on deaf ears,” he says.
On that outputs side, Nymex, the LME and NFX offer finished steel futures contracts, with the LME’s tied to steel rebar and the NFX contract tied to HRC steel.
Advocates of the ferrous scrap contracts point to several reasons why recyclers and mill buyers alike can benefit from the risk management aspects of making trades tied to the contracts. “Price opportunity and volatility are key drives,” Frawley says. He cites price drops in the second half of 2018 as having provided a perfect example.
“In early June 2018, second half of 2018 futures could have been sold at a $395 per ton average price.” That sale figure could have been realized even though “shredded steel scrap prices dropped under $320 per ton in September,” Frawley says.
Regarding such scenarios, he says, “The tipping point for many will come when the pain of not being hedged will outweigh the fear of taking the plunge.”
With scrap and finished steel contracts available, Fruchter says steel producers have two good reasons to begin hedging. “Mills should have greater interest because they can buy and sell using these contracts for their steel as well as their scrap, whereas recyclers can only hedge their scrap.”
Xodo says bankers who like to see more evidence of stability from their metals sector clients can see hedging as a plus. “Two key trends have been slowly emerging, and in 2019 they could change the scale of the ferrous scrap derivatives market by orders of magnitude: collateralized financing and referencing of LME prices in physical contracts,” he says. “We have heard of a number of banks beginning to offer financing to corporations against hedged scrap as collateral,” Xodo continues. “This type of transaction is beneficial for both parties.”
He also points to the commodity pricing volatility risk minimization benefits. “It provides both buyers and sellers the ability to manage their risk exposure flexibly according to varying market conditions and risk appetite,” he says. “It also allows both parties to Xodo on the negotiations around the specific premium or discount and value-add of the transaction rather than having to discuss the market price over and over again.”
While acknowledging that firmly establishing new trading contracts is hard work, Frawley, Fruchter and Xodo all say they see momentum building for the ferrous scrap contracts.
Fruchter sees a glimmer of hope based on 2018 LME activity but repeats his assertion that the timeline stretches forward.
Frawley says the NFX contract, tied to Fastmarkets AMM Midwest shredded scrap pricing, “seems like the ideal scrap product to list,” since “obsolete scrap makes up about 80 percent of the U.S. scrap market.”
Xodo says “a few major players” in the recycling sector “have been exploring how to effectively structure long-term physical supply transactions referencing the LME prices for steel scrap.”
The LME is demonstrating confidence in its steel and ferrous scrap products by introducing two additional products March 11, he says. “Until now, steel mills have not had appropriate instruments to hedge their outputs, and this is a gap that the current LME Steel Rebar contract, as well as our new ferrous contracts—LME Steel HRC North America and LME Steel HRC FOB (freight on board) China—aim to fill.”
Frawley is bullish on the future of hedging in the steel and ferrous scrap sectors. “Those who work to develop their expertise in this space will reap significant rewards,” he predicts. “To us, it feels like the tinder is dry, and we are just looking for a spark.”
The author is senior editor with the Recycling Today Media Group and can be contacted at email@example.com.
If you’re a fan of craft beer, you’ve most likely encountered PakTech’s can carriers, which are made from 100 percent recycled high-density polyethylene (HDPE). These carriers, available in an array of colors, protect the cans’ tops from dirt and provide a comfortable and convenient way to transport them, says Gary Panknin, the Eugene, Oregon-based company’s sustainability officer. PakTech also makes handles for bottles and other applications. Ninety percent of its products are made solely with recycled HDPE, and Panknin says PakTech hopes to reach 100 percent by year-end.
In 2018, the company says it kept more than 102 million gallon-sized milk jugs out of landfills by using postconsumer resin (PCR) in its manufacturing process. Since 2012 when PakTech started using PCR, it has consumed the equivalent of 338 million of these containers.
“Since we started using recycled HDPE in 2012, our consumption use has increased roughly 20 percent each year,” Panknin says. “We used approximately 11 million pounds in 2017 and 14 million pounds in 2018.”
HDPE is PakTech’s material of choice because it offers “the best physical properties for the end use of our products and is also readily available in the recycling market,” he adds.
PakTech has purchase contracts for recycled natural HDPE pellets with Merlin Plastics in Canada and Envision Plastics in Southern California. The pellets are shipped to PakTech via rail, Panknin says.
PakTech did not begin as a product manufacturer but as a tooling “job shop” that made molds for injection-molding companies, Panknin says. That was in 1983. Over time, the company evolved to provide custom injection-molded parts.
PakTech’s foray into handle manufacturing began a decade after its founding. “In 1993, PakTech designed and began molding a TwinPak handle to hold two 1-gallon milk bottles together for Albertsons, who wanted to compete with Costco,” Panknin says.
However, this project for the grocery retailer faded over three years, which is when the company was approached by Mott’s Hawaiian Punch to produce a handle to help consumers handle its large bottle, he continues. “PakTech developed the UniPak handle as a solution, which ultimately saved Hawaiian Punch’s business and kicked off the success of Pak- Tech in the multipack handle business,” Panknin explains.
In 2012, the company began producing its multipack handles, the lightweight design of which already used the least amount of material possible while ensuring performance, using 100 percent recycled HDPE, he says. “The objective was to provide an even more sustainable packaging alternative by producing products with 100 percent recycled content and [reducing] the consumption rate of virgin HDPE while maintaining product integrity and performance.
“We believe that sustainable practices are not only the right thing to do for the environment, they are also a smart business strategy,” Panknin continues. “We recognized that using recycled plastics is the best sustainable option available to help reduce the depletion of natural resources and minimize waste by repurposing products which have reached the end of their useful life.”
He says keeping sustainability at the forefront of PakTech’s sourcing, design and manufacturing lowers costs by reducing waste, increasing competitive advantage, improving customer satisfaction and creating less environmental impact.
Using PCR in its manufacturing process consumes 100 percent less petroleum and 90 percent less energy while emitting 78 percent less greenhouse gases compared with using virgin plastics, Panknin adds.
PakTech’s use of PCR also helps provide sustainable income streams to material recovery facilities and reprocessors.
“We at PakTech have our own extremely active recycling initiative,” Panknin says. “We provide customers with ‘ready to use’ handle recycling centers, which can be set up at a brewery or a place of business. The recycling kit consists of a recycle receptacle with informational graphics, and we provide local collection information so that once the bins fill up, recycling the handles is quick and painless.”
PakTech partners with reprocessors in Oregon, Ohio, Indiana, California and Canada to recycle the handles collected through these centers, Panknin says. The PCR they produce from the handles is used in other end markets.
“We are partnered with Merlin Plastics, where we send our waste generated through the production of our handles to be ground and put back into pellet form for reuse in other end markets and in our handles,” he says. “We are currently working to further establish a more circular model in the Northwest with Merlin Plastics by having collected handles delivered to them for reprocessing back into pellet form, returned to us and reused in our products.”
To ensure the recyclability of its handles, PakTech does not use additives apart from colorants, Panknin says. “Unlike alternatives being presented, our handles are a lightweight design utilizing the least amount of material possible while ensuring the quality and performance meet consumer demand. They are also free from chemical additives that cause the physical properties of the HDPE to deteriorate, which ensures that the material can be further processed through a typical recycling process cost-effectively into a postconsumer plastic feedstock suitable for use in identifiable new products.”
100 Pure Aluminum Discs
To use 100 percent recycled HDPE in its production process, PakTech modified its equipment to accommodate fractional-melt bottle-grade HDPE, Panknin says. Ongoing challenges include securing a sufficient supply of clean natural HDPE.
“The availability of natural recycled HDPE has been fairly robust here in the U.S. thus far,” he says. “However, as environmentalists and the like continue their campaign against the use of plastics as a whole, the supply could tighten. Focus and energy need to be directed on how and what needs to be done to ensure plastic products are properly discarded, collected and repurposed. There is a robust industry of plastics reprocessors and businesses that can and will repurpose plastic into other products, all of whom wish to contribute to a sustainable circular economy.”
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