Scrap shredders are hungry machines, with owners willing to vary their diets if it will keep the beasts well fed and profitable. Expect shredders to be on the prowl for material that in the past might have ended up as No. 2 bundles or mixed aluminum castings, executives said at AMM's Scrap Conference in November.
Some of the biggest shredders are now being installed in China, and some conference attendees speculated on whether China might begin importing vehicle hulks, crushed but unshredded, from the United States. That would make domestic shredder operators very unhappy. The consensus view Not quite yet.
"The reason why we're shredding so many different types of material is that we add more value by shredding than we did when we processed with a shear and a torch," said Scott Newell, chairman of Shredder Company LLC, Canutillo, Texas.
As a maker of the fragmentizers from a family that arguably invented them, he took an upbeat view of shredders expanding their role still further, estimating that U.S. steel mills get 30 to 35 percent of their scrap intake in shredded form.
Randy Ehret, manager of strategic sourcing at Timken Co., which owns two mills making specialty products, said fragmentized scrap accounts for 43 percent of his company's scrap purchases, amounting to 45,000 long tons a month. Trailing far behind in second place is busheling at 10 percent of the mix. He cautioned that 43 percent is an average. For some products, the melt will use zero shredded scrap. Such material has an attractive density, he said, but needs policing to minimize the residual percentage of copper.
Ehret said that Canton, Ohio-based Timken works closely with suppliers to ensure that the chemistry of the shredded meets Timken's standards, which can be quite fussy for some products.
Does one help the scrap consumer by feeding the shredder subtler material than vehicles and white goods, then splitting the commingled material into streams with high-tech sorting equipment? That issue was raised during a question-and-answer period at the conference in Scottsdale, Ariz. "If we shred materials that are low-residual, and now they're mixed with high-residual shreddables, doesn't that really dumb down the scrap supply, from a chemical point of view," the conference participant asked Newell.
"If you want to make low-copper residuals, you have to select the type of material that you're shredding," Newell acknowledged, but he argued that the process is more efficient. He said the ultimate test is whether mills prove willing to pay more for the shredded version of a particular mixture or for the unshredded.
He noted that his company had helped supply a $100-million shredder plant in Xuzhou, China, for Jiangsu Fengli Group Co. Ltd., which plans three more such facilities elsewhere in the country. Annual processing capability at Xuzhou is more than 1 million tonnes, with a 10,000-horsepower motor.
"Twice now, I've said to the (Chinese) guy who bought a shredder from me, 'How are you going to get enough scrap to process?' He said 'don't worry about that, we already have that much scrap.' It will be a while before they get to shredding automobiles as a main diet, (but) 1.4 billion people throwing away cans creates a lot of tonnage," Newell said.
He recalled that his Chinese customer did ask for the names of U.S. scrap dealers that might export unshredded material. "I dodged that one," Newell said, to avoid irking U.S. shredder operators who are his customers.
Newell said he doesn't expect scrap industry consolidation to benefit the participants as much as steel mergers did. "The biggest driver to this is to reduce competition and to increase margins. But when the margins increase, as we all know, it encourages other people to invest," he said. "Investment-wise, the entry level to the scrap industry is much lower" than in steelmaking.
Small shredders and large shredders can coexist, in his view, by using different market strategies. Newell said he recently sold a $4-million shredder, with 1,500 horsepower, to a U.S. yard located close to a megashredder. "This guy can make money with 4,000, 3,000, even 2,000 tonnes a month," Newell said, adding that the smaller players must serve a particular niche, processing material that draws higher prices when fragmentized than when not.
A more skeptical view of shredder growth, also voiced at the conference, is that the industry is saturated with such equipment. Experience has established what shredders are useful for and there are more than enough of them to handle those functions.
Such skepticism was voiced in a paper from scrap processor David J. Joseph Co. presented at the AMM conference by David Hodory, Joseph's director of marketing and communications.
"Building more and bigger shredders does not expand the supply of scrap to shred. (The) market is already over-served from a shredder capacity/utilization perspective," the David J. Joseph document said. "Demand has been at near-record levels for 10 years," the paper said about obsolete scrap. "Backlogs are gone, the reservoir depleted."
As for prompt manufacturing scrap, its availability is barely affected by how much the yards will pay for it, the analysis said. "High prices do not provide incentive to make more defective hoods, door panels, etc.," Hodory said.
Newell, hoping for growth, sees yet more shredders as a way to make scrap processing more efficient, with fewer bounces and fewer intermediaries. "There are many, many steps from where a piece of scrap originates until the time it gets into an electric furnace. It's picked up and set down, picked up and set down, processed and set down, then transported and set down," he said.
Newell would like to see shredded scrap moving 10 rail cars at a time on a single bill of lading. Even truckload movement could become more efficient if mills would accept nighttime delivery and let the trucks dump the fragmentized scrap near the destination furnace, he said.