Over the past decade, the number
of shredders operating in scrapyards across North America has
skyrocketedprojected to reach 302 by the end of this
year, a 56-percent increase from an estimated 193 in
2000as supply and demand of shredded material have been
locked in a mutual growth cycle.
As demand and prices rose
significantly in recent years, adding a shredderor
starting up a new yard featuring onebecame a relatively
common business decision. Profit margins on material produced
through shredders were strong, as mini-mills in
particularbecause of the needs of their electric-arc
furnace operationssnapped up as much shredded material as
they could find.
"This has become an extremely
popular grade, especially with certain mill operators," a
leading Midwest broker said. "The mills that use frag are very
comfortable and flexible in their mixes and will ride the
market from cycle to cycle. What they have found is that frag
more often than not is what suits all of their considerations
Shredded scrap is defined by the
Institute of Scrap Recycling Industries as homogeneous iron and
steel scrap, magnetically separated, originating from
automobiles, unprepared No. 1 and No. 2 steel, miscellaneous
baling and sheet scrap, with an average density of 50 pounds
per cubic foot. Most of that mix is usually fist-sized,
homogenous pieces of old automobile hulks.
The number of shredders has
increased in lockstep with shredded scrap demand, which has
jumped about 50 percent during the past decade to more than 18
million tons annually from around 12 million tons. The price
has risen about 420 percent during that period, settling at an
average of $455 per ton delivered to consumers so far in 2011.
(The largest monthly price average was nearly $600 per ton in
"With prices riding the wave
they have during the past five or six years, I dont see
anyone whos going to want to get out of the shredded
business," a New York-based scrap dealer said. "That being
said, the marketplace can hold only so many businesses, and so
at some point the growth in shredders being installed is going
to have to slow down."
It should come as no surprise
that OmniSource Corp. (owned by Steel Dynamics Inc.) and David
J. Joseph Co. (owned by Nucor Corp.) would be among the leaders
in North American shredder operations.
But its not only the big
dogs that are barking right now. Smaller shredder equipment
"also allows smaller scrapyards to enter the shredding side of
processing because the smaller shredders do not have the high
feedstock/material demands of the larger shredders," said a
spokesman for Tonawanda, N.Y.-based shredder equipment
manufacturer Wendt Corp. "This means they can produce a return
on investment with smaller amounts of material and still take
advantage of the premium for shredded product."
Shredders have become
increasingly popular over the past decade because they usually
provide an opportunity for better marginsthey allow yards
to upgrade material to fetch a higher sales price. While they
are a major investment, usually involving hundreds of thousands
or even millions of dollars, shredders bring quick returns.
Projects are in the works all across the country this year,
despite the continuing economic uncertainty.
But not everyone has a rosy
outlook. As one Pittsburgh-area dealer said, "When you look at
the overall playing field, youd better be sure you can do
two things before you add a shredder: secure enough scrap to
run through it, and have a big enough market to sell into.
Im not sure either of those look good right now."
Yet it is undeniable that the
growth trend in shredders was a major factor in fueling the
unprecedented run that ferrous scrap has been on in the past
decade, and especially since 2004. Much of the obsolete scrap
that put wind in the sails of this run was processed through
the numerous shredding machines operating in so many yards.
In fact, one problem that has
emerged in recent years is finding the scrap to keep those
shredders operating for as many hours as their owners would
Feedstock issues are on the
minds of all shredder operators today. Those who cant
control their own feedstock often find themselves paying higher
prices for peddler scrap just to secure enough tonnage. That,
of course, can cut into profit margins. Auto dismantlers often
have taken to holding back their stripped vehicles until the
market prices are favorable for them, creating artificial
shortages in some months. In response, some shredder operators
have been aggressively expanding their acquisitions of smaller
yards to maintain their own feedstock stream. Just this year,
several such purchases have taken place.
Cleveland-based PSC Metals Inc.
purchased Warmington Road Recycling in Massillon, Ohio., which
will serve as a feeder yard for PSC Metals shredders in
Canton and Wooster, Ohio. The company described the acquisition
as an important step in PSCs growth as an industry
Sims Metal Management Ltd., New
York, is building its network of feeder yards. The large scrap
processor, which has export yards in Port Newark, N.J., and
Fairless Hills, Pa., disclosed in a recent conference call with
analysts that it had bought two small yards: East Coast Metal
Recovery in Deptford, N.J.the backyard of rival EMR
Ltd.s big Camden, N.J., export yardand Johnston
Enterprises Inc.s Port 33 in Tulsa, Okla.
Schnitzer Steel Industries Inc.,
based in Portland, Ore., operates a large scrap metal export
yard in Boston and has feeder yards throughout the New England
area. Earlier this year it bought State Line Scrap, an
Attleboro, Mass., yard that also operates as a bulk cargo
exporter of ferrous scrap.
Britain-based EMR, which owns
the former Camden Iron & Metals Co.the Philadelphia
areas largest scrap export yardrecently signed a
joint-venture agreement with Washington-based Joseph Smith Co.
Like Schnitzer, Smith has a wide-ranging network of feeder
yards mainly in the mid-Atlantic states and along the eastern
seaboard. EMR also recently opened an export yard in Newark,
N.J., near Sims main export facility in northern New
And Commercial Metals Co. (CMC)
is gearing up for two shredder installations: one at an
existing operation in Oklahoma and another at a greenfield site
in Corpus Christi, Texas.
"The decision to install a shredder at our Tulsa scrap
processing yard was based on already-captured feedstock from
our existing recycling facilities in Oklahoma, Kansas, Missouri
and Arkansas," Joe Alvarado, CMCs president and chief
operating officer, said of the 4,000-horsepower Metso
Recycling-Texas Shredder machine the company is adding at its
27-acre CMC Recycling facility in Tulsa.