An Overview Of The U.S. Scrap Industry
The US scrap industry includes about 8,000 companies with combined annual revenue of $30 billion. Large national scrap processors include Metal Management, Schnitzer Steel, Alcan, and David J. Joseph Corporation. A typical local scrap processor has annual revenue under $5 million. The industry is fragmented and local, because the low value-to-weight ratio of most scrap discourages long-distance transportation. The top 50 companies hold only about 40 percent of the market.
Demand from the steel, auto, and construction industries drive the recycling industry. The profitability of individual companies depends on cultivating relations with suppliers and buyers. Most companies are small and compete by specializing in one type of material in their local market. Large companies have economies of scale and have the financial ability to invest in new, faster machinery.
Scrap metal recycling companies collect, process, and resell materials like metals, glass, plastics, and paper. Recycling iron and steel scrap comprises about half of the industry’s revenue. One company, Alcan, recycles about 40 percent of all aluminum cans in the US.
The scrap recycling industry processes about 145 million tons of material annually, including 75 million tons of iron and steel (ferrous metals); 50 million tons of paper and paperboard (cardboard); 10 million tons of nonferrous metals like aluminum, copper, stainless steel, lead and zinc; 4 million tons of glass; and 300,000 tons of plastics (PET and HDPE bottles). Almost all old cars are recycled, 90 percent of appliances, 65 percent of aluminum cans, 45 percent of paper, and 30 percent of bottle glass.
Scrap metal is classified as "industrial" or "obsolete." Industrial scrap is left over from industrial manufacturing operations like cutting, casting, stamping, and boring; the auto industry is the largest single source. Obsolete scrap is metal recovered from old or used consumer and industrial products -- mainly cars, cans, and appliances -- but also machinery, railroad cars and rails, construction girders, wire, pipes, and ships. To be suitable for reuse, scrap metal must be cut to convenient sizes, sorted according to metal or grade, and often formed into bales, pellets, or briquettes that end-users can put directly into their operations. The smaller and denser the scrap, the more valuable it is, because end-users can use it more efficiently.
Collecting scrap metal occurs at junkyards, recycling centers, or directly at industrial sites. Scrap metal processors often have long-standing relationships with industrial producers of scrap, and have drop-boxes on their sites for efficient collection. Because the quality of new steel made from scrap depends on the quality of the scrap, there is an extensive metal scrap grading system, with more than 80 grades of unprocessed ferrous scrap, including sheet iron; "white goods" (appliances); "unclean motor block"; and "whole prepared car bodies."
Metals processors, such as Lowland, use crane-mounted "alligator" or scissor shears and stationary guillotine shears to cut large pieces of scrap, such as girders, into smaller pieces. Cars, appliances, and other light scrap are processed by shredders that break the scrap into fist-sized pieces in less than a minute. Shredding operations use magnets to separate ferrous metals and nonferrous metals from residual "shredder fluff," which is put into landfills. Many nonferrous metals have a higher value than ferrous iron or steel, and are therefore sorted and separated using more labor-intensive methods. Light-gauge metals may be processed in balers, large hydraulic presses that compress the metal into uniform blocks. Nonferrous metals are often melted or pressed into ingots or "pigs" for the end-user.