This classification comprises establishments primarily engaged in recovering nonferrous metals and alloys from new and used scrap and dross, or in producing alloys from purchased refined metals. This industry includes establishments engaged in both the recovery and alloying of precious metals. Also included in this industry are plants involved in the recovery of tin through secondary smelting and refining, as well as by chemical processes. Excluded from this classification are establishments primarily engaged in assembling, sorting, and breaking up scrap metal without smelting and refining the metal. These establishments are classified in SIC 5093: Scrap and Waste Materials.
331314 (Secondary Smelting and Alloying of Aluminum)
331423 (Secondary Smelting, Refining, and Alloying of Copper)
331492 (Secondary Smelting, Refining, and Alloying of Nonferrous Metals (except Copper and Aluminum)
Metal, utilized by nearly every manufacturing industry in the United States and abroad, is produced through two basic production methods: primary and secondary. Primary manufacturers produce metal by subjecting particular extracted ores to various metallurgical processes, creating metal in large block or bar form. Secondary manufacturers smelt, refine, and sometimes blend metal recovered from either the shaping and trimming of primary metal during production and fabrication, or from recycled metal. The secondary smelting and refining of nonferrous metals, as defined by SIC 3341, comprises the secondary production of metals that do not contain iron, such as aluminum, copper, gold, lead, nickel, silver, tin, and zinc. These metals are used in a wide variety of manufactured products, including ammunition, beverage cans, coins, automobiles, household appliances, and a wealth of other products that encompass the breadth of U.S. manufacturing activity.
Copper, possessing superior electrical conductivity, is a strong, durable metal used in a variety of structural applications, as well as for power, lighting, and communications transmissions. Domestically, the major markets for copper are construction, electrical and electronics, and industrial machinery and equipment.
Aluminum, the most widely used nonferrous metal, possesses several positive attributes, such as light weight, corrosion resistance, and high electrical and thermal conductivity that make the metal suitable for a variety of applications. Container and packaging manufacturers purchase a majority of the domestically produced aluminum, while other major end-use markets include the transportation sector, the buildings and construction sector, and the electrical sector.
Lead is primarily used for the manufacture of storage batteries, which in turn are incorporated into automobile ignition starters, uninterruptible power supplies for computer systems, and standby power supplies for emergency lighting systems and telephones. Other market sectors that purchase lead include paint and glass manufacturers and building products manufacturers.
Zinc is primarily used to galvanize products found in the automobile, steel, and construction industries, but a greater percentage of secondary zinc is used to produce brass and bronze, as well as assorted chemicals and dusts. Additional applications include the blending of zinc-based, die-cast alloys and brass alloys.
The industry recorded $7.4 billion in sales in 2001 for products included in this classification, an aggregate value of shipments primarily derived from the production of the industry's five key products: secondary aluminum, secondary precious metals (gold, silver, platinum), secondary copper, secondary lead, and secondary zinc. Although the secondary smelting and refining industry produces other metals, such as nickel and tin, these five metals accounted for the bulk of the industry's total shipments. The industry slumped during 2001, due to poor economic conditions and oversupply, and is not expected to see significant recovery until at least 2004.
In terms of the number of people employed per establishment, the secondary smelting and refining industry has been historically populated by relatively small manufacturing facilities. Of the 395 secondary smelting and refining establishments in operation in 1997, 173, or nearly 44 percent, employed less than 20 people, while the remaining 222 employed 20 people or more. These 395 establishments represented all of the individual production facilities operated by the approximately 354 companies engaged in smelting and refining secondary nonferrous metals in 1997. The average number of employees per establishment in the secondary smelting and refining industry in 1997 was 52.
Geographically, a majority of the secondary smelting and refining production facilities in the 1990s were located in a four-state area comprising Michigan, Illinois, Indiana, and Ohio. Together, these states contained 99 production facilities. The mid-Atlantic states of Pennsylvania, New York, and New Jersey formed the second largest regional concentration of facilities, with 65 establishments. The Pacific region was the third largest area of production solely by virtue of the 37 establishments located in California—the greatest number located in any one state and the only state within the region that contained any secondary smelting and refining facilities. When ranked according to the number of establishments per state, California was followed by Pennsylvania, with 34 production facilities, and Ohio, with 33 establishments. The 17 manufacturing facilities in Alabama and Georgia together accounted for a whopping $719.4 million in shipments in 1992, 77.5 percent more than the $405.4 million generated by the 37 establishments in California.
The expenses incurred from operating a secondary smelting and refining facility were substantially higher than the amount of money required to operate the average manufacturing facility in the United States. This disparity was most evident in the average cost per establishment, that is, the average amount of money paid for raw manufacturing materials. According to 1994 figures, the average cost per establishment in this industry was $12.8 million, more than three times greater than the $4.2 million averaged by all other manufacturing industries. At $399,225, the average investment per establishment in the secondary smelting and refining industry for production machinery and other equipment necessary in the recovery of primary metal, however, was 43 percent higher than the average investment per establishment in all other manufacturing industries, which required only $278,244.
In the historiography of secondary smelting and refining, one chronicler traces the origins of recovering scrap metal to the seventh descendent of Adam, back to the founder of the iron and steel industry, and by implication, the founder of the scrap metal industry—Tubal-Cain. The writer then proceeds to chart the utilization of scrap metal throughout the span of civilization, making references along the way to documented accounts of scrap metal usage by such notable personages as Moses, Chaucer, Shakespeare, Paul Revere, Captain Kidd, and Thoreau. While this exploration into the depths of scrap metal's history may strike some as overindulgent, it does indicate the pervasiveness and integrality of secondary metal in the history of human existence. It also suggests that scrap metal has been used as long as metal has been used by mankind.
But, obviously, the processing of scrap in the days of Tubal-Cain bore no resemblance to the modern secondary metal industry. The smelting and refining of scrap metal as an organized and structured industry—the type of industry that operated in the 1990s—was a modern creation of the United States. It formed in the early 1900s as secondary smelting and refining manufacturers began to shed their image as junk peddlers, and gradually became regarded as legitimate operators of an enterprise essential to the existence of modern manufacturing industries. This transition was hastened by the formation of the National Association of Waste Material Dealers in 1913, which gave manufacturers, for the first time, formalized rules of operation, a code of ethics, and uniform specifications for scrap metal production. The creation of this governing body, renamed the National Association of Secondary Material Industries (NASMI) in 1960, lent cohesion to a loosely structured group of manufacturers struggling to attain order in a rapidly changing manufacturing environment.
Although the advent of NASMI helped define and shape the industry, the smelting and refining of secondary nonferrous metals had been occurring in an industrial setting for quite some time before NASMI came into existence. No statistical record of scrap consumption in the United States exists prior to 1900, but, in the first year figures were recorded, U.S. manufacturers consumed 5.1 million gross tons of ferrous and nonferrous secondary metal. Indeed, the first American scrap metal company, Cline & Bernheim, based in Nashville, Tennessee, had begun operating nearly 40 years before industry-wide consumption figures were recorded in 1862. According to these records, the first market coverage of the scrap industry was published in 1865, when the Commercial Bulletin of Boston began providing scrap metal prices. And, even further back in time, the first commercial use of scrap metal in the United States occurred at an iron works in Lynn, Massachusetts, in 1642.
Although some of these early uses of scrap metal were of the ferrous variety, the tradition of scrap metal usage had its roots stretching back to the founding of the United States. Accordingly, the scrap metal industry gathered more than a modicum of momentum by the time NASMI emerged. Once it did emerge, however, the modern version of the secondary nonferrous metal industry began and the recovery, smelting, and refining of such metals became distinguished from the production of primary metals, rather than lumped together under the more general and generic metal industry umbrella.
Following the founding of NASMI, secondary non-ferrous production occurred at a predictable, steady rate, without any significant influence from external market forces that would have otherwise proportionately boosted the industry's production volume. Military build-up during World War I, which had a positive effect on many manufacturing industries, provided less than its expected impact on secondary metal producers, largely due to the conspicuous absence of wartime scrap metal drives. A tremendous increase in secondary nonferrous metal production did occur however, as a result of America's entrance into World War II. By early summer in 1942, the first summer after the Japanese bombed Pearl Harbor, the nation embarked on a virtually uninterrupted campaign to recover scrap metal, elevating the importance of secondary producers in the metal manufacturing industry.
During the immediate post-war years, a majority of American manufacturing industries flourished, and the secondary nonferrous metal industry, as a supplier of the raw material for much of the accelerated production, shared in the explosive growth of the American economy. By 1950, primary manufacturers of nonferrous metals held a commanding lead in the global market, producing nearly half of the world's supply of refined copper, aluminum, and zinc, and more than 25 percent of the world's supply of lead. Secondary producers of these metals, who literally benefited from the crumbs of the prodigious production volume, were well positioned to profit from the increased demand for nonferrous metals, converting "old" scrap, or metal recovered from recycled products, and converting "new" scrap gleaned from the trimming and shaping of primary nonferrous ingot (referred to as "home" scrap).
This closely knit, interdependent relationship secondary producers maintained within the nonferrous metal industry, which had matured and strengthened in the nearly four decades since the establishment of NASMI, invigorated production during robust economic conditions, but also made industry participants vulnerable to the vagaries of the overall metal industry. Although conditions were favorable in the 1950s, several portentous developments arose during this time that would create a somewhat bleaker future for all manufacturers of non-ferrous metal.
The consumption of nonferrous metals increased exponentially since the turn of the century, fueled by a rapidly growing population and its need for products manufactured with this type of metal. By the time the United States entered World War II, this increased demand had depleted the country's metal ore reserves to the extent that the self-sufficient production of several key nonferrous metals, such as zinc and lead, was no longer possible. To compound this problem, the manufacturing of another key nonferrous metal, aluminum, required an ore more commonly found in countries other than the United States.
During the 1950s, this development persuaded many primary manufacturers of nonferrous metals to either affiliate with foreign metal manufacturers to meet existing U.S. demand or to establish wholly owned operations overseas, where ore deposits were plentiful. While this expansion into foreign metal markets narrowed the gap between supply and demand and sparked the overall metal industry's growth, it also fostered the growth of the global nonferrous metal market, establishing the first manufacturing facilities in less-developed countries and encouraging output in more sophisticated, foreign markets. Repercussions from this shift overseas were not immediate, but, in the years ahead, the evolution of a genuine global metal industry would create a highly competitive nonferrous metal market.
Another development affecting industry participants was a technological innovation developed by primary manufacturers in the 1950s that promised to impinge directly on the demand for secondary nonferrous metal. The underlying principle behind this innovation was relatively simple: introduce oxygen into the furnaces in which pig iron is converted to steel.
The addition of oxygen quickened the conversion process, reducing the energy requirements of metal production. Most harmful to secondary producers, however, was that the process required far less scrap metal with which to manufacture ingot. Without oxygen, primary manufacturers needed a high percentage of scrap metal to efficiently produce metal, but with oxygen the proportion of scrap metal dropped to as low as 40 percent. Initially, steel manufacturers employed this new process, but, by the mid- and late 1960s, the utilization of oxygen in the production of nonferrous metals had begun, as aluminum manufacturers also adopted the process. Of course, the use of oxygen also reduced the conversion time in the production of secondary metals, but the losses suffered as a result of the diminished role scrap metal played in the manufacturing of primary metal were significant.
Fortunately for secondary metal producers, the popularity of this new production method was roughly concurrent with the increased interest in consumer product recycling efforts, which bolstered the industry's production output and marked the beginning of a movement that would serve as a linchpin to the industry's existence and success into the 1990s. To varying degrees, the recycling of used products and materials had been occurring for many decades prior to the late 1960s and early 1970s—the existence of the secondary metal industry itself, comprised of former junk peddlers, was a testament to the long tradition of recycling. But these efforts were intensified due to the growing outcry against pollution and waste, as landfills dotting the nation's landscape brimmed with refuse. Also, recycling had been generally limited to the recovery of industrial, or commercial byproducts, not the recycling of consumer products such as storage batteries, aluminum, and tin cans.
Once recycling began in earnest, secondary producers of nonferrous metals began to play a more dominant role in the overall nonferrous metals industry, outpacing primary manufacturers in terms of production volume and capitalizing on governmental efforts aimed at reducing the amount of national waste. Federally led and financed attempts to reduce waste received an initial push from the creation of the Office of Solid Waste Management in 1965, which was strengthened in 1970 by the promulgation of the Resource Recovery Act. The Resource Recovery Act of 1970 authorized a three-year budget of $461 million, but, most important to secondary nonferrous metal producers, the act changed the Office of Solid Waste Management's primary objective from the sanitary dumping of solid wastes to the recycling of those wastes. In a short time, the effect of this concerted push toward recovering solid wastes improved the secondary nonferrous industry's position, driving scrap manufacturer's production output upwards. By 1971, roughly 50 percent of the total lead consumption in the United States was supplied by secondary metal producers and the proportional representation of other secondary nonferrous metals were no less impressive: 45 percent of secondary copper, 35 percent of secondary aluminum, and 23 percent of secondary zinc.
By the mid-1970s, however, a recession and a worldwide energy crisis nearly crippled all sectors of the ferrous and nonferrous metal industry, as successive oil shocks shook the foundations of an industry that relied on relatively large amounts of energy to exist. Indeed, the deleterious effects of the energy crises plagued metal manufacturers for the rest of the decade and stood as a turning point for the health of metal manufacturers worldwide. The annual growth rates in the consumption of nonferrous metals from 1979 to 1988 stood well below the pace recorded from 1950 to 1974. Indeed the annual consumption rate of aluminum, worldwide, from 1950 to 1974 was 9 percent, while from 1979 to 1988 the rate dropped to 2.3 percent; copper fell from 3.9 percent to 1.1 percent; lead from 2.7 percent to 0.5 percent; and zinc from 3.9 percent to 1.2 percent.
Entering the 1980s, a period of corporate restructuring began, as companies purchased, sold, and merged operations to enhance their competitiveness. Still, the key metals within the industry were each affected, either negatively or positively, by conditions peculiar to their markets. The production of secondary copper suffered a decline in total shipments in the early 1980s after effecting a rebound from the pernicious 1970s. By 1989, however, shipments eclipsed the one-year surge experienced at the start of the decade, as manufacturers combated difficulties associated with aging production facilities and environmental regulations. Over the entire decade, secondary production accounted for 26 percent of the total U.S. copper production, a more encouraging representation than the 20 percent share recorded from 1975 to 1979.
Secondary aluminum production fared comparatively better during the 1980s, increasing 40 percent over the decade. Hampered by decreasing primary production of aluminum in the United States and a nearly glutted beverage can market, secondary aluminum manufacturers also experienced capricious fluctuations in demand during much of the decade. Nevertheless, secondary aluminum producers concluded the 1980s with three solid years of production output, during which they recorded much of the production growth of the decade.
Primary lead manufacturers, struggling with the sharply decreased demand for tetraethyl lead (TEL), which is used to produce leaded gasoline, witnessed secondary manufacturers of lead increase their representation of total lead consumption during the 1980s. The reclamation of lead acid storage batteries, the largest market for lead and typically recyclable, elevated the importance of the secondary lead industry. In 1980, primary and secondary lead production was about equally split, with secondary producers supplying half of the nation's total lead. By the end of the decade, however, secondary lead manufacturers supplied approximately 65 percent of the total lead consumed in the United States.
Secondary zinc manufacturers also figured more prominently within their nonferrous metal niche during the 1980s. The demand for zinc, both from primary and secondary suppliers, increased throughout much of the decade, excluding a temporary decline in 1982. Overall consumption rose 21 percent over the course of the decade, while secondary zinc producers increased their share of the total zinc production to 23 percent.
As the secondary smelting and refining industry entered the late 1990s, an intensified interest in recycling by both the consumer and industrial sectors buoyed the production output of industry participants. From 1990 to 1997, shipments of nonferrous castings rose 9 percent, indicating a revitalization in this sector of the market. Each of the metals within the industry were expected to demonstrate a positive but slow growth forecast by the expected increase in the reclamation of industrial and consumer solid waste. Additional success in this direction will continue to elevate the industry's importance within the overall nonferrous metal industry and fuel its future growth.
While secondary aluminum production accounted for only about 25 percent of total supply in 1989, by 1997 secondary production—at 3.76 million metric tons—had for the first time exceeded primary production, which totaled only 3.6 million metric tons. One of the most important factors spurring increased secondary aluminum production was the 95 percent savings realized in energy costs. Above-average growth is expected for secondary aluminum production in the early years of the new millennium. At the same time, copper is expected to remain steady or increase only modestly into 2000 and beyond. Zinc, on the other hand, is being constantly replaced by plastics and may experience either no growth or limited growth into the new millennium. Lead consumption is expected to experience a continual decline as this metal is removed from various metal formulations for toxicity reasons.
In 2001 the United States shipped 5.0 billion pounds of nonferrous products, compared to 5.6 billion pounds in 2000, representing a 9 percent decline. Accounting for 72 percent of products, aluminum shipments totaled 3.6 billion pounds, dropping 11 percent from 2000 production levels. Copper-based products totaled 500 million pounds, or 10 percent of total shipments. Copper products declined year-on-year by 9 percent. Lead-based products increased year-on-year from 442.9 million pounds to 461.2 million pounds, a gain of nearly 10 percent. Zinc shipments declined by 15 percent, from 451.1 million pounds to 383.2 million pounds. Magnesium shipments, a very small category, fell off 18 percent, from 59.2 million pounds to 48.7 million pounds.
Total value of shipments in 2001 was $7.2 billion. Aluminum generated $5.4 billion in revenues, 73 percent of total sales; copper, $1.0 billion in revenues, 13 percent of sales; zinc, $765.1 million in revenues, 10 percent of sales; magnesium, $203.2 million in revenues, 3 percent of sales; and lead, $4.7 million in revenues, less than 1 percent of sales.
Since early 2001, the nonferrous metals market has been in a slump. The downtrend in the industry and the economy at large was exacerbated by the terrorist attacks of September 11, 2001, with poor economic conditions continuing into 2003. Lack of demand, combined with overcapacity and oversupply, have kept prices down. Although some producers have idled capacity, the lackluster performance of the manufacturing sector has not allowed nonferrous producers to sell off overstocked inventories.
As the general economy recovers, and particularly the manufacturing sector, nonferrous sales should pick up. Price increases are dependent on reinvigorated demand cleaning up overstocks. If producers restart idled capacity at the first signs of recovery, oversupply may continue to be a problem for the industry. John Mothersole noted in Purchasing, "For individual companies, these decisions may make sense, but collectively, the industry could very well end up slitting its own throat. The pressure on high-cost producers will, therefore, remain intense."
Ranked according to sales volume, the largest manufacturer in the secondary smelting and refining industry in 2002 was Commercial Metals Company, located in Dallas, Texas, with 7,728 workers and $2.4 billion in sales.
Second is Connell L.P., located in Boston, Massachusetts. Connell, a holding company with operations involved in fabricating special dies, plate work, and metal forming machine tools, as well as sheet metal production, is engaged in the secondary smelting and refining industry through its Wabash Alloys division, the leading producer of aluminum casting alloys in the United States. Deriving a majority of its business from the automobile industry, Wabash converts aluminum scrap into aluminum casting alloys, which are then sold to major automobile manufacturers or to die-casting companies that cater to the automobile industry. With 2,800 employees, Connell posted roughly $1.1 billion in sales in 2002.
Total employment in the secondary smelting and refining industry dropped throughout much of the 1980s, with a slight rise occurring during the late 1980s and into the 1990s. In 1982, the industry's total employment stood at 19,200, then slipped to 12,500 by 1987. The largest precipitous drops occurred during 1982 and 1983, and during 1986 and 1987. After 1987, the nadir of the industry's employment decline, total employment increased by an average of 800 per year. In 1994, the industry's employment base continued to rise, although at a less robust pace than during the late 1980s, reaching 14,400 by the end of the year. Perhaps fueled to some degree by the increasing popularity of recycling, the late 1990s saw a sharp uptrend in the size of the industry's workforce, which swelled to about 20,600 by 1997 before declining once more, to 18,770 in 2001.
Of the nearly 19,000 people employed in the secondary smelting and refining industry in 2001, some 5,170 were salaried employees, or those performing managerial, administrative, or technical duties, while the balance of the industry's workforce comprised just over 13,500 production workers.
Generally, production workers are employed on a full-time basis, averaging 12 percent more hours per year than the average number of hours worked by production workers in all other manufacturing industries. On average, the production workers employed by the secondary smelting and refining industry earned slightly less than the typical production worker. In 2001, a typical production worker employed by the secondary smelting and refining industry earned $15.45 per hour.
Prognostications for the industry's workforce in the year 2005 suggest a general decline for nearly every occupation employed by the primary metals industry, of which the secondary smelting and refining industry is a subdivision. According to the U.S. Bureau of Labor, only furnace operators, metallurgists, and ceramic and materials engineers are expected to proportionately increase their representation in the industry between the years 1994 and 2005. Occupations expected to be affected most severely are machine operators, material movers, bookkeepers, and accounting clerks.
The U.S. nonferrous metal industry, once the prominent, global leader in production volume, entered the 1990s harried by escalating production costs and mounting foreign competition. Consequently, foreign manufacturers of nonferrous metals, some of whom were located in countries rich in metal ore deposits, were able to gain ground on domestic manufacturers during the 1980s, and, with certain metals, supplant the United States as the leading metal manufacturer. This situation was further exacerbated for U.S. manufacturers because some of the state-owned foreign manufacturing companies pursued political rather than economic objectives. This affected domestic manufacturers of primary nonferrous metals more severely than secondary producers, although any significant cutbacks in primary production eventually and inevitably affect secondary producers.
Despite the increasing competition and the flight of primary manufacturing facilities, secondary producers in the United States maintained a leading position in the international nonferrous market well into the 1990s. With five secondary smelters, two electrolytic refineries, and six fire refineries operating in 1992, the U.S. secondary copper industry ranked as the largest producer in the world, accounting for 35.3 percent of the 1.2 million metric tons of secondary copper produced by all countries with market economies. The Federal Republic of Germany ranked as the second largest producer, supplying an estimated 23 percent of the copper, followed by Japan, which accounted for 6 percent. Other prominent secondary copper-producing nations are the United Kingdom with 2.6 percent and Italy with 6.2 percent. The region responsible for producing most of the secondary copper is Europe with 47.5 percent, followed by North America with 37.8 percent.
The United States' secondary aluminum producers held a larger lead in the global secondary aluminum market than their copper counterparts, manufacturing 44.6 percent of the 6.1 million metric tons produced in 1992. America's closest rival, Japan, produced 17.4 percent of the total, and an estimated 13.7 percent was produced by the Commonwealth of Independent States (CIS). Other important producers of secondary aluminum in 1992 were Italy with 5.7 percent and France with 3.6 percent. The production of this metal was divided regionally between North America with 47.3 percent, Asia with 32.4 percent, and Europe with 18.7 percent.
The production of secondary lead was regionally divided between Europe with 41.2 percent of the 1.7 metric tons produced worldwide in 1992. Asia was responsible for 22.0 percent and North America for 32.8 percent. The United States was the leading producer of secondary lead with 26.7 percent, and the Federal Republic of Germany produced approximately 15.9 percent. The United Kingdom was responsible for an estimated 11.0 percent of the world production of secondary lead, and Italy produced 5.0 percent.
The international secondary zinc market was sharply contested in the late 1980s, as the former U.S.S.R. maintained a precarious lead over its two strongest competitors, the United States and the Federal Republic of Germany. Of the 349,602 metric tons of zinc produced globally in 1992, the United States controlled 36.5 percent of the market, followed closely by the Commonwealth of Independent States (CIS), which accounted for 35.4 percent of total production. The Federal Republic of Germany supplied an estimated 10.0 percent of the international market. Japan accounted for 9.3 percent, and France produced 4.0 percent. The production of secondary zinc was divided regionally between Asia with 44.7 percent, North America with 36.5 percent, and Europe with 17.3 percent.
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