SIC 5093
SCRAP AND WASTE MATERIALS



This industry category includes establishments primarily engaged in assembling, breaking up, sorting and distributing scrap and waste materials. The industry also includes auto wreckers engaged in dismantling automobiles for scrap. Those establishments engaged in dismantling cars for the purpose of selling secondhand parts are classified under SIC 5015: Motor Vehicle Parts—Used.

NAICS Code(s)

421930 (Recyclable Material Wholesalers)

SIC 5093 Scrap and Waste Materials

Industry Snapshot

The United States generates more than 229 million tons of municipal waste annually, distributed as follows: paper and cardboard, 36 percent; yard trimmings, 12 percent; metals and plastics, 19 percent; and other waste, 33 percent. In addition to collection, the scrap and waste materials industry operates the sorting and recycling services that help to reduce the amount of waste sent to landfills. To that end, it also processes for wholesale distribution a wide variety of materials including bags and bottles, fur cuttings and scraps, nonferrous metal wastes and scraps, and rubber scraps. The industry's primary output, however, has been wastepaper and ferrous scrap metals such as iron and steel.

In 2001, the United States Environmental Protection Agency (EPA) reported that the total municipal solid waste generation of 229 million tons before recycling consisted of yard trimmings 12.2 percent; wood 5.7 percent; rubber, leather and textiles 7.1 percent; plastics 11.1 percent; metals 7.9 percent; glass 5.5 percent; food scraps 11.4 percent; paper 35.7 percent; and other was 3.4 percent.

There were a total of 8,133 establishments engaged in the scrap and waste materials industry in 2003. Combined they generated approximately $20.1 billion. There were about 75,853 workers with approximately nine employees per establishment. The average sales were about $2.90 million per establishment. States with the highest number of businesses in this industry were California with 1,053 establishments, Texas with 563, New York with 505, Pennsylvania with 459, and Ohio numbered 437.

Organization and Structure

Scrap Wastepaper. Wastepaper processors use large balers to bundle compressed wastepaper—such as news-print, cardboard, or office paper—for shipment to paper mills for recycling. Recycling efforts by the scrap industry increased substantially during the final decades of the twentieth century, recovering 45 percent—45 million tons—of all paper and paperboard used nationally in 1997; recycled office paper alone increased to 48 percent, up from just 15 percent in 1990. The industry set a goal to recycle 50 percent of all paper, and 65 percent of office paper by the year 2000.

Export markets increased by 285 percent from the mid-1980s and the mid-1990s, and prices for recycled paper products soared in 1995, but fell again in 1996. A subsequent no-growth forecast for the entire paper industry late in 1998 led producers to forestall plans to increase plant capacity for recycling of paper products as the 1990s drew to a close. At that time the American Forest & Paper Association projected a continued 2.1 percent annual growth for recovered fiber, which reflected a 75 percent decline from previous growth. Revised projections called for recycled paper to flatten and stabilize at 36 percent of total product, with printing and writing paper down at 10 percent. The lower projections stemmed from an ongoing pattern of lack of demand. Meanwhile, paper recovery in Japan and Europe remained above 50 percent.

To help bolster the market, companies developed chemicals and techniques for improving the marketability of recycled paper products. Ponderosa Fibers of Baltimore, Maryland, developed a method for removing fluorescence from office wastepaper, and Cytec Industries Inc. of West Paterson, New Jersey, introduced a chemical that reduced bleeding of ink in recycled paper products. A growing trend among producers in 1998 was to move aggressively toward lowering the chlorine content through substitution, with a goal of achieving elemental chlorine-free (ECF) pulp. There were a total of 412 establishments handling the waste paper in the United States. There were about 6,231 workers contributing to $8.8 million in sales in the mid—2000s.

Scrap Iron and Steel. Scrap iron and steel companies collect junked cars, steel from buildings, and scrap from metalworking industries, then process it for use by steel mills. Processors are required to remove and properly dispose of many hazardous wastes before shredding any metal scraps. Of particular concern is the disposal of shredder fluff—the waste left after processing metals—which often contains high levels of oils, PCBs, lead, and cadmium. At least 75 percent of shredder waste is recoverable. Ways to recycle this waste are being studied by government and industry researchers alike.

In the mid-1990s, U.S. steelmakers were using more than 70 million tons of scrap metal annually to produce new steel. Globally, the use of scrap metals reached 400 million tons. Some analysts predicted that this demand on a global scale would keep prices high throughout the 1990s. However, demand leveled off by 1996, and prices for ferrous scrap metals dropped. A 1997 rebound in prices, offset by a monetary crisis in Asia, led to an industry slump at the close of the decade. The industry recycled 1.9 million tons of steel in 1998, or 72.1 percent of eligible steel—a decline of 8.9 percent from the 1997 recycling level of 81 percent. The decrease resulted from excessively low steel prices brought about by the economic crisis in Asia and by "steel dumping" (excessive cheap exports) by foreign nations. Analysts detected some improvement early in 2000 as Asian recovery progressed, and secondary producers fought to maintain an effective price differential between primary and secondary product. There were approximately 1,050 establishments that were engaged within the metal scrap and waste materials industry sector employing about 15,847 workers. Combined, they generated $8.3 million in sales in the mid—2000s.

Scrap Plastic. The United States used more than 30 billion pounds of plastics annually in the 1990s, of which the recycling rate was nearly 20 percent. By the late 1990s, more than 15,500 U.S. communities—representing nearly 50 percent of the U.S. population—had access to some form of plastics recycling.

In response to the growth in plastics recycling, research and development departments sought ways to use various types of recycled plastics. One industry association listed more than 1,300 uses for recycled plastics, including products such as PCV pipes, lawn furniture, and auto dashboards. A technique called pyrolysis can convert plastics from shredder fluff into fuel oil. This process is being tested by the Illinois-based Argonne National Laboratory. There were a total of 1,009 workers throughout 137 businesses specifically handling scrap plastic in 2003.

Current Conditions

According to the EPA, there was a 1.2 percent decrease from 2000 until 2001 of municipal solid waste due to the slowed economy. The main industry segment affected was paper and paperboard, a segment which dropped 5.7 percent. During that same time period, according to Waste Age Magazine, the slowed economy led to consumers buying less, leading to lower consumption. Overall, there was a decrease of 2.8 million tons in 2001, or 0.11 pounds per day of individual consumption. There were also less operational landfills located throughout the United States in 2001. This had been an ongoing trend for the industry that wanted to operate larger facilities that were easily accessible. The total number of landfills had dropped to 1,858 in 2001 from 2,216 in 1999.

Industry Leaders

The largest company in the solid waste handling industry in 1999 was Waste Management Inc. of Houston, Texas—formerly USA Waste Services. Waste Management took its new name following a 1998 acquisition of the former Waste Management Corp. A Fortune 500 company, Waste Management reported $12.7 billion in sales. Waste Management maintains operations worldwide through Waste Management International. In 2003, Waste Management's annual sales were $11.6 billion. Allied Waste Industries Inc., with $1.7 billion in holdings, assumed the rank of second largest waste handler, following its acquisition of BFI. Allied Waste reported $1.6 billion in sales for 1998, and $5.2 billion for 2003.

Among recycling firms, IMCO Recycling Inc. of Irving, Texas, is the world's largest recycler of aluminum, with 20 plants in the United States, and overseas operations in Wales and Germany. IMCO sells to General Motors, Alcoa, and Kaiser Aluminum among others. IMCO's 1999 sales totaled $765 million and $892 million reported for 2003.

Junk Conglomerates. In 1999 two major corporations entered the salvage arena. Prior to that time, according to the Automotive Recyclers Association in 1997, that industry involved 5,500 independent firms engaged primarily in parts recycling, for estimated collective revenues of $7.05 billion annually. A survey conducted by the association and reported in Automotive News revealed that 86 percent of U.S. junkyards maintained a staff of 10 or fewer employees in 1997. The scenario shifted course between April of 1999 and January of 2000, as the giant automaker, Ford Motor Co., entered the marketplace through a wholly owned subsidiary called Greenleaf Acquisitions. The incorporation of Greenleaf was a critical move in a new diversification strategy underway at Ford, and by January of 2000 Greenleaf had expanded into 6 of the United States and had acquired a total of 20 previously independent junkyards. At that time the company indicated plans for international expansion into Canada, Mexico, and Europe. Management projections held that Greenleaf's annual sales might surpass $1 billion at an undetermined time in the future, primarily through the salvage car parts market. Ford's entry into the salvage market followed an earlier move by LKQ Corp. to diversify into junkyards in 1999.

Research and Technology

Power of Plastic. A $20 million plant for gasification of recycled plastic—the world's first facility of its kind—was under construction at Varkaus, Finland, in 1999. The plant, designed to recycle aluminum and plastic packaging, promised to convert the waste into gas energy. Common types of refuse included in this category include paper cartons designed to contain liquid, as such cartons typically contain 30 percent plastic and aluminum foil. The new plant, designed to support recovery of aluminum, can operate at 95 percent energy savings over aluminum ore processing. Prior to the Varkaus plant, aluminum recovery from cartons was considered unfeasible. Corenso United Oy, Foster Wheeler, and VTT Energy undertook the construction of the plant as a joint venture. VTT Energy is a research organization that pioneered the gasification technology in the early 1980s. The plant, according to projections, will produce more than 2 million kilograms of aluminum every year, for export to Sweden. Also in Europe, in 1999 German researchers reported initial success with near-infrared spectroscopy (NIR) as a method for determining the paper content of plastic for recycling. NIR can be implemented more cheaply and faster than current chemical processes in use.

Automation. A process that automated the sorting of waste was designed by National Recovery Technologies Inc. of Nashville, Tennessee, in conjunction with the U.S. Department of Energy's Office of Industrial Technologies. Not only did this new technology allow for sorting according to material, but also according to more specific characteristics such as color, or particular type of plastic. With these new advances, up to 1,500 tons of municipal solid waste can be processed in one day. The EddySort system, manufactured by Wendt Corp. of New York, can recover virtually all nonferrous metal from automobile shredder fluff. Overall, automating the recycling process improves both the speed and efficiency of the recovery of hazardous wastes. Technologies also are being introduced to improve or provide additional applications for recycled paper and plastics, which ultimately will strengthen the market for industry products.

Further Reading

"Allied Waste Industries, Inc." Hoover's Online, 18 February 2000. Available from wysiwyg://13/ http://www.hoovers.com/co/capsule/6/0,2163,15676,00.html .

D&B Sales & Marketing Solutions, 2003. Available from http://www.zapdata.com .

Hoffman, Bryce. "Fod Finding Treasure in Trash." Automotive News, 3 January 2000.

"IMCO Recycling Inc." Hoover's Online, 18 February 2000. Available from wysiwyg://17/ http://www.hoovers.com/co/capsule/2/0,2163,13732,00.html .

Miller, Chaz. "Measure for Measure." Waste Age, 3 December 2003. Available from http://www.keepmedia.com/pubs/WasteAge/2003/12/01/345678 .

O'Connell, Kim A., "Road to Recovery." Waste Age, 1 February 2004. Available from http://www.keepmedia.com/pubs/WasteAge/2004/02/01/371234 .

Scharf, Stewart. "Gradual Recovery for Waste Management" S&P—Industries, 29 October 2003. Available from http://www.hosting.standardpoors.com/ .

U.S. Environmental Protection Agency. "Municipal Solid Waste in The United States: 2001 Facts and Figures." 2001. Available from http://www.epa.gov/epaoswer/non-hw/muncpl/pubs/msw2001.pdf .

"Waste Management, Inc." Hoover's Online, 18 February 2000. Available from wysiwyg://10/ http://www.hoovers.com/co/capsule/4/0,2163,15374,00.html .

Worden, Edward. "Scrap Dealers Welcome Higher 2000 Price Tags." American Metal Market, 6 January 2000.



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