Investors only: investing in efficient processing equipment has been necessary to stay in the North American wire chopping game.

North American wire choppers continue to have hungry end markets for the processed copper and aluminum chops created by their production lines.

Throughout this decade, though, the difficult part has been procuring the cable and wire scrap at the front end of the process, as export brokers pegging their prices to the higher Shanghai commodities exchange often win bidding wars for material.

The fallout of this situation has been fewer wire chopping lines remaining up and running, with only the most time- and cost-efficient producers staying viable.

FAST TIMES. Electrical wire and cable remains an important source of reclaimable copper and aluminum scrap, and competition for the clean metal that can be found inside remains fierce.

While many things about the wire and cable recycling sector may have changed in the past decade, the hunger for clean wire and aluminum recovered from old wire and cable has not.

The scrap material is valued not only by copper and aluminum consumers in North America, but also by consumers overseas. The overseas competition, especially from the booming red metals sector in China, is often cited as a source for changes that have greatly affected the wire and cable recycling sector.

Foremost among the changes has been a willingness for export brokers representing consuming companies in China to pay more for copper-bearing wire and cable than many North American consumers will pay.

Bernard Schillberg, CEO of Prime Material Recovery Inc., Hartford, Conn., notes that the Shanghai index against which Chinese buyers pay has typically been several cents-per-pound higher for copper than the U.S.-based Comex index. "Because [export brokers] can buy against that exchange, that often makes us uncompetitive, and that has consistently been the case for three of four years," says Schillberg of North American-based wire and cable processors.

Fortunately for domestic wire choppers, some domestic copper scrap consumers are limited in their ability to use copper cathode, so they have been paying above-market prices for copper wire chops.

Additionally, the Shanghai pricing index has recently leveled off against the LME and Comex pricing against which North Americans typically trade. "That could make U.S. processors and consumers more competitive, says Schillberg.

The competitive wringer of the past few years has meant that only efficient and well-capitalized operators have been able to stay in the wire chopping sector. "From a processing standpoint, the strides the remaining wire choppers have made means we can compete from a processing or labor standpoint," says Schillberg.

Remaining plants, he says, can process the same amount of material using fewer people and in half the time than they were one decade ago. "Each facility needs to produce more pounds per hour," he remarks, "even if fewer total pounds are being processed annually."

Consultant and equipment sales representative John Groscurth of Wire Recycling Services Inc., Evergreen, Colo., says fewer facilities are able to process the wire and cable scrap that is being prepared for domestic consumers. "Actual net production of wire choppings has increased, I believe, but the existing processors have upgraded to be able to meet that need."

Groscurth estimates that some 60 percent of the wire chopping operators in the U.S. have undertaken major upgrades to their equipment to increase their capacity. "Many of these facilities have upped their production capacity by 30 to 60 percent in the past five years. It has been a huge change as far as performance capabilities," he says.

Groscurth, who represents sales of shredders made by French equipment maker MTB Recycling, credits that companies machines with helping many of these domestic processors reach their increased capacity goals.

PLUGGING IN TO STAY. It is probably dangerous to assume that a transformation has occurred and now the industry is stable. But recyclers can at least be hopeful that the most dramatic effects produced by the Chinese metals boom have been felt.

For those who have been able to retain an operating margin and stay in the wire chopping arena, the past two years may even have provided some good news. "The high copper prices have helped recyclers re-invest in equipment," says Groscurth. He adds that for scrap recyclers who also deal in ferrous metals, the boom market on that side of the business has provided further capital for potential reinvestment.

A source of greater income security for wire processors has also come from aluminum cable, according to Schillberg. He says export brokers have been less assertive in acquiring aluminum electrical cable.

Additionally, Schillberg notes that the relatively uniform characteristics of incoming aluminum cable means North American processors can set up their systems to handle a high volume of this material in an automated fashion. This helps take away a labor surplus advantage that Chinese buyers can enjoy when it comes to sorting mixed loads of copper wiring, which can come in an array of circumferences and configurations.

New investments in wire chopping and downstream separating equipment have in part been targeted toward automating the processing of the inconsistent array of copper wire and cable. "Copper can range anywhere from lamp cord, which is about 30 percent copper, to building wire, which is about 90 percent copper, says Schillberg. "But now, from a processing standpoint, the strides wire choppers have made means we can handle this material and compete from a cost of operations standpoint."

One way in which Prime Materials Recovery has tried to grasp a competitive advantage is by scouring for opportunities to recycle the plastic coating that has often been considered a byproduct by wire choppers.

"We are recycling a minimum of 90 percent of what comes into our plants, and that includes the packaging," says Schillberg. "We have a market for almost every type of polymer that comes into our shop, both segregated and mixed."

This situation, says Schillberg, "has changed dramatically" since he entered the business in 1977. Initially, he remarks, environmental considerations provided a boost to finding a home for reclaimed cable coatings, but now a growing market for such materials is a bigger factor. "It went from an environmental impetus to a financial impetus," he remarks.

As with improved production capacity, Schillberg says it has taken capital investments to make the necessary changes. "We're unique to that, I think," he says. "Many wire choppers are not recycling their plastic to the extent that we are."

Groscurth says location can be a key to whether wire choppers can improve their plastic coating recycling markets. "The plastics marketing is hugely dependent on the contracts you have as far your sources of material. People taking in a lot of mixed wire will have a more difficult time producing a desirable commodity," he says.

Processors such as Jeffrey Mallin of Mallin Bros. Co. Inc., Kansas City, Mo., seem to agree. Mallin notes that mixed plastic choppings from the variety of wire and cable coatings that enter his facility remain problematic.

NEW KIDS ON THE BLOCK? While conditions for wire processors may have improved compared to earlier this decade, this does not necessarily mean the door is open for new competitors to rush in.

"We have plenty of capacity here," says Groscurth. He says that while he has been involved in several plant upgrades in the past two years (since the last time the Recycling Today list of wire choppers was published), one of the only new plant installations he can think of that has taken place in North America in that time was in Mexico.

Remaining recyclers probably have to achieve a sustainable volume level to stay competitive, says Groscurth. "I think a company needs to handle at least 3 to 4 million pounds of material per year, and it's at 6 to 10 million pounds level where the economics really start to make sense," he suggests.

Schillberg says that despite some conditions changing for the better, the current market "is competitive as it's ever been."

Like Groscurth, he says, "I don't think there is much room for new players. Existing facilities are trying to become more efficient, but there are no 'greenfield' operations being started."

The high price of copper may have helped some wire choppers stay afloat, and a drop in prices could prove harmful, especially if export brokers move in to buy at the lower prices.

Remaining processors have to take advantage of fast turnaround times and freight savings offered by proximity to generators and consumers.

"We'll be more competitive with high copper-content material and with locations near a consumer or near the suppliers," says Schillberg. "I think U.S. wire chopping facilities have become globally competitive through their efficiencies and investment in improved technology," he states.

The author is editor of Recycling Today and can be contacted at [e-mail].