Agency issues alert urging shredder operators to “contact their local regulatory or permitting authority for further guidance.”

The United States Environmental Protection Agency (EPA) has issued an “Enforcement Alert” that verifies what some auto shredder operators have been concerned about for more than a year: the EPA is targeting their facilities for air quality reasons.

The July 2021 three-page document states in part that “EPA and state investigations have identified Clean Air Act violations at metal recycling facilities that operate auto and scrap metal shredders, causing excess emissions of air pollution.”

Continues the agency, “Shredder operators should be aware of the amount of volatile organic compounds (VOCs) and other emissions from their facilities and should contact their local regulatory or permitting authority for further guidance.”

At a May 2020 State of the Industry roundtable conversation, Kevin Gershowitz of Medford, New York based Gershow Recycling commented on his company’s having been has been selected by the EPA for emissions testing on its shredders.

Stated Gershowitz more than a year ago, “The big kick now with [the] EPA on a nationwide basis is volatile organic compounds (VOCs), which are emitted at shredders. Basically, as you shred the car, there’s some residual oil left in the engine; it goes into the shredder, and the shredder doesn’t get hot enough to actually burn it and destroy it, but it gets hot enough to create fumes. And the fumes get hot enough to become VOCs that go in the atmosphere.”

Several hundred miles west in Chicago, Ohio-based Reserve Management Group (RMG) has been unable to open its new shredding plant in the Second City because of the refusal of Chicago’s city government to issue final permits. This despite the existence of a finalized and signed agreement between RMG and the current mayoral administration, which has triggered a $100 million lawsuit.

It is unclear whether the new Enforcement Alert will add any clarity for shredding plant operators. The threats initially are spelled out more clearly than the path forward, with the EPA writing that plants with emissions levels found to be above its thresholds “may be required to install add-on controls, pay civil penalties, and take other measures.”

In sections titled “Air pollution control strategies,” “Depolluting to prevent pollution,” and “Recommended actions,” the EPA lists “permanent total enclosures,” venturi scrubbers and regenerative thermal oxidizers as potential technical solutions. The agency also recommends “removal and recovery or proper disposal of scrap metal shredding operation that uses a fluids and certain materials prior to shredding (depolluting).”

In the alert’s final section on recommendations for plant operators, the EPA lists three steps: 1) “depolluting” scrap materials before they enter the shredder; 2) estimating or measuring VOC emissions; and 3) contacting the EPA or a state agency afterward.

In early August, the Houston-based law firm of Vinson & Elkins LLP followed up on the EPA alert by advising its clients in part, “Shredding facilities should take steps now to confirm that their emission levels do not exceed regulatory thresholds. Shredding facilities should also evaluate whether they wish to take advantage of EPA’s Audit Policy, which can offer substantial penalty reduction benefits for self-disclosed violations.”

Members and staff of the Washington-based Institute of Scrap Recycling Industries (ISRI) will remain attentive to the issue, according to ISRI President Robin K. Wiener. 

“This is a critical issue that ISRI is working with our Shredders Committee to address on behalf of all of our members that operate shredders throughout the country," says Wiener. "During last month’s governance meetings held in D.C., the ISRI board authorized funding specifically for this issue, allowing ISRI to develop a compliance framework and provide assistance for its members.”

 A full copy of the EPA Enforcement Alert can be viewed on this web page.

The aluminum company’s net income for the quarter increased thanks in part to strong demand for beverage packaging and specialty products and a rebound in automotive shipments.

Atlanta-based aluminum rolling and recycling company Novelis Inc. saw its net income increase to $303 million in the first quarter of its 2022 fiscal year compared with a net loss of $61 million in the comparable quarter of the prior year, which was negatively affected by the COVID-19 pandemic and acquisition-related special items. Excluding special items in both years, first-quarter fiscal 2022 net income from continuing operations of $260 million is up significantly compared with $22 million in the prior year, driven mainly by higher after-tax adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). Net income attributable to the company’s common shareholder was $240 million for the quarter ended June 30 compared with a net loss of $79 million in the prior-year period.

Novelis’ net sales increased 59 percent to $3.9 billion in the recently completed quarter compared with $2.4 billion in the prior-year period, primarily driven by a 26 percent increase in shipments, favorable product mix and higher average aluminum prices. Total flat-rolled product shipments increased to 973,000 metric tons compared to 774,000 metric tons in the prior-year period. The company says the increase primarily was a result of strong demand across end markets, particularly in beverage packaging and specialty products. Automotive shipments for the quarter were more than double those of the prior year, despite some headwinds from the current semiconductor chip shortage affecting the automotive industry, Novelis says.

Adjusted EBITDA increased 119 percent to $555 million in the first quarter of fiscal 2022 compared with $253 million in the prior-year period. The increase in adjusted EBITDA is primarily from higher volume and favorable product mix, as well as from metal benefits and a $47 million gain related to a favorable decision in a Brazilian tax litigation, partially offset by higher costs resulting from higher production volume and inflationary cost pressures, according to the company. Novelis says it achieved an adjusted EBITDA per ton shipped of $570 in the first quarter of fiscal 2022 compared with $327 in the prior year and $514 in the fourth quarter of fiscal 2021. Excluding the nonrecurring tax litigation benefit, adjusted EBITDA per ton equates to $522 in the first quarter of fiscal 2022.

"Our strategy to grow a diverse portfolio of sustainable aluminum products utilizing our leading geographic footprint to meet strong demand has again delivered outstanding results in the quarter," Steve Fisher, president and CEO of Novelis, says. "With new automotive capacity in the U.S. and China now ramping up and the financial fortitude to continue to invest in growth opportunities aligned with our long-term carbon neutrality goals, we will further expand our leading position in delivering low-carbon, sustainable aluminum solutions across premium end markets worldwide."

Free cash flow from continuing operations was $30 million in the first quarter of fiscal 2022 compared to $146 million in the prior-year period, driven primarily by higher adjusted EBITDA and favorable metal price lag, largely offset by higher working capital requirements, including rising aluminum prices, according to the company.

"Novelis has achieved a milestone $2 billion of adjusted EBITDA on a trailing 12-month basis, driving rapid improvement in our net leverage ratio and providing significant financial flexibility to grow the business within our capital allocation framework," Devinder Ahuja, senior vice president and chief financial officer, says.

The company says it continues to maintain a strong total liquidity position of $2.3 billion as of June 30.

Recognizing the continued steady improvement in Novelis' business and end markets, Novelis notes that July 22, S&P Global Ratings raised its issuer credit rating on Novelis to BB from BB-.

Shipping firms and port agencies report backups at container ports in several locations.

More than two dozen container ships are anchored near Los Angeles awaiting unloading, part of a national total of about 80 such backed-up vessels, according to global freight news service FreightWaves.

Recyclers of metal, old corrugated containers (OCC) and other secondary commodities shipped internationally have been among those affected by shipping delays, a shortage of containers and lofty freight prices that have defined container shipping conditions in late 2020 and thus far in 2021.

A logistics consultant FreightWaves quotes cites new capacity in the trans-Pacific market (added to address the previous shortage) as a reason he expects ports on the United States West Coast will be “slammed the entire month of August.” Seattle-based consultant Jon Monroe adds, “We are entering gridlock plus.”

Citing automatic identification system (AIS) data from Greece-based MarineTraffic.com, FreightWaves says the number of container ships anchored in San Pedro Bay near Los Angeles rose to 30 July 23 before falling to 27 July 30.

The ports of Los Angeles and Long Beach in California are not alone in being unable to service vessels promptly, according to MarineTraffic tracking. FreightWaves says at the end of July, another 16 ships are anchored in the Pacific Northwest and six near San Francisco.

On the East Coast, 17 container vessels are awaiting unloading near Savannah, Georgia, and in the Gulf Coast region, another seven ships are waiting for unloading service near Houston.

FreightWaves says as of July 30, “Altogether, around 80 container ships are awaiting berths at ports on all three U.S. coastlines. And peak season is now set to begin in earnest, implying even more congestion ahead.”

The issue has been ongoing and is affecting ports beyond those in North America. Pireas, Greece-based Hellenic Shipping News reported in early August that a container terminal in Ho Chi Minh City, Vietnam, has stopped accepting some refrigerated containers until August 16, “since containers have piled up and there is little space left.” The media outlet cites Saigon New Port Corp., the operator of the Cat Lai Terminal in Ho Chi Minh City, as the source of that news.

That same Vietnamese port management company says it also will stop receiving oversized and overweight cargoes starting Aug. 5.

The publication cites COVID-19-related restrictions for the backup in Southeast Asia, a common destination for U.S. scrap metal and paper exports. “During weeks of social distancing, the number of trucks coming to pick up cargo decreased sharply, leading to the pileup,” writes Hellenic Shipping News.

The full FreightWaves article on the situation at U.S. ports can be found on this web page.

The acquisition includes on-site paper and hard drive shredding trucks along with other assets.

Redishred Capital Corp., Mississauga, Ontario, has completed the acquisition of the Proshred Atlanta business from its franchisee located in Atlanta. The acquisition was effective at the end of the day July 30. The location earned about $1.3 million in revenue during the 2020 fiscal year and currently operates five trucks in the Atlanta market.

The acquisition includes on-site paper and hard drive shredding trucks, containers, client relationships and other assets used in the shredding business. Redishred says the Atlanta market has the size, scope and growth profile for this to be an “attractive market” moving forward as the area has a population of more than 6 million people and its population has grown by 15 percent in the last decade.

According to a news release from Redishred, the company views this acquisition as accretive to its cash flows and earnings on a per share basis. The company financed this acquisition through cash reserves and from accessing CA$854,000 from its acquisition loan facility.

Redishred reports that the purchase price of the acquisition has a target payout of between $2 million and $2.9 million based on the performance of the operation over the following three years from the closing date. Cash consideration was $2 million. The remaining consideration was in the form of earnout provisions tied to attainment of financial metrics.

Bill introduced would give Commodity Futures Trading Commission oversight over aluminum pricing if passed.

A consortium of trade associations has given its backing to a bill introduced in the United States Senate that would give the U.S. Commodity Futures Trading Commission “jurisdiction over the markets, including the process, oversight, transparency and manner in which reference prices for aluminum premiums are set or reported.”

That phrasing is found in the second paragraph of the second section of House Resolution (HR) 2698, legislation introduced in the U.S. House of Representatives in April. It also is used in the Aluminum Pricing Examination (APEX) Act recently reintroduced in the Senate by Sens. Tammy Baldwin (D-Wisconsin) and Tom Cotton (R-Arkansas).

“We applaud Sens. Baldwin and Cotton for their work to ensure aluminum costs reflect market fundamentals,” says Jim McGreevy, president and CEO of the Washington-based Beer Institute, one of five trade associations releasing a joint statement backing the bill.

The bills likely are tied to an effort to reconsider and repeal tariffs introduced by the Trump administration in 2018 on imported aluminum. Aluminum consumers, including beverage can makers and boat manufacturers, have long contended the tariffs have restricted aluminum supplies and caused spikes in prices.

The associations cite a report by Texas-based Harbor Aluminum which found that from March 2018 through December 2020 the Section 232 tariffs “cost America’s beverage industries an additional $848.6 million.”

The associations say the tariffs “have created significant costs on aluminum end-users, and these costs are only magnified by the problem inherent in the current aluminum premium pricing structure. When the tariffs are coupled with the effects of the pandemic, American businesses are faced with enormous costs, and American jobs and future investments are imperiled.”

As prices for aluminum in the U.S. have risen (including prices for used beverage cans (UBCs) and other aluminum scrap), the Midwest Premium (MWP) has gained attention. Pricing service S&P Global Platts says the MWP “is not a ‘fee’—it reflects the regional price of aluminum.”

The Section 232 tariffs, by imposing a 10 percent duty on aluminum imports, have likely contributed to a lofty MWP in recent years. Also contributing has been a steady rise in demand for aluminum packaging caused in part by a growing stay-at-home beverage market during the pandemic and by recycled-content aluminum’s positive status as sustainable packaging.

Whether the effort to investigate the MWP and other pricing mechanisms outlasts the Section 232 tariffs on aluminum (if and when such tariffs are rolled back) will be closely watched by aluminum producers and aluminum scrap processors.

On its website, S&P Global states “commodity transactions occur out of sight” but its tracking of the MWP and other prices “sheds light on these deals as a neutral third party.” Adds the business information service, “S&P Global Platts provides an independent assessment of where commodity prices fall each day and has no financial stake in the price going up or down.”

The five trade associations (American Beverage, the Beer Institute, the Consumer Brands Association, the Flexible Packaging Association and the National Marine Manufacturers Association), however, sound anxious to find out more about the pricing methodology.

“As manufacturers face cost increases at every link in their supply chains, there could not be a more important moment for this legislation,” says Geoff Freeman, president and CEO of the Consumer Brands Association. “The APEX Act will bring more certainty and transparency for the consumer packaged goods industry – which depends on aluminum to make and package everything from aluminum foil to canned goods –  and will allow the consumer packaged goods industry to continue to deliver essential goods to the American people. We thank Senators Baldwin and Cotton for their leadership on this critical issue.”

The text of HR 2698, identical or nearly identical to the APEX Act, can be found on this web page.