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Thursday, Dec 1, 2022
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Throwaway Sector?

A regulatory double whammy has hit scrap metal recyclers in California, causing some to go out of business and others to contemplate future closure. First, there is a drop in the price metals, which is partially the result of tariffs imposed by the federal government in its trade dispute with China, as well as lower demand both domestically and overseas. Next are proposed regulations by the California Department of Toxic Substances Control that Valley recycling company owners said could cause them to go out of business. The regulations, still in draft form, would place new rules on the use of chemicals used to treat scrap metal waste before it gets sent to landfills. Mitchell Kramar, owner of Kramar’s Iron & Metal Inc., in Sun Valley, said the proposed regulations make no distinction between those companies using the chemicals and those, such as his, that do not. “It is like lumping airplanes, cars, motorcycles and bicycles into one category when they are all totally different,” Kramar said. The department is following the direction of state lawmakers who in 2015 passed a bill to re-evaluate the metal shredding industry due to concern of fires at shredders, release of chemicals into the environment and concerns that the composition of waste had changed. At Kramar’s business, metal gets shredded and separated through the use of magnets. There are no chemicals to treat the metal waste. “They are trying to classify metal recycling as hazardous waste treatment, which it is not,” Kramar said. The use of chemicals to treat metal shredder waste – rubber, foam, plastic, metal dust, glass and wood – dates back to the late 1980s. There are currently six companies identified by the Department of Toxic Substances Control as authorized metal shredders, none of which are headquartered in the greater San Fernando Valley area. SA Recycling, one of the companies, does have recycling yards in Sun Valley and Lancaster. Robert Hall, president of Pacific Auto Recycling Center Inc., also in Lancaster, echoed Kramar’s complaints about the proposed regulations’ one-size-fits-all approach and the definition that any metals coming out of a shredder are hazardous waste. “The commodity has a value and to classify that commodity as hazardous waste is a dangerous precedent,” said Hall, who opened his business with some partners less than three years ago. “It is a bit of an overstep.” The new regulations come on top of other rules that have already driven recyclers out of business. In August, consumer recycling center operator rePlanet LLC closed all its operations, citing depressed prices of recycled aluminum and plastic and the rise in the minimum wage and required health and workers compensation insurance that “have made operation of these recycling centers and supporting operations unsustainable.” In the Valley region, rePlanet collected recyclable materials at locations in Agoura Hills, Burbank, Canoga Park, La Crescenta, Woodland Hills, Lancaster, Saugus, Valencia, Newhall, Simi Valley, Thousand Oaks and Moorpark.  The Valley Industry & Commerce Association, the Los Angeles County Business Federation and the Lancaster Chamber of Commerce are among the organizations that have come out in opposition to the proposed regulations. Elizabeth Hawley, director of legislative affairs at VICA, said the Van Nuys advocacy group has been talking with area legislators about the changes and emphasized that if California becomes too onerous with metal recycling, then the material may be shipped out of state where it might end up in landfills. “That’s against a lot of the environmental goals that our folks are talking about,” Hawley said. “We have been having those conversations for the last couple of years.” VICA President Stuart Waldman said there is a disconnect in that people think that if you make it harder to recycle metal, it won’t be recycled. “It goes to Nevada; it goes someplace else,” Waldman said. “It is going to happen. And really, we want it to happen. We want scrap metal to be recycled in some way, shape or form.” Gama Ortiz, a public information officer with the department, told the Business Journal that the regulations are currently under review. “It may be some time before any steps are announced,” she said. Future industry? The recycling industry is a lot bigger than most people know. That is the opinion of Joe Pickard, chief economist of the Institute of Scrap Recycling Industries Inc., a Washington, D.C. trade organization. A study released last month by the institute found that in 2019, the economic value of scrap recycling in the U.S. totaled $110 billion. California led all 50 states with an economic impact of $11.4 billion. The second highest was Texas with a $9.7 billion economic impact. “Because of the investments we are making today, and efficiencies gains that will come as a result, the outlook is actually quite positive even though we are in a period of transition,” Pickard said of the overall health of the industry. Still, that transition includes a drop in the prices of metals and other recyclable materials. Much of that has to do with tensions with China and the imposition of tariffs in retaliation for U.S. tariffs on Chinese imports. China accounted for 40 percent of U.S. exports of scrap metals in 2017, according to the institute, or about $5.6 billion worth. Kramar estimated that the price of metals is down between 30 and 50 percent due to the tariffs and a global slowdown in metals purchases and infrastructure projects. “That means manufacturers we buy from are not getting as much for (metal) which they rely on a lot of times,” Kramar said. Hall, of Pacific Auto Recycling, said that his business was lucky enough to have been able to continue shipping metals even as the price took a dive. “I knew some friends in the industry who were having difficulty moving material for a few weeks,” Hall said. Recycling is a cash flow sensitive business and if you are not moving material then your cash flow comes to a screeching halt, he continued, adding, “that can be very difficult situation to overcome.” Pacific Auto was able to continue shipping based on relationships with brokers and others who were able to get its metals to Southeast Asia. The future of the company, however, rests closer to home, Hall said. “Our long-term goal is to have a much stronger domestic presence and sell higher volume in the domestic market,” he added. Lobbying efforts Kramar has been in contact with the office of state Sen. Robert Hertzberg in Van Nuys about the proposed rules. Hall said the Institute of Scrap Recycling Industries is watching the issue as well. While Hall believes that there are good people in the toxic substance department, they are not seeing the unforeseen consequences that will impact the recycling industry, he believes. Without recyclers to take cars, appliances and other items, they may be abandoned on the streets or in the desert, he said. “They are an environmental hazard in and of themselves. What do you do to remedy that situation? Is the state going to take care of it?” Hall asked. “Historically the recycling industry has been there to handle this problem. I don’t think the recycling industry will be there if they pass these regulations, frankly.” “If people aren’t recycling metal, it ends up on the streets which will cause more pollution,” Kramar said. “The more we can recycle, the better off we are with everything.” An easy solution, Hall continued, is that the department needs to clarify language in the proposed changes to make a distinction between metal shredder aggregate that is recycled by physical separation – operations such as Pacific Auto and others – and the metal residue that is chemically treated prior to landfill disposal. Such a distinction would allow the department to regulate hazardous waste and allow scrap metal recyclers to continue their business of physically separating material into recyclable and re-sellable metals. “That is really a simple thing, clarifying the language,” Hall said. “Let’s not lump these guys who are not doing this thing in with the guys who are.”

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.
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