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Th© IteSe of Markets In Recycling
-• - ecycling, along with source
J ' reduction, combustion, and
x ' disposal in landfills, is a key
" x^ _ component of an integrated
x J^ municipal solid waste man-
agement strategy. Recycling may consist
of several steps, including collection,
separation, processing, rernanufacture,
and marketing. A material is not consid-
ered "recycled" until all of the necessary
steps are completed and the "recycling
loop" is closed. Since materials must be
converted into products and used by
consumers to dose the recycling loop,
understanding the markets for recyclable
materials and for goods manufactured
from recyclable materials is key to con-
tinued and expanded recycling. Markets
for recyclable materials, like all markets,
are influenced by the laws of supply and
demand. As more and more communi-
ties across the nation implement recy-
cling programs and more recyclable
materials enter the marketplace, both
supply and demand are affected.
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The U.S. Environmental Protection
Agency (EPA) is supporting market
development by promoting both govern-
ment and private sector purchase of
goods containing recycled materials;
providing assistance to local govern-
ments; and researching, developing, and
evaluating policy options.
This booklet summarizes EPA's
Markets for Recovered Aluminum. It
describes factors affecting the current
supply and demand for recovered alu-
minum and provides information on
future market trends. It also explains
how to obtain a copy of the full report.
iS«e the maeSmere pictured mere, can be- y
Aluminum has been recycled since
the early 1900s, so markets for scrap alu-
minum are established and compara-
tively well understood. Scrap aluminum
originates from both municipal (mostly
aluminum cans) and industrial (scrap
from production and old aluminum)
sources. Primary aluminum (from virgin
material) is smelted from
bauxite, a mineral mined
in the United States and
several other countries.
Bauxite, primary alu-
minum, and scrap alu-
minum also are imported
and used in manufacturing.
Recovery of scrap alu-
minum for recycling has
increased steadily since
1970. Aluminum recycling
often is considered a "suc-
cess story" in the municipal
solid waste -world, with
recovery rates in 1989
above 27 percent. This
highly successful rate of
scrap recovery is due in
part to the aluminum
recycling industry's well-
developed infrastructure,
which includes scrap deal-
ers, used beverage can col-
lectors, and processors.
Scrap dealers handle
the volume of scrap that
flows from industry and
consumers to aluminum
product manufacturers.
Aluminum scrap comes in
two forms—old and new
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scrap. When products and
packaging are formed into
shapes, there is often excess
aluminum left over. This is
defined as "new scrap" since
it has not been sent out as a
final product. "Old scrap"
refers to aluminum products
that have been used and col-
lected for recycling. Scrap
dealers handle all types of
aluminum scrap, from siding
to cans to automobile manu-
facture castings, and some-
times nonaluminum materials
as well. These dealers then
sort the aluminum scrap,
which is consolidated and
shredded, baled, or reduced
in sweat furnaces to dense
ingots for shipping.
Used beverage can collec-
tors collect aluminum cans
from a number of sources,
such as municipal programs,
drop-off or buy-back centers,
bottlers and distributors in
states with deposit programs,
and nonprofit collection pro-
grams. Due to the popularity
of recycling in communities, more than
60 percent of all aluminum beverage
cans were recovered in 1989.
Secondary smelters use only alu-
minum scrap in production and are the
largest purchasers of non-used beverage
can scrap. These smelters are exclusively
processors, producing aluminum to vari-
ous specifications, which is then sold to
end users and used in manufacturing.
The success of recent recycling
efforts has caused a significant increase
in the market share of aluminum scrap.
In 1989, recovered aluminum accounted
for over 28 percent of the aluminum sup-
ply of the United States, an increase of 52
percent over its 1970 share of 19 percent.
centers, raraging from
fwmltae to
Several factors, particularly cost,
influence the supply side of the market.
The major cost for aluminum scrap deal-
ers and secondary smelters is the cost of
scrap, which is greater than all of their
other costs, including labor, handling,
processing, and marketing. This demand
is what makes aluminum such a "recy-
clable" material: aluminum is easy to
reuse without a great deal of expensive
processing.
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Deposit programs currently in place
in nine states (plus California, which
assigns a redemption value to beverage
containers) affect supply by assigning a
deposit value to aluminum beverage
containers that is independent of scrap
value. Charging a deposit fee artificially
raises the containers' cost to consumers,
resulting in a higher quantity of contain-
ers collected. Deposit programs do not
increase the value of used beverage cans
once they leave the collectors, but the
effect is to push more used beverage
cans into the scrap market than other-
wise would be there.
of consumer-generated aluminum scrap.
As land disposal and combustion costs
increase and disposal sites become less
available, recycling is becoming an
extremely attractive waste management
option for many communities across the
nation. Several states and municipalities
are implementing mandatory recycling
programs, imposing taxes on nonrecy-
clable or nonrecycled packaging, and
developing other initiatives designed
to increase recycling of many types of
materials. As these programs succeed
and grow in number, the supply of inex-
pensive consumer-generated scrap alu-
minum wil
The major trend in the coming years
will continue to be an increase in supply
Industrial recycling has been prac-
ticed longer than residential recycling.
While not growing as rapidly as residen-
tial recycling, industrial recycling might
expand further when plants are able to
recover more aluminum scrap and when
recovery of industrial waste becomes
more economical.
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Scrap consumers include primary
sheet and ingot producers, which smelt
aluminum from bauxite, but also use
scrap aluminum; secondary smelters,
which convert scrap into ingots meeting
predetermined specifications; fabrica-
tors, which manufacture consumer prod-
ucts such as cans, appliances, and pails;
and foundries, which produce castings
for automobiles, motors, and hardware.
In addition, a major portion of alu-
minum scrap (650,000 tons in 1989) is
exported; approximately 60 percent of
this is sent to Japan.
Until the 1970s, secondary smelters
were the dominant purchasers of alu-
minum scrap, but with the rising cost of
primary production, primary producers
are starting to purchase used beverage
cans and other relatively "clean scrap"
(with fewer impurities). Clean scrap is
more cost efficient than raw material and
easier to make into new products than
contaminated scrap. Contaminated
scrap, such as most non-used beverage
can scrap, is more difficult to recycle
since it often is attached to or alloyed
with other materials that make the scrap
more expensive to process.
'Bten akjmlsturn ts gradusBSy hardened
into ingot tarn. Hardened ingots are
shipped to •& faforiesaiisig plant where they
isra rejSecl Into aSumEnum sliest and
incorporated into new products, A 38,§@G-
pound ingot erf rsdlairned aiumarsym ean
fae B'eq/cled into 750,00© new beverage
One of the major reasons recovered
aluminum has increasing importance in
the marketplace is that it has become
cost competitive with imported and
domestic primary aluminum made from
virgin materials. Primary production of
aluminum from bauxite consumes a
great deal of electricity; therefore, the
price of electricity is an important factor
affecting scrap aluminum demand. Since
the United States has the highest electric-
ity costs of any aluminum-producing
nation, foreign producers have the com-
petitive advantage of offering the same
product at a lower price. This competi-
tion has prompted domestic producers
to shift more and more to using scrap
aluminum, which requires 95 percent
less energy than producing primary alu-
minum from bauxite. In addition, since
the United States produces less than \
percent of the world's bauxite, primary
producers must import a large amount
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of bauxite. When the dollar weakens,
raising the cost of importing this raw
material, utilization of scrap aluminum
becomes even more attractive.
Another factor that influences
demand is the distribution of aluminum
scrap to end users and collectors. Most
end users purchase scrap locally, and
most collectors arid dealers are small
operations located near industrial or con-
sumer generators of scrap. The scrap
market for aluminum in general, there-
fore, tends to have regional fluctuations.
The one exception is the market for used
beverage cans. This market is more
national, since used beverage can scrap
brings such a high price and is so versa-
tile for end users, and also because a
highly developed collection infrastruc-
ture exists.
Scrap consumers often purchase
only certain types of scrap, depending
on production processes. For example,
beverage can manufacturers buy only
used beverage cans. Because firms are
selective in their choice of scrap, they are
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able to manufacture products that are
indistinguishable from primary prod-
ucts. Thus, aluminum scrap has no
stigma attached to it as a raw material
for use in production.
Finally, demand for aluminum scrap
is dependent on the demand for finished
aluminum products, which fluctuates
with consumer demand and the state of
the economy. For example, during the
recession in the early 1980s, the automo-
tive industry was hit particularly hard,
and, as a result, demand for aluminum
castings declined.
Political pressure to promote recy-
clable packaging, along with increasing
competition in the packaging industry,
indicates that primary producers will
continue to purchase more consumer-
generated scrap. Demand for scrap
aluminum, therefore, will increase,
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although scrap prices may fall in the next
few years due to an increase in the total
volume of scrap in the market.
Even though demand for aluminum
scrap may increase, demand for alu-
minum products has slowed, resulting in
less growth in the three main domestic
markets for aluminum: beverage con-
tainers, automobiles, and construction.
Exports of aluminum, however, will con-
tinue to grow. Even if domestic demand
for aluminum products were to expand,
any corresponding increase in produc-
tion would be slow. This is because, from
1980 to 1987, imports combined with
reduced growth of aluminum product
consumption caused many manufactur-
ers to reduce the capacity of their facili-
ties. From these indications, experts pre-
dict a growth rate of only 1 percent for
the aluminum industry as a whole
through 1993.
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