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AMM Article - Analyze This..Fighting Low Quality Scrap

June 23, 2014

American Metal Market Article – Published June 16, 2014

Originally published on

Reprinted with permission from American Metal Market

Article written by Sean Davidson


NEW YORK — In 2002, Daniel Pflaum launched Gamma-Tech LLC to resell a product—now manufactured by Waltham, Mass.-based Thermo Fisher Scientific Inc.—that could determine the composition of materials.

Before then, the Cross-Belt Metal Analyzer had been used in the iron ore, coal, cement and phosphate industries. But with decades of experience in scrap recycling and steel, Pflaum felt he could bring the technology to the shredded scrap industry.

Twelve years later, Pflaum, president of Dayton, Ky.-based Gamma-Tech, continues to lament the industry’s use of visual inspection for scrap. In this conversation with AMM, Pflaum details his push for wider adoption of the belt analyzer and what changes his company could bring to the industry.

AMM: Why is the analyzer beneficial to scrap companies and steel mills?

Pflaum: Using the scrap analyzer, scrap processors can now market the material and steel mills can buy and use the material based on the same data-based value analysis. We ultimately see a bifurcation of shredded scrap into two principal categories. The first is an analyzed product—sometimes called Gamma-Shred—that is sold by processors to steel mills that specify a chemistry and expect or require a report to demonstrate the material meets this requirement. This would largely be those mills whose product line is chemistry restrictive, such as rail, special bar quality, flat-rolled, wire rod and plate. The second grade is a commodity grade that is not analyzed and is marketed to steelmakers that don’t care about the chemistry of the product. This is really no different than the value-based concept present in the market today where prime industrial scrap is valued higher than shredded due to inherent lower residuals, less variability and improved melting yields.

AMM: In the past 12 years, what does your data show in terms of contaminant, or tramp element, levels in shredded scrap? Is it getting better or worse?

Pflaum: The chemistry of shredded scrap is not only getting worse, with higher copper levels, but equally troubling for steel mills is the increased variability of the product. Our data show that the average copper content of shredded scrap has risen from about 0.21-percent copper in 1980 to approximately 0.33-percent copper today. The variability of shredded, both from shipper-to-shipper and also month-to-month, presents an equally challenging problem for steelmakers. They must add prime scrap or iron ore-based material to buffer and dilute this problem. The industry focuses on the effect of scrap prices on steel mill costs, but the effect that quality can have on the true value-in-use is often overlooked. If the price of shredded dropped from $380 per gross ton to $360 per ton, that is a 5-percent change in price; however, if during the same period the shredded from a supplier shifted from 0.21-percent copper one month to 0.33-percent copper the next, that is a 50-percent change in quality. So while the price dropped the true value-in-use for that period dropped. Simply stated, what the mill bought at $360 was actually lower quality and higher cost than the purchase at $380.

AMM: What is the cost benefit to a shredder and mill for installing an analyzer at a facility?

Pflaum: The analyzer technology is a process control instrument and therefore is often best suited where the process exists, which is at the shredder. The analyzer is not normally marketed on a usage basis, but the typical cost to analyze at a shredder is approximately $1.50 to $2 per gross ton. The net savings at the steel mill from the value of knowing and reduced variability is significantly higher than this cost, so the value proposition exists in the marketplace.

AMM: Is the company growing?

Pflaum: Over the past four years our initial rapid growth has stagnated as the industry has suffered through the economic downturn. In addition, given the high spread between prime scrap and shredded in 2008, the term Gamma-Shred became synonymous with a very-low-copper (often 0.17-percent copper maximum) and high-premium shredded product. While we saw value in that application in those market conditions, this is a very small niche application and subset of the real value proposition to both industries. Gamma-Tech believes that steel mills should be able to designate the chemistry of the product that creates the most value for their specific mill and then look to their suppliers to produce that grade with a value-in-use pricing approach. This may be 0.17-percent copper for certain mills or specific market conditions but it will be 0.25-percent copper max or even 0.28-percent copper max for other mills and markets. It has taken several years to shift from the mindset that it must be low copper only, to one of the value of knowing. Moreover, scrap companies are faced with low capital spending as margins are compressed due to over-capacity of shredders.