Setting Priorities for Aluminum Recycling Research

1. Setting Priorities for Aluminum Recycling Research Subodh Das Executive Director Center for a Sustainable Aluminum Industry Presented to International Scrap Recycling Institute New Orleans, LA April 14, 2005

2. I want to “pick your brain” about: • Understanding the recycling stream. • Enhancing the beverage can recycling rate. • Increasing the efficiency of automotive recycling. • Understanding the impact of auto recycling on other product streams.

3. Sloan Foundation Industry Centers • The Alfred P. Sloan Foundation was established in 1934 by Alfred P. Sloan, Jr., then president and CEO of General Motors Corporation. Sloan Industry Centers form the nucleus for the Industry Studies program. • Sloan Industry Centers draw their leadership from economics and business disciplines to manage a research and education portfolio focusing on economic, business management, and policy issues pertinent to a single industry. • A Sampling of Other Sloan Industry Centers: • University of California-Berkeley – Semiconductor Manufacturing • Harvard – Textile and Apparel Research; Legal and Professional Services; Managed Care • MIT – International Motor Vehicle; Global Airline; Industrial Performance; Pharmaceutical • Georgia Tech – Paper Business; Trucking • Carnegie Mellon – Steel; Software; Electricity • Vanderbilt – Retailing Industry

4. A little bit about CSAI • Founded in Jan. 2005 • Funded by several sources: • Sloan Foundation Industry Centers Program • A consortium of Aluminum Producers • The Commonwealth of Kentucky • The University of Kentucky • Have about $800,000 in funding for research over the next two to three years. • Faculty in Economics, Business and Engineering are members of CSAI

5. Major Research Foci • Developing and getting the most out of a world-class workforce • Supply Chain Management • Encouraging Recycling

6. Agenda Setting • Plan is to develop a white paper on research priorities in each of these three areas by Fall 2005 • To do this we are: • Reviewing the existing literature to determine what we already know in each of these areas. • Interviewing practitioners and other stakeholders to get their views and opinions about the most pressing research needs. • We are looking for how to get the greatest “bang” for the research buck.

7. Remainder of Talk • Spend a few minutes laying out what we know. • Share some preliminary thoughts on places we might make a difference. • Open it up for your input and discussion.

8. 2003: Fourteen (14) Smelters Operating • SMELTERS OPERATING - 2003 • 8 Alcoa • 2 Century • 1 Alcan • 1 Norandal • 1 Ormet • 1 Columbia Falls Best Case (6) Worst Case (3) SOURCE: LIGHT METAL AGE & SECAT, INC. - FORECAST Figure 1. NUMBER OF PRIMARY SMELTING PLANTS IN THE U.S.

9. Figure 2. U.S. TRENDS OF RE-MELTING VS. SMELTING(000 METRIC TONS) SOURCE: SECAT, INC.

10. U.S. Aluminum Markets

11. Secondary Metal Supply • Two-thirds of all aluminum ever made is still in use! • Two largest areas of secondary market are cans and autos • Can recovery reached ~67% in early 1990’s – now at less than ~50%; cultural, societal and economic issues • Auto metal recovery >90%; aided by regulations, shredders and lack of individual choice. • Recovery of Al from autos will exceed all other scrap sources beyond 2005 • It takes 9350 cans to get the same amount of recovered aluminum as is in 1 car. • Question: Are we better off focusing on automotive recycling, can recycling, or a combination of both?

12. Studying “Big Content” Items • More aluminum in transportation and durables than cans. • More aluminum per site and fewer sites to reach than households—the target of can recycling. • EU mandates on product design are likely to spill over to US anyway. This should aid recycling efforts here.

13. Reverse Logistics • Reverse logistics channels research examines how products move from a large set of origins to a relatively small set of destinations. • Such flows commonly characterize reuse, recycling and disposal activities (Carter & Ellram, 1998). • Goal is to develop benchmarks and diagnostic tools that can be used to improve recycling efficiency and maximize the amount of recyclable material collected.

14. Possible Reverse Logistics Study • Apply and extend Data Envelope Analysis to aluminum recycling by studying the reverse logistics systems associated with a sample of twenty or so aluminum recyclers. • Detailed financial and operational data would be collected through personal interviews with the person responsible for reverse logistics management at each facility. • Heterogeneity among facilities would be evaluated through regression analyses.

15. Issues in Big Content Recycling • Scrap dealers can engage in speculative behavior—holding their stock until the price is right. • Recycling big content items may make up for the loss in recycling cans.

16. So What About Can Recycling? • Cans are the great recycling success story. • We recycle more cans than any other type of packaging: • Cans 45-50% • Glass Bottles 20-30% • Plastics 20-25% • Recycling of all types of packaging declined during the 1990s.

17. A Familiar Picture Percent of Containers Recycled • What this tells us: • Unlikely to learn much from studying experience of other containers. They are doing worse! • Uniform declines in recent years suggests that there are global causes—not something unique about the material. • Declines have occurred even as curbside recycling programs have increased.

18. The Main Suspects for Decline in Can Recycling • Economics of Supply • Takes 34 cans to get a pound of aluminum today, this is up from 22 cans in 1972. • As real incomes rise, the value to people of recycling cans will fall. • Changes in Lifestyle • People are consuming more cans away from home. Average employee consumes 2.5 cans day at work. How do recycling programs capture this? • Ignorance about the problem and its costs • Most people believe the recycling rate for cans is above 70%, true even of “industry experts.”

19. Potential Solutions for Can Recycling • Advocates of Mandatory Programs • Rise in curbside recycling has corresponded with a decline in recycling rates. • Studies of mandatory curbside recycling suggest it does not raise rate above voluntary programs. • Push for a national “bottle bill” requiring a deposit on cans/bottles. • Note ten states that have this have recycling rates above 70%. Same is true for other countries that have bottle laws.

20. Potential Solutions Can Recycling • Advocates of Voluntary Recycling • Bottle laws not in the cards. • Three key elements • Convenience: curbside is convenient and increases recycling, but not so important for aluminum because it is frequently used as fund-raiser. • Incentives: Some evidence coupon programs work, but mostly for people already predisposed to recycle. (what about other types of incentives?) • Attitudes: ultimately must change people’s attitudes which in turn will change behaviors. This requires education and better marketing of recycling.

21. Proposed Study of Sustainable Communication for Can Recycling • Sustainable Communication: Continuous and consistent exchange between the organization and customers to reinforce a cooperative green mentality. • Having a curbside program is not enough you must combine it with the right marketing program to change behavior. • Requires studying how to best establish credibility and trust with the target population. • Some evidence that direct personal contact and regular newsletters to consumers enhance participation and yield from curbside recycling programs. • Need to do a set of longitudinal case studies working with local community-based recycling programs to determine the types and frequency of communication that most influence people’s recycling behavior. • Could take the results and provide education and perhaps a grant program to municipalities to help them increase effectiveness of their curbside programs.

22. Main Issues for Auto Recycling • EU Mandatory Recycling approach. Would that happen in the US? • Secondary impact on US production. • Multitude of wrought and cast Aluminum alloys. • Multiple materials to separated and sorted. • Little experience in recycling automotive aluminum. • Different materials have different values. • Lag time is ten to fifteen years? • Lack of infrastructure: not many places equipped for sorting and recycling different materials. • Can we turn recycled aluminum into beverage cans? • What is a viable business model?

23. Final Comment • So one basic choice we face is whether to put more money into studying how to increase can recycling by studying household behavior or to put more money into studying how to enhance the yield through better reverse logistics of big content products like cars and consumer durables. • Or is a combination of both, recycling transportation and packaging products the best way to go? • Or, do we study how to co-mingle the two recycling streams (cans and cars) to sustain the aluminum recycling industries. • Comments? • Suggestions? • What have we missed? • Where would you put your money???