John Shegerian: Welcome to another edition of Green Is Good. This is the ISRI edition of Green Is Good. And we’re so honored to have with us today Tom Knippel. He is the Vice President of Commercial Recycling for SA Recycling. Welcome to Green Is Good, Tom. Tom Knippel: Good morning. Pleasure to be here. John Shegerian: Great to have you today. Before we get talking about SA Recycling can you please share with the audience a little bit your own journey, your own story leading up to joining SA Recycling and your history in the recycling business and with ISRI. Tom Knippel: Recycling started for me in college when I took an Environmental Studies course. John Shegerian: Where did you go to college? Tom Knippel: This was many years ago. Wisconsin. John Shegerian: Oh there you go. Tom Knippel: University of Wisconsin. Go Badgers. John Shegerian: Go Badgers. Tom Knippel: I have to put a plug. NCAA Champions. But anyway I always had an interest in conversation and the environment and the outdoors always fascinated me. I saw some of the things that were going on so I took an interest. But that’s not how I got in the industry. I actually worked – Time Warner was my first career. I worked in cable television for six or seven years in Wisconsin and traveled the country for them. The travel was getting a little excessive, so I decided what can I do that’s going to keep me local with my kids? And it was a serendipitous find for me. I found a scrap company that was regional in the Wisconsin area. They liked me and I liked them. And what they’ll tell you in the scrap industry is you either love it or hate it, and if you love, it you’ll never leave it. And that was over 25 years ago and I’ve been there ever since. John Shegerian: That’s great. And then our common friend, George Adams, recruited you to come out to SA Recycling at some point? Tom Knippel: He did. I’ve known George for quite a while. We both serve on the ISRI board of directors and we have a common interest in this business. Over the years, George is a leader in this industry and I admired him greatly. And when he presented the offer for me to come out to work for him – I had been with the same company for 22 years, but I reached a point where I just couldn’t say “no.” John Shegerian: Right. Tom Knippel: He is that type of person. And it’s been a great adventure for me. Just a wonderful adventure. John Shegerian: That’s great. And for our listeners to learn more and our audience to learn about SA Recycling and Tom’s great company, you can go to www.SArecycling.com. Tom Knippel: Absolutely. John Shegerian: I have been to one of your facilities and I’ve seen the massive amount of machinery down there. We’re going to be talking about that today. We’re going to be talking about, more specifically, car recycling. What happens when people are done driving their car and a car comes to its regular end of life? Where does it go? We all have these cartoonish pictures in our mind of cars being put into like a rectangle cube or something like that. But there is a really different story to what real recycling looks like in the car shredding industry. Can you share with our listeners? Tee up a little bit about what happens at a car’s end of life. Tom Knippel: And thank you, Hollywood, for that misinformation on cubing parts. There were old movies and it was always great when they put these cars in this compressor and made it into a bale. John Shegerian: Right. Tom Knippel: But what has really replaced that technology is today’s shredder. John Shegerian: OK. Tom Knippel: Which is a phenomenal engineering wonder. A huge machinery that separates the car. But prior to getting to the shredder cars need to go through several processes. There is an intermediary process when a car comes to the end of its useful life driving. There is a second life for it, and that is that it goes to the boneyard and its parts are then resold. Because when your car gets broken or dented, as opposed to buying a brand new fender, what you should do is go to a junkyard, an auto salvage yard, to get a fender, a hood, a doorknob. So the cars are cannibalized for their parts in the auto recycling industry prior to them coming to us. John Shegerian: Got you. Tom Knippel: And in most cases automobiles today are also de-polluted before coming. There are several processes in the shredding process that have to be done prior to a car being shredded. John Shegerian: Such as what does “de-polluting” mean in the car shredding industry? Tom Knippel: In everything that we manufacture, there are elements of concerns. Items of concern. For an automobile to function and give us the type of luxury that we like today, there are many components. I guess the most common one that people will recognize, and this goes back a few years, is when you popped your trunk and the light came on. Well, that light came on because there was a switch in it that had mercury in it. And when it went up, the mercury fell down and made the connection, and when it went down, it went the other way and disconnected to turn the light on and off. So the mercury has to be removed. The mercury switches. That’s just one element. And they stopped using mercury in cars today but we’re still seeing the old cars come in. John Shegerian: Got you. Tom Knippel: So we remove mercury switches. Batteries which are made of lead have to be removed. Fluids. You have all sorts of fluids in a vehicle. There is oil in the engine. There is transmission fluid. There is brake fluid. There is antifreeze. So all of these elements of concern have to be removed prior to the shredding process. John Shegerian: So all the hazardous materials, hazardous to the environment materials, are taken out first. Tom Knippel: Correct. John Shegerian: Prior to them being put through one of your processors. Now we’re going to talk a little bit about what the process looks like. What I saw was a big shredder. Can you explain how shredding, as you pointed out a couple of minutes ago, revolutionized from the big block image of a car being recycled? How shredding revolutionized it? What do one of these shredders look like? How are they manufactured and how much do they cost? Tom Knippel: Sure. A lot. It’s a lot of machinery. But I’ll give you just a quick history of the recycling of automobiles. John Shegerian: Yeah. I’d love for our audience to hear that. Tom Knippel: Years ago, prior to shredders, literally, men – and it was men that did it – took axes to a car and chopped it up, and before they did that, they actually set them on fire, which if you can imagine how environmentally friendly that would be, burning plastic and foam and so on. And that’s how they removed the non-metallic parts from it. And then taking it apart with axes to cut it in pieces small enough to send back into the mill. So it was a very labor intensive process. A very environmentally unfriendly process to do. John Shegerian: Right. Tom Knippel: So at some point they would get these cars cleaned up and then they would cube them because when you melt in a steel mill you need a certain density for efficiency. And that’s what shredding does too. Part of the shredding process is making density. But this evolution, when shredders were first invented in the ‘50s, was revolutionary in that you were able to process a larger volume of cars, break them down by their components and separate them into the components so that they could be reused. So it was a revolutionary introduction to the industry. John Shegerian: Got you. And so where is it now? How have the shredders evolved and what do you build now on one of your facilities? Tom Knippel: A shredder today can take up a city block. And larger in some cases. They can be three to five stories tall when you have all the components put together. But it basically consists of an in-feed conveyor that’s bringing them up to the shredder itself. John Shegerian: Right. Tom Knippel: The shredder, which is a hammer-mill, and then after it comes out of the shredder, it goes on various conveyors, air systems and separation of the components that come out of the shredder. John Shegerian: Got you. And the air systems on the backend and the conveyors on the backend are to separate the different commodities of it coming out of the car? Tom Knippel: Correct. The shredding process itself – and some people when they hear the word “shredding,” they think of paper shredding, and it’s really nothing like it. The end product is to break to down in smaller pieces. John Shegerian: Right. Tom Knippel: Which is the same. But a shedder is also called a “hammer-mill.” And there is a very large shaft in the middle that can lay 50,000 pounds that rotates at about 500 revolutions per minutes. And attached to that are approximately 30 hammers and each hammer can weigh 250 to 1,250 pounds. John Shegerian: Wow. Tom Knippel: And this is spinning at 500 revolutions per minute inside a closed chamber. And as material is fed in, these hammers come around and they actually tear the car apart. So there is a large clamp at the opening of the shredder that holds the car in place so it doesn’t get pulled in too fast. John Shegerian: Right. Tom Knippel: But it’s continually ripping apart that car inside the shredder. The top is solid and the bottom of the shredder looks almost like a sewer grate. So shredding is really two processes. It breaks all the components apart because in a car you have steel, you have aluminum, you have stainless steel, copper, foam, plastic, glass, and all these components have to be separated. That’s what the first part of shredding does. The second part is as it forces this broken up material through this grate in the bottom, it forces it into fist-sized balls. John Shegerian: OK. Tom Knippel: Which densifies the steel product. John Shegerian: OK. Tom Knippel: And then you have all this material coming out on the backend. The first separation that occurs is the easiest. Magnetic separation. Steel is ferrous, so it’s magnetic. Everything else is non-magnetic. So the first system are these large drums on conveyors that will pick up the steel and take it one way. John Shegerian: Got it. Tom Knippel: So that is our steel product process. John Shegerian: Steel is taken out first. Tom Knippel: Absolutely. But there are some components in there – every car is equipped with a starter to start your car. This starter is like an electric motor. There is copper inside but it’s wrapped around steel so the magnet picks that up too. So even in the mechanized systems today, there is some level of hand separation as the material is coming out. John Shegerian: Got it. Tom Knippel: The rest of the material goes on to a conveyor system of separation because we want to get the aluminum separated from the copper separated from the stainless steel separated from the plastic, glass and foam. And we do that through a series of technology that uses rare earth magnets that expel the metals at different rates. And we set up dividers so that the aluminum gets thrown the longest. The copper that is heavier based on density gets thrown the least. So actually in the industry there is a term for aluminum that comes out of shredders called “long throw aluminum” because it’s thrown the furthest. But the technology is so good today that we can separate all these components and get maximum recovery of the car. John Shegerian: Higher value. Tom Knippel: Higher value and more elements coming back into use as opposed to being landfill. John Shegerian: So besides value and, you just mentioned, less landfill, what are the other benefits? Is it just an environmentally better system than crushing the cars? Tom Knippel: It’s an environmentally better system, but it also increases the melt capacity at a steel mill. Their efficiency is improved by a densified pure, homogenous product. A cleaner product. So there are efficiencies all the way along the line. But what we’d like to look at as probably the biggest, though, are the environmental savings. When you produce any material from a recycled component versus mining raw materials you’re saving virgin materials, you’re saving natural resources. John Shegerian: Lots of energy. Tom Knippel: Lots of energy. On an average car you’ll save over 500 gallons in energy savings on one vehicle and 8,000 pounds of CO2 emissions. John Shegerian: Wow. So if you take a car going in to one of your facilities, it, like you said, has to be decontaminated first. After decontamination, after the parts have been harvested from it prior to it coming to your facility, what percentage of the car actually is getting shred and going back into resource reassignment and reallocation? Tom Knippel: And the goal obviously for cost benefit is to maximize that. John Shegerian: Right. Tom Knippel: So just like with everything else we want to get everything out of the hog including the squeal. SA Recycling – our owner George Adams is by far the expert in that category and systems. But we’ll maximize recovery. An average car is 70-plus percent steel and 3-4 percent nonferrous metals, being aluminum, copper and stainless. The rest is the residuals. What we call the “automobile shredder residue,” which may contain plastic, foam, glass and those components. There is technology being worked on right now, and this was only recently approved by working with the EPA to start harvesting more so we could get up to close to 90 percent recovery on the vehicles. John Shegerian: Really? Tom Knippel: Yeah. John Shegerian: I want to come back to the issue of steel in a second. For our listeners in our audience who have just joined us, we’ve got Tom Knippel. He is the Vice President of Commercial Recycling for SA Recycling. You can find SA Recycling at www.SArecycling.com. We’re doing the ISRI Green Is Good special here in downtown Vancouver at the Vancouver Convention Center and we’re talking about car and automobile recycling with Tom. You mentioned historically how much you can recycle out of a car nowadays and what it is made out of in terms of steel and other items. Is there a change, a sea change, coming now with all these cars becoming much more sustainable and hybrids and the CAFE standards that we have? Is there less steel and more aluminum and other products and carbon products going into the making of cars? And how is that affecting how you create and build and design your shredders? Tom Knippel: And the answer is yes. And the challenge is how do you recover the maximum amount of materials both economically and efficiently. John Shegerian: Yeah. Tom Knippel: And just to give you some ground work on the amount of materials that are recycled annually in the U.S. John Shegerian: Yeah. Tom Knippel: One-hundred-and-thirty-eight million tons. Seventy million tons of steel. The United States produces about 100 million tons per year of steel. Seventy percent of that comes from recycled steel. John Shegerian: Wow. Tom Knippel: So we’re talking some phenomenal numbers in terms of the amount of materials. But it is reducing. Aluminum is replacing steel in cars for fuel efficiency – the CAFE standards – and we want cars to get more miles per gallon. John Shegerian: Right. Tom Knippel: Batteries are being used instead of gas-powered engines. So the recycling process changes, and one of the things that ISRI took the forefront on years ago and actually trademarked the term Design for Recycling is working with auto manufacturer, working with engineers, working with manufacturers of all products to design their products to maximize recycling. And that includes removing. Hazardous materials. If there is no mercury to begin with, it’s much easier to recycle. And if something is put together with two bolts instead of 32, you can dismantle it manually to recover something prior to being shredded. But the shredding process is still for many years going to be there as the base component for recycling automobiles, appliances and other light gauge steels. John Shegerian: Do the tires get recycled? Tom Knippel: The tires are removed prior to, in most cases, being recycled so that they don’t fall into a waste stream. Because there are many beneficial uses today for tires, and they are recyclable, and that’s a big part of ISRI’s component. John Shegerian: So they get recycled from a different recycling? Tom Knippel: From a different recycling. Foam/rubber. John Shegerian: Wow. So, really, as our audience sees these scrap yards and they drive by them, the old Sanford and Son model, the car shredding that’s being done there is truly almost a new economy type of business. A very sustainable and very green industry in that you’re taking all this amount of huge tonnages you point out of cars and you’re turning it into new resources that go back to smelters and are made into the next generation of planes and infrastructure in India and China and in the United States. Tom Knippel: And it’s an international market. It’s funny that you mention Sanford and Son, because growing up that was my only perception of a scrap dealer. John Shegerian: Mine too. Tom Knippel: And it’s so far from what the truth is, and it’s simply because this industry hasn’t had a public presence in the past. John Shegerian: Right. Tom Knippel: It’s been there for 100 years in the U.S. and metals have been recycled for thousands of years because of their value. So it’s just that we don’t see it in our every day. So if you have the opportunity ever to go online and see how some of these processes are done, it’s a highly advanced technological process that employs a lot of machinery. It’s labor intensive still. But it’s an industry that employs 138,000 people in the United States. John Shegerian: On SA Recycling’s website can we actually view the shredding of a car? Tom Knippel: We won’t be there, but on the ISRI website I’ll direct you to…. John Shegerian: Got you. Tom Knippel: www.ISRI.org. You’ll be able to find shedder videos, videos of recycling ferrous/nonferrous plastics, tires and so on. John Shegerian: Everything is right there. Tom Knippel: Everything is right there. John Shegerian: That’s wonderful. And so, as you say, what was a legacy in this industry is really a futuristic industry now in that it’s as green and sustainable as ever before, but it’s now getting visibility and it’s really doing so much good for the environment and for the planet, that all these car shredding facilities that SA Recycling owns and other of your colleagues and competitors own are really part of the new green economy now. Tom Knippel: Absolutely. We have to move to a society of sustainability. Natural resources – the earth is limited. John Shegerian: Right. Tom Knippel: We can’t produce more of what’s here. So as we start to run down on certain commodities, recycling just becomes that much more important. John Shegerian: So those 138,000 jobs that you just mentioned – they are really, as would be called under new terminology, “green collared” jobs. They’re really part of the new green economy, even though they’re a legacy industry. Tom Knippel: Absolutely. And I love that term. I’m going to be using that too now, so thank you. John Shegerian: You talk about the international markets, Tom. At SA Recycling when you recycle these cars, are you selling to domestic buyers? Are you selling to overseas buyers? Or both? Tom Knippel: Everywhere. We’re located in four states. Over 60 locations in California, Nevada, Arizona and Texas. The marketplace is international today and it’s hard to be in this business without having an international presence. We own and operate two dock loading facilities so we can load bulk vessels with 40,000-45,000 tons of scrap steel at one time. We load containers of scrap steel for oversea shipments. We utilize rail for domestic shipments to the steel mills and service all the major steel mills in the U.S. and abroad. So it’s a very diverse marketplace on the steel side. On the nonferrous side – aluminums, stainless steel, coppers and brasses – that is dependent on the market that’s the most predominant consumer. China consumes 40 percent of the world’s copper, so they’re a natural buyer of copper products. John Shegerian: Got it. Tom Knippel: Aluminum, a lot of it is smelted domestically. Because the U.S. is still the largest economy in the world. I have to take that back, because I think China surpass us in dollars just recently. John Shegerian: Right. But we’re right there. One or two. Tom Knippel: We are at the top of the heap, so we still consume a lot of materials for the products that we consume here in the United States. John Shegerian: We’re sitting here at the ISRI Convention, Tom. It’s the third week of April, 2015. Last summer, last August or so, oil was at $100 a barrel. We’ve seen a slide, almost a pro rata slide, in every commodity platform whether it’s iron, oil, copper, silver, gold. What’s the future of responsible recycling, like what you do at SA Recycling, what other responsible recyclers do, or members of ISRI and the greater ISRI organization? How is this going to affect the economics of recycling, and what is going to be the new normal? What is the visibility that you and George and other leaders in the industry see right now? Tom Knippel: The difference is that we’re subject to a world market. John Shegerian: Right. Tom Knippel: We’ve looked to the world as a marketplace and now we have to live within that realm. And one of the interesting things that has occurred over the last 20 years has been the growth of China. John Shegerian: Right. Tom Knippel: I’ll just take steel as an example. China is producing about 800 million tons per year of steel. They’re consuming about 700 million tons internally. John Shegerian: Wow. Tom Knippel: And they have to get rid of the other 100 million tons by selling it to other countries. The United States produces 100 million tons of steel and consumes about 100 million tons. So we’re living in a world economy today that we can’t just manage ourselves locally. We have to look at what is going on in the rest of the world. China has been slowing so demand has decreased. Europe has been in a recession for some time and it’s just starting to come back. John Shegerian: Right. Tom Knippel: But when we look at the production – and I’ll start with oil. With fracking, all of a sudden we put out a lot of capacity and oversupplied a market that was actually decreasing in demand so prices go down. Economics is very simple. It’s supply/demand and fear/greed, as I tell people, and those elements are always what are at play. So in the commodities market, in the metals market, our consumers know our worldwide as opposed to 50 years ago when most of it was bought and sold within the United States as far as steels go. John Shegerian: Right. Tom Knippel: So we have to watch what those markets do. There’s always going to be demand for steel. There’s always going to be demand for copper and aluminum. So you just have to read just your business plan to accommodate what those worldwide markets are doing. And they’re always cyclical. They go up. They go down. But today’s paradigm has changed just a little bit with steel because of China’s great production capacity, which is unprecedented so it has changed the game plan a little bit for some people. John Shegerian: But what goes down eventually goes back up again. Tom Knippel: Correct. John Shegerian: Do you feel positive about the future in terms of whether it’s a year from now or three years from now that we’re at a low right now in most of these commodities – not just steel obviously, oil as well and others – that eventually we’ll start seeing the demand go up and the rise of these commodities again? Tom Knippel: Always. When there’s too much supply, it gets cut back. When there is not enough, it gets produced. Again, it’s all cyclical. And for those of us that have been in the business for years, we know their cycles and we don’t panic when the market drops. John Shegerian: Got it. Tom Knippel: Unfortunately, this last one was rather large. And everybody remembers the start of the great recession in 2008, and most recently, in February, we saw a drop in the steel markets here that on a percentage basis was actually larger than the drop that we saw in 2008. John Shegerian: Wow. Tom Knippel: So it requires a lot of adjusting. And we know some companies won’t make it. There will be some consolidation. But at the end of the day healthy companies will survive. Companies that are doing the right thing will survive. Doing it the right way will survive. John Shegerian: Right. Tom Knippel: Because there is a need and demand for recycled commodities as we run shorter and short on raw materials. And the percentage that we can get out of, say, a copper mine that used to produce at 3 percent and is now producing at 1 percent or less becomes very expensive and difficult to extract. John Shegerian: So the future of car recycling and SA Recycling is very bright, very hopeful. Tom Knippel: Absolutely. John Shegerian: And the future of ISRI of course is evergreen. So we’re in a good position right now. Tom Knippel: I’m always accused of being the eternal optimist, but my optimism has always paid off. John Shegerian: I love it. That’s what we need more of. We need more eternal optimists like you in this world that make the world a better place. Tom, we thank you today for joining us on Green Is Good. The world needs more people like you that make the world a better place. You are truly living proof that Green Is Good. So, thank you for your time today. Tom Knippel: And thank you for helping us to get the message out. It’s very important John Shegerian: I’m happy to do it. Again, this is John Shegerian and Tom Knippel here at the ISRI Convention in downtown Vancouver. Thank you for joining us at Green Is Good. We’ll see you in our next episode.