scrap/kanter/22″/mike1st/mark2nd

LARRY KANTER Staff Reporter

LONG BEACH To most people, the mountains of engine blocks, steel coils and dented appliances at PacificCoast Recycling’s new scrap yard at the Port of Long Beach would look like nothing more than a bunch of junk.

But as PacificCoast’s Chief Operating Officer Jim Nuckels is quick to point out: “Junk” is in the eye of the beholder.

“This is like the Lexus of scrap metal,” Nuckels says, pointing to a cluster of sheared I-beam sections stacked on edge of the company’s 18-acre lot. “Some of this stuff you could almost hang it on a wall. It’s beautiful stuff.”

But Nuckels isn’t looking to sell his stuff to art collectors. Instead, PacificCoast Recycling, which opened for business earlier this year, is the latest entry in the growing, $4 billion worldwide marketplace for scrap metal.

The 100-foot-high mountains of materials accumulating at the company’s waterfront site are awaiting shipment to steel manufacturing plants across the United States, as well as plants in the fast-growing territories of Asia which pay as much as $150 a ton for recycled scrap to melt down in their furnaces.

According to the Institute for Scrap Recycling Industries, a Washington-based trade group, U.S. steel-makers consumed about 57 million tons of scrap metal in 1996, up from 40 million tons a year in the early 1980s. The group estimates that 40 percent of the raw steel manufactured in the United States now comes from recycled scrap metal rather than ore.

Globally, steel manufacturers currently consume some 350 million tons of scrap, and that amount is likely to grow as developing countries acquire new steel-making facilities, says Jordan Estra, an analyst with Bankers Trust New York Corp.

The demand for scrap is growing as a result of major technological changes sweeping through the steel-making industry. The traditional image of big steel’s blast furnaces melting ore from nearby mines is fast becoming a thing of the past.

Instead, almost all of the steel mills being built today are small, efficient plants dubbed “mini-mills” in the industry which rely almost exclusively on scrap, rather than ore. The new mills melt recycled steel in high-tech electric furnaces and can produce raw steel much more cheaply than the powerful blast furnaces of yesterday.

The growing demand for scrap metal has sparked a wave of consolidation in the scrap industry, which traditionally has been composed mostly of small, family-owned operations, Estra said.

Most of the scrap being shipped to the world’s steel mills consists of material left over from manufacturing processes.

That includes punchings, filings and discarded edges of steel plates that ended up on the factory floor.

A trio of massive, magnetic cranes works the piles at PacificCoast, stacking new material and sifting out tainted, non-ferrous materials that are not used by steel-makers. Meanwhile, another crane feeds large metal sheets, unwieldy lengths of pipe and other oversized materials into a heavy-duty guillotine shear that slices the metal into more-manageable-sized chunks, which are then added to the piles.

Southern California’s large manufacturing base makes it a great place for a scrap business, according to Nuckels.

“It’s a very lucrative scrap-producing area,” he says.

A joint venture between Birmingham Steel Corp. and Mitsui and Co. of Japan, PacificCoast moved onto the site of another scrap dealer, Hiuka America Corp., in January. The company hopes to be more successful than its predecessor, which declared bankruptcy in December 1995 after three of its executives were arrested on fraud charges.

PacificCoast so far has collected 45 tons of scrap metal from Southern California manufacturers and plans to begin shipping later this month. By the end of the year, the company hopes to have shipped some 300,000 tons of the stuff.

The company is likely to be a formidable foe to its competitor across the bay at the Port of Los Angeles, Hugo Neu-Proler Co., the country’s largest exporter of scrap metal.

But large outfits like PacificCoast and Hugo Neu-Proler are the exception in the highly fragmented scrap industry. According to Estra, the majority of the 2,000 or so scrap collection and processing firms are small, mom-and-pop operations.

Such firms, however, are likely to be gobbled up in an industry rapidly consolidating, said Nathan Mizrahi, president of Royal Metal in the City of Commerce, a family-owned firm with six employees.

“I don’t know of many scrap yards now that exist with just six employees,” Mizrahi said. “It gets to the point where I wonder why I’m even doing this when I could make more money letting a big company take over.”

Estra attributed the consolidation to changes in scrap consumers’ demands.

“Scrap consumers are requiring more-sophisticated processing of materials,” Estra said, which requires a large capital investment that many small firms are unable or unwilling to make.

PacificCoast, for example, inspects every shipment of scrap before adding it to its reserves. Those inspections include a screening process for nuclear or chemical contamination. Shipments with large amounts of dirt, wood or paper are returned.

“We reject scrap here every day,” says Nuckels. “If we see that it’s not what it’s supposed to be, we’ll put it back on the truck and send it back where it came from.”