Founded in 1906, Schnitzer Steel Industries, Inc. ("SSI"), an Oregon
corporation, is one of North America’s largest recyclers of ferrous and
nonferrous scrap metal, including end-of-life vehicles, and a manufacturer of
finished steel products. Worldwide demand for scrap metal is driven primarily
by steel production levels. Steel mill production using electric arc furnace
(“EAF”) technology relies on scrap metal as its primary feedstock,
and steel manufacturing using blast furnace technology also uses scrap metal
for a portion of its raw materials. Steel mills around the world, including
those in the North American domestic market in which our own steel mill operates,
are the primary end markets for our recycled scrap metal.
Our internal organizational and reporting structure supports two operating
and reportable segments: the Auto and Metals Recycling ("AMR") business
and the Steel Manufacturing Business ("SMB").
AMR collects and recycles autobodies, rail cars, home appliances, industrial
machinery, manufacturing scrap and construction and demolition scrap from bridges,
buildings and other infrastructure. We source material through well-developed,
regional supply chains that collect scrap from large and small businesses and
individuals. Our largest source of autobodies is our own network of 52 self-service
auto parts stores, which operate under the commercial brand-name Pick-n-Pull,
a majority of which are located in close geographic proximity to our metals
recycling operating facilities, six of which have large-scale shredders.
AMR processes recycled metals ranging from iron and steel to aluminum, copper,
lead, stainless steel and zinc for use in the manufacture of new products. With
operating facilities located in 23 States, Puerto Rico and Western Canada, we
are well-positioned to efficiently collect scrap metal throughout North America
and deliver products to customers around the world from our seven deep water
ports.
In recent years we have undertaken a number of productivity improvements and
restructuring initiatives designed to reduce operating expenses and improve
profitability and to achieve further integration and synergistic cost efficiencies
in our operating platform.
AMR sells and brokers ferrous scrap metal (containing iron) to foreign and domestic
steel producers, including SMB, and nonferrous scrap metal (not containing iron)
to both foreign and domestic markets. AMR buys, collects, processes and recycles
autobodies, rail cars, home appliances, industrial machinery, manufacturing
scrap and construction and demolition scrap through its 97 auto and metals recycling
facilities. Our largest source of autobodies is our own network of auto parts
stores, which operate under the commercial brand-name Pick-n-Pull. AMR procures
salvaged vehicles and sells serviceable used auto parts from these vehicles
through its 52 self-service auto parts stores located across the U.S. and Western
Canada. Upon acquiring a salvaged vehicle, we remove catalytic converters, aluminum
wheels and batteries for separate processing and sale prior to placing the vehicle
in our retail lot. After retail customers have removed desired parts from a
vehicle, we remove remaining major component parts containing ferrous and nonferrous
materials such as engines, transmissions and alternators, which are primarily
sold to wholesalers. The remaining autobodies are crushed and shipped to our
metals recycling facilities to be shredded, or sold to third parties where geographically
more economical.
To prepare scrap metal, we crush, sort and bale the material by product grade
for easier handling and sale. AMR processes mixed and large pieces of scrap
metal into smaller pieces by crushing, torching, shearing, shredding and sorting,
resulting in scrap metal pieces of a size, density and metal content required
by customers to meet their production needs. The manufacturing process includes
physical separation of ferrous and nonferrous materials through automated and
manual processes into various sub-classifications, each of which has a value
and metal content of importance to different customers for their end products.
One of the most efficient ways to process and sort recycled scrap metal is through
the use of shredding and separation systems.
AMR operates seven deep water port locations, six of which are equipped with
large-scale shredders. Our largest port facilities in Everett, Massachusetts;
Portland, Oregon; Oakland, California; and Tacoma, Washington each operate a
mega-shredder with 7,000 to 9,000 horsepower. Our port facilities in Salinas,
Puerto Rico and Kapolei, Hawaii each operate a shredder with 1,500 to 6,000
horsepower. Our port facility in Providence, Rhode Island does not operate a
shredder. In fiscal 2016, we idled a shredder in Concord, New Hampshire, we
idled a shredder in Johnston, Rhode Island and another in Surrey, British Columbia
to more closely align our business to the prevalent market conditions. Our shredders
are designed to provide a denser product and, in conjunction with advanced separation
equipment, a more refined form of ferrous scrap metal which is used efficiently
by steel mills in the production of new steel. The shredding process reduces
autobodies and other scrap metal into fist-size pieces of shredded recycled
scrap metal. The shredded material is then carried by conveyor under magnetized
drums that attract the ferrous scrap metal and separate it from the nonferrous
scrap metal and other residue found in the shredded material, resulting in a
consistent and high-quality shredded ferrous product. The nonferrous scrap metal
and residue then pass through a series of additional mechanical sorting systems
designed to separate the nonferrous metal from the residue. The remaining nonferrous
metal is then further sorted by product and size grade before being sold. AMR
invests in nonferrous metal extraction and separation technologies in order
to maximize the recoverability of valuable nonferrous metal. AMR also purchases
nonferrous metal directly from industrial vendors and other suppliers and prepares
this metal for shipment to customers by ship, rail or truck.
SMB operates a steel mini-mill in McMinnville, Oregon that produces a wide
range of finished steel products using recycled metal and other raw materials.
AMR is the sole supplier for SMB’s scrap metal requirements, which SMB
purchases at rates that approximate market prices for shipments from the West
Coast of the U.S.
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