March 28, 2008 / 12:13 AM / 10 years ago

Planes, yachts feed shifting French recycling drive

CHATEAUROUX, France (Reuters) - A deafening roar fills the air as giant pliers plough through the wing of a retired Boeing 747, sending its cavernous 230-foot (70-metre) shell crashing to one side.

<p>Commercial planes are seen on the dismantling site of Bartin Recycling Group at Chateauroux's airport March 6, 2008. Companies such as Bartin Recycling Group, recently acquired by Veolia Environmental Services, are looking to recycle more ferrous and non-ferrous metals from everything from aeroplanes and cars to discarded industrial metals to satisfy growing demand for scrap materials especially from rapidly developing nations. REUTERS/Jean-Paul Pelissier</p>

After two days of picking apart the 23-year-old plane at Chateauroux airport in central France, around 100,000 tonnes of material will be ready to be sorted and recycled nearby.

Two-thirds of that will end up as aluminum ingots, some of which will be transported to China to make bicycles and to European neighbors to feed commodity-hungry industries. Titanium and copper will also re-enter circulation.

Recovering metals from aircraft is only a tiny part of the global scrap metal recycling business, which helps produce half of the world’s steel and is valued by industry experts at around 100 billion euros ($156 billion) a year.

But it offers a dramatic example of how metal recycling firms in France and elsewhere are searching for ways to extract metals out of everything from aged submarines to luxury yachts.

“Planes won’t ever be the business of the century. What we mainly focus on is the scrap from cars and leftover metals,” said Charles Kofyan from Bartin Group, the firm which recycles aircraft at Chateauroux, as planes flew noisily overhead.

Demand for metals has skyrocketed as fast-growing nations, led by China, have sought ever greater supplies, sending the price of scrap sharply higher in recent years.

Scrap prices are closely associated with the value of refined metals, which have been lifted, alongside other commodities, by flows of speculative cash seeking a safe haven amid global economic uncertainties.

The French market is peppered with family-owned firms, but has recently attracted the interest of waste management giants which have watched prices evolve.

Veolia Environmental Services bought Bartin Recycling Group in February, following on the heels of rival Suez Environnement, which made its metals foray two years ago and now operates in France and Britain.

Derichebourg is their biggest French competitor.

SOARING PRICES

Prices rather than the potential to expand volumes of recycled metals have proved to be the main draw for the likes of Suez and Veolia, industry analysts say.

Prices for low-grade steel scrap have more than doubled from 80-100 euros a tonne in 2002 to some 190 euros last year, according to French recycling association Federec.

Scrap aluminum prices have risen some 50 percent over the past three-and-a-half years. Values for non-ferrous metals such as copper, zinc and lead -- which account for a minor portion of recycled metals in terms of volumes-- have also jumped.

“One reason to go into metals recycling is to meet the needs of industrial clients ... another is prices,” said Cyril Fraissinet, senior vice president of Suez Environnement’s waste business, which began construction of an aircraft dismantling site in France last December.

Short of a global market crash, scrap prices would probably remain high given the probability emerging markets would remain hungry for metals, said Claude Platier of Federec.

France recycled some 14 million tonnes of scrap steel in 2006, the last year for which official data is available. That was only slightly higher than the 13 million tonnes seen three years earlier.

Just 60 percent of France’s 2006 total was consumed by domestic industry, with the rest exported to Spain, Turkey and other European nations.

Neighboring Britain recycles around 15 million tonnes of mostly ferrous metals every year, according to figures from the British Metals Recycling Association.

France’s shift away from heavy industry has meant dwindling supplies of scrap to recycle, prompting predictions of steady rather than surging output of recycled metals ahead.

Analysts say the biggest obstacles to industry growth also include high shipping costs and a move by some consumers to seek substitution products which are cheaper than scrap.

CONSOLIDATION

One big question overhanging scrap metal markets in France is the future development of what has traditionally been a fragmented sector.

A wave of consolidation, like that seen in steel production, could take hold as industry behemoths spot the value of securing raw materials, industry experts say.

“I think there will be more concentration in scrap similar to what we have seen in aluminum and steel & it won’t be great for the industry but it will be a reality,” said Cornel Radiciu, who heads scrap broker Schnerb SAS in Paris.

U.S. steelmaker Nucor Corp, the largest buyer of ferrous scrap in North America, agreed in February to buy scrap processor David J. Joseph Co for around $1.44 billion so that it could secure key sources of raw material.

Sector consolidation in France and elsewhere in Europe has tended to focus on waste management firms seeking to become scrap suppliers. But steelmakers such as Arcelor Mittal, the world’s biggest, could look to purchase scrap companies in the 27-nation bloc, said Federec’s Platier.

“The big question will be whether the scrap sector goes for the European or U.S. model,” he said.

Editing by Tamora Vidaillet; Editing by Clar Ni Chonghaile

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