New Yard & Portable Shredder Advice Needed

Hello,

My name is Matt and I am looking for some advice on starting a scrap yard. The yards focus would be on purchasing ferrous (prepared, unprepared, and cars) and processing the ferrous. My plan includes building my yard in an area without any other shredders around, my area in particular doesn't have another shredder for over 150 miles but still has a extremely large amount of scrap.

I want to purchase a Hammel portable shredder (has anyone seen these?) and build a downstream separation plant in which I have a lot of knowledge in. The separation plant would just be a screen and a magnet to start. The location that I plan on building at will have a rail spur.

My question is this viable? Any thoughts? Equipment would be a shredder, scale, office, skid steer, excavator with magnet, semi trucks with trailers, anything else?

The reason I want a portable shredder is because it would be easier to get a loan because I could just ship it off if (only if) we go out of business so it has more value to banks.

My second question is auto shred sold as HMS #1? Or is there another spec for shred?

I have ran a scrap hauling business awhile with employees as well as have knowledge in shredding & processing municipal solid waste.

Let me know what you think.

Thanks

I think your biggest problem will be getting the permits to get set up. Next - you threw me with this one: "My second question is auto shred sold as HMS #1? Or is there another spec for shred?" You're going into business at that level without knowing?

A temporary scrap yard is being created in a new project I have. A shredder was not even a consideration. Many large scrap yards do not have shredders. All of the scrap yards around here have excavators with shears, magnets, and grapples, scales, skid steers, office, warehouse, etc. A shredder would only be a consideration after the rest of the yard is profitable.

My yard has a shredder and a baler. The baler is for all the tin and light metal and the shredder gets the rest.

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Originally Posted by snowyscrap

Hello,

My name is Matt and I am looking for some advice on starting a scrap yard. The yards focus would be on purchasing ferrous (prepared, unprepared, and cars) and processing the ferrous. My plan includes building my yard in an area without any other shredders around, my area in particular doesn't have another shredder for over 150 miles but still has a extremely large amount of scrap.

I want to purchase a Hammel portable shredder (has anyone seen these?) and build a downstream separation plant in which I have a lot of knowledge in. The separation plant would just be a screen and a magnet to start. The location that I plan on building at will have a rail spur.

My question is this viable? Any thoughts? Equipment would be a shredder, scale, office, skid steer, excavator with magnet, semi trucks with trailers, anything else?

The reason I want a portable shredder is because it would be easier to get a loan because I could just ship it off if (only if) we go out of business so it has more value to banks.

My second question is auto shred sold as HMS #1? Or is there another spec for shred?

I have ran a scrap hauling business awhile with employees as well as have knowledge in shredding & processing municipal solid waste.

Let me know what you think.

Thanks

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Hello,

Those portable shredders are typically a little small in the auto shredding business. They'd work good for white goods and sheet iron. To really get a good throughput you'd want to be looking at 1000hp machines (and even those are small). A better option at that size is probably a car crusher or logger.

Shredded scrap typicallly is sold as a shredded scrap specification, the ISRI specs should help some there, but really that's all up to the mill.

Magnets are typically not that useable for picking auto's either a clam or orange peal grapple is more efficient.

Skidsteers are really more just support equipment. Loaders are the way to go.

Oh, operating capital is essential.

In my experience banks are really trepidatious to loan money, unless your credit is stellar or you already got a pile of cash.

Also, what's your location?

Alex

We are in the Midwest.

Does anyone know the price range is of auto shred compared to HMS #1?

My thought was at looking at Hammel shredders that we could get a higher price because we could sell directly to a mill instead of to a shredder or the mills shredder. That would be a higher price per ton. I have seen that these shredders can run 25-35 cars per hour. I know this is less throughput then large shredders that do not move.

My thoughts were-
You could justify a shredder with less tons per month
It would be easier to get a loan on because it could be loaded on a trailer and moved and sold if needed.
It has a high enough throughput to be profitable
It has low operating costs when compared to a regular shredder
We could hire out our shredder in he early phases of operation to A. Other scrap yards & B. Other companies or municipalities that need a shredder. They are commonly used for shredding wood.

I didn't know magnets couldn't pick up cars, the shredder by me uses them to move cars. But from what some of you are saying a grapple is a must, thoughts on the magnet grapple combo?

My plan includes a yard that is next to a rail line so we would put in a spur. We would purchase scrap from haulers as well as smaller yards without shredders or rail lines. We would processes the scrap and ship it out on a train to get the best price. Our largest profit margin would obviously come from the scrap we buy from haulers and just use the scrap from other yards to keep us at a high throughput. We would be mainly ferrous with non-ferrous being secondary and from picking off what non-ferrous is on the ferrous.

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Originally Posted by snowyscrap

We are in the Midwest.


My thought was at looking at Hammel shredders that we could get a higher price because we could sell directly to a mill instead of to a shredder or the mills shredder. That would be a higher price per ton. I have seen that these shredders can run 25-35 cars per hour. I know this is less throughput then large shredders that do not move.

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I'm not trying to discourage you, I just want you to be sure you know what you are getting into. This is also to help out anyone that reads this and thinks about opening a yard. If you sell to larger yards, you wont need trailer loads, but you get a smaller payout.

Time for very sloppy math

25 cars per hour 6 hours of run time 150 cars a day

150 cars 350 each 52,000 per day going out that you have to wait to get back

You need a lot of cash on hand to run a yard

aluminum. lets say you need a trailer load to get a fair price. Not sure how much aluminum fits in a trailer, lets call it 10 tons

You pay out a little low at .45 so you need to pay out $9000 before you can ship it out and then wait for a check.

what about copper, should be able to fit 20 tons of that and you pay out real low at 2.50 thats $100,000 you are sitting on

It is not unreasonable to think you could have $500,000 or more just sitting in your yard, and who knows how much out on net 15, 30, or more.

With a rail spur and shredder I would also have high profits.

I've seen $320-$350/ton

Subtract $20 for shipping (for rail)

25 cars per hour with an operator costing say $30/hour that's $1 a ton

Operating cost for the shredder is around $120/hour or $5/ton

You have say another $5/ton in other operating costs.

Price where I am are only $165/ton

Leaving you with a nice little profit of $124/ton or roughly $20,000 a day in profit just from shred. You obliviously wouldn't be making that by the time you account for drop in market price, being screwed over by haulers, etc. But even if you made half of that $10,000 a day is still a profitable operation.

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Originally Posted by snowyscrap

With a rail spur and shredder I would also have high profits.

I've seen $320-$350/ton

Subtract $20 for shipping (for rail)

25 cars per hour with an operator costing say $30/hour that's $1 a ton

Operating cost for the shredder is around $120/hour or $5/ton

You have say another $5/ton in other operating costs.

Price where I am are only $165/ton

Leaving you with a nice little profit of $124/ton or roughly $20,000 a day in profit just from shred. You obliviously wouldn't be making that by the time you account for drop in market price, being screwed over by haulers, etc. But even if you made half of that $10,000 a day is still a profitable operation.

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I'm not saying there is no money to be made. I am saying that you need a lot of cash on hand to run a yard, especially a yard that intends on keeping a shredder fed. with the numbers you posted, you are looking at 26,000 spent per day on cars to feed the shredder or 130,000 per week. that you have to wait until you ship it out to get payed for.

Are you aware of the price of putting in a rail spur? Especially off a main line? You would be better off to find property with an existing spur, unless you have several hundred grand for building the spur.

My hats off to ya if you can make a go of it! I've heard of guys starting off with non-ferrous and building up to the whole meal deal over the course of a few years. Your idea of smaller portable machines seems to make sense, too. But you probably need to start with thoroughly used equipment and learn to fix it yourself to keep costs down rather than go with top of the line new right away.

I've seen the combination magnets/orange peel grapples...haven't talked to anyone about their pros and cons. But the magnet is real good at separating the non-ferrous stuff that lands in the steel yard but is worth more to you if someone picks it up and gets it into your non-ferrous side.

Good luck!!

Jon.

Based on the questions you are asking you don't know anywhere near enough to run a scrap yard with a shredder.

The most glaring problem is that your profit estimates are way off reality. A well run ferrous scrap yard with a large shredder has a net profit margin of 10% or lower. Even a well run yard can lose money over a number of months or have a bad year.

The best way for you to properly learn the business is to start as a feeder yard for a larger yard with a hungry shredder. After a few years learning the in and outs of the business then you could consider moving up to acquiring a shredder.

You should read this American Recycler article on shrinking profit margins in the scrap yard business. One problem nationwide is that there are already too many shredders installed.

American Recycler News, Inc. - Dealing with shrinking profit margins

Also read this SMF thread:

http://www.scrapmetalforum.com/gener...rks-oh-my.html



If you insist on going forward please put together a full blown business plan and have it vetted by some sucessful business people. Also take some time to look into and visit scrap yards that are up for sale. And look into yards that have gone out of business and why they are defunct.

Hello,

I should start off with a little background information. I obtained a masters in mechanical engineering before I entered the scrap business, my personal area of expertise was numerical analysis and advanced statistical analysis. So that being said, I have a little different viewpoint than most. However for past 3 years I have been involved with starting up a yard, it's grand fun.

Last I looked at shredded scrap prices it was lower than HMS #1. It really depends on what the mill demands. Some mills don't want shred, others do, some only want rail and others other types of steel scrap. It really depends on your relationship with the mill and their product line.

Have you taken into consideration landfill fees? Shredder residue is typically disposed of at an industrial landfill. So 30-40 a ton tipping cost for any non metals around 20% for autos.

The reason I argue against using a magnet for unloading is that it would take a large magnet to unload a car, which would then require a large material handler. Now with a clam loader I can pick a car up with a Barko 80. The mag/grapples are interesting, I personally haven't used or seen one in operation, but I know some guys swear by them. Also excavators are typically better utilized in a scrap yard as mobile shears, material handlers are much better (especially with the hydraulic cab). The reason for this is that if you are unloading a gondola with 8 to 10 foot sides you'll have a tough time seeing the material, even with a truck mount material handler it's a little difficult. The goal is to lift up not dig down.

I think your cost and throughput predictions are a little rosy, double the costs (at least) and half the throughput would be more realistic without doing a full analysis of your operation.

Have you obtained permits? Do you have the connections to obtain 100 ton a day? Do you have the credit/cash to finance the purchasing?

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Originally Posted by Amnelson

Hello,

Have you taken into consideration landfill fees? Shredder residue is typically disposed of at an industrial landfill. So 30-40 a ton tipping cost for any non metals around 20% for autos.

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I saw somewhere an article about using the shredder residue as fuel for power plants. It might be something to look into

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Originally Posted by MattInTheHat

I saw somewhere an article about using the shredder residue as fuel for power plants. It might be something to look into

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Yes, I think the EPA was looking into lower the restrictions on shredder residue, I don't know for sure if it happened.

One company I know and have done business with for 15 to 20 years . Told me they figure it cost them forty dollars a ton after it come across the scale . TO unload grind up and load in the railcar . Labor overhead etc . This was back in 2006 or 2007 when the volume was better. Plus most shredders are run so close of margins . They make their profit on the down stream system . The alum brass copper etc they pick out . Plus the fluff or trash in the metal on average in 30 percent or more at times . Which you buy then pay to get rid of . Customers are pull more non ferrous out of their loads .