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USTAR-supported company EDX Magnetics poised to address the challenges and opportunities in scrap metal industry brought on by trade wars

From agriculture to construction, tariffs imposed and planned by the Trump administration are expected to have widespread consequences across the United States and in Utah. In particular, trade restrictions on aluminum, steel, and other metals are already impacting companies and consumers.

While the long term economic impact and challenges of these tariffs are currently unknown, one Utah company, EDX Magnetics is developing technology that can provide an innovative solution for American companies currently most affected by bans on scrap metal being imported into China.

With support from the Utah Science Technology and Research Initiative (USTAR), the company has developed a new metal sorting technology that could prove revolutionary for the recycled metals industry, especially amidst ongoing trade disputes.

Current technology is tedious, outdated

Current practice in the handling of finely shredded metal waste is to transport it via container ship to China where it is slowly and painstakingly sorted by hand in order to reclaim and recycle high-value metals. Sorted metals are then sent back to the U.S. to be repurposed and reused.  The process is tedious and time-consuming—not to mention the inefficiency, cost, and environmental impact of shipping U.S. scrap metal to China to only then return it back to the U.S. Because of the cost and difficulty of separating non-ferrous scrap metals, more than 14.8 million tons of potentially reusable metals are thrown into U.S. landfills every year, according to the Environmental Protection Agency.

Trade wars create challenges for economic growth and the metals industry

Over the past several months, the Trump administration has introduced a series of tariffs on goods, including steel and aluminum imported to the U.S. by key trading partners Canada, Mexico, Japan, the European Union, and China—which combined account for approximately half of all Utah exports in 2017.

In turn, many trade partners have announced retaliatory tariffs which will harm a range of Utah’s industries, including manufacturing iron, steel, aluminum, and other goods that rely on metal industries in their supply chains, such as electrical equipment and machinery. An analysis by World Trade Center Utah found that retaliatory tariffs threaten more than $27 million of Utah’s total iron and steel exports and $68 million in aluminum exports.

“On one hand, when you have a tariff on a product coming into the U.S., that’s a tax that is passed to the U.S. consumer,” said Derek Miller, president and CEO of the Salt Lake Chamber, and chair of the Utah Inland Port Authority. “On the other hand, when you have those retaliatory tariffs, that creates a barrier for Utah companies to now sell their goods overseas.”

To further compound the problem, Beijing has now prohibited the import of U.S. scrap metal into China.  As a result of this change, the scrap metal industry will see large increases in the cost of sorting through scrap metals.

The disruption in the scrap metal industry and new tariffs add financial strain and uncertainty to long-term planning and supply chains for a variety of industries, including construction, consumer goods, automotive, and even traditional municipal recycling programs.

“Let’s look at steel as an example because that one so far has had the highest tariffs slapped on it at 30 percent,” said Miller. “If you are a builder that uses steel—and they all do—if you’re a manufacturer, which uses steel—and many of them do—and you’re buying that steel from overseas, you’re now paying 30 percent more.  You might think that you could now buy it domestically for cheaper because it costs 30 percent more to buy from an overseas supplier. That is not the case.”

Miller continued, “Why? Because domestic steel producers slap a 30 percent increase on their product as well, right? They realize ‘Oh, now we can start charging 30 percent’ which is exactly what they did overnight…Now you bring that home in a very literal way, because housing prices are now going to go up. Construction prices are going to go up, and we’re already seeing that.”

Finding opportunity through economic uncertainty

Despite the challenges and potential negative economic consequences of the trade wars, they present a potentially invaluable market opportunity for EDX Magnetics and Utah. EDX Magnetics has created a machine that uses advanced magnetics to exploit differences in the density and electrical properties of metals in order to automate and speed up the sorting process. EDX Magnetics’ technology can reduce costs and increase overall economic output in two primary ways.

First and foremost, EDX Magnetics’ technology could be a solution that allows Utah and U.S. companies to re-shore their scrap metal processing, making it easier and more efficient to sort metals locally. These reshoring capabilities could potentially give birth to new industry clusters and job opportunities here at home.

In addition to reshoring opportunities, EDX Magnetics’ disruptive technology also allows for more automated sorting of these metal scraps.  Again, most scrap metals have traditionally been sorted manually. EDX Magnetics’ technology can sort up to one ton of scrap metal per hour.

Further, what few automated sorting technologies do currently exist generally lack the ability to effectively separate different grades of alloys, or sort small metal mixtures where the pieces range from just one to 25 millimeters in size.  Since recycling metal is more resource efficient than extraction, EDX Magnetics’ ability to sort scrap metals quickly and more precisely will allow for more effective resource use across industries that rely on scrap metal or repurposed metals in their supply chains.

From both a resource allocation, and growth and development perspective, EDX Magnetics’ technology could be revolutionary in its industry, and be an effective way to offset the cost increases associated with the trade wars.

To learn more about USTAR supported technologies and companies located throughout Utah, visit ustar.org

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