In a move designed to double its plastics recycling capacity, Scrap Masters Inc. is investing $1.4 million to open two new plants by the end of the month: in Blue Island, Ill., near Chicago, and in Toccoa, Ga.
The plants will dramatically increase Scrap Masters' plastic scrap recycling capacity from 30 million to 60 million pounds per year and more than triple the square footage of its facilities from 40,000 square feet to 130,000 square feet. The expansion also is the company's first outside Michigan, where it has plants in Chelsea and Blissfield.
Scrap Masters reported sales of $6.25 million for the fiscal year ended last June. Chief Executive Officer Keith Hansen said he expects business from the two plants to boost that number by $2 million for the fiscal year ending June 30, 2007.
The Chelsea-based, family-run company recycles all plastics except expanded polystyrene and film. But some two-thirds of the scrap it recycles is high-molecular-weight high density polyethylene purgings from gas-tank makers, Hansen said.
Scrap Masters recycles about one-third of the 80 million pounds of gas-tank waste generated annually in North America.
``The companies we have dealt with in Michigan have plants in those areas'' where Scrap Masters has chosen to expand, said Hansen, who founded the company 18 years ago with his sons, Bryce and Dale.
Dale directs sales and purchasing, while Bryce is in charge of technical issues. Another family member, Eric Hansen, will run the Chicago plant.
``We are in a growth mode,'' said Keith Hansen. ``We expect that we will grind close to 10 million pounds'' of scrap initially at each facility and 10 million to 15 million pounds at each plant within the first two years. The Chicago plant will have more square footage - 49,000 - compared with 40,000 at the Georgia facility. Each site will employ 15 at the onset.
The two Michigan plants have a combined 40,000 square feet and 37 employees.
Hansen said each new plant will start with about $400,000 of equipment, including a shredder and two or three grinders.
``We expect to have a total of eight to 10 grinders'' at the new plants within a year or so, he said.
The expansion is an outgrowth of Scrap Masters' shift seven years ago into processing scrap from gas-tank manufacturers. Initially, the company recycled ABS sheet scrap from thermoforming companies and HDPE from pharmaceutical bottle scrap.
``Initially, we had a baler and [were] sorting it and shipping it. We didn't buy our first grinder until about a year after the company started,'' Hansen said.
Today, the company boasts 22 grinders and shredders at its four plants. Most of the recycled resins are sold to plastic lumber, plastic pipe and sheet makers.
The two new plants will recycle plastic gas-tank waste initially, Hansen said, but he expects both plants to expand into other areas of plastic recycling long term.
Hansen also said the company will continue to expand geographically, particularly in areas where there is a sufficient volume of gas-tank waste.
``We need to find areas where we can see that there will be 5 million to 10 million pounds of waste available over the next couple of years,'' he said.
He said the company is not looking to expand for the next year or so but added that ``if an area pops up where there is a lot of material, we'll look into it.''
He credited Scrap Masters' growth to its strong relationship with suppliers and customers and the decision years back to operate its own trucking fleet.
``We have six trucks on the road and about 70 trailers'' for the two Michigan plants, Hansen said. He said he expects each of the new plants to start with 10-15 trailers and one truck, with the truck fleet increasing in the next couple of years.
Hansen said Mitch Griggs, executive director of the Stephens County Development Authority in Georgia, was instrumental in helping the company find a facility to buy and connecting Scrap Masters with banks.
Scrap Masters leased the plant south of Chicago for two years to give the company time to find a suitable facility to purchase, he said.
Scrap Masters is ISO 9001-certified.