1. Dr. Subodh K. Das President & CEO Secat, Inc. Aluminum Recycling – Challenges & Opportunities Presented To: Can Manufacturing Institute Aluminum Association Aluminum Can Council May 17, 2006 Washington, DC

2. Items to be discussed Enhancing UBC Recycling –Sloan Center for a Sustainable Aluminum Industry –Fayette County Recycling Laboratory –Six Sigma Studies ( Published in Light Metal Age, June 2006 –Economics of Recycling ( To be Published in Journal of Metals or Aluminum Now ? ) –Consumer Behavior Studies ( To be Published in Aluminum Now ?) –Future Studies Emerging Trends in Aluminum Recycling

3. Center for a Sustainable Aluminum Industry (CSAI) Founded in Jan. 2005 Funded by several sources: –Sloan Foundation Industry Centers Program –Arco Aluminum, Aleris International, Wise Alloys, Nichols Aluminum, Logan Aluminum, Ormet, Hydro Aluminum, Century Aluminum –The Commonwealth of Kentucky –The University of Kentucky

4. Sloan Industry Center- Synergy of Partnership Clark Distributing Co.

5. Recyclable Commodities Weight Shipped (lbs) Price for April 2005 ($) Revenues Generated ($) Composition by Weight of Total Commodities Shipped (%) Composition of Total Revenue Generated (%) Ratio of Revenues Generated to Weight Shipped Old Newspapers (ONP)15,151,02582.50per ton 624,980 50.0%36.68%0.73 Old Corrugated Containers (OCC)4,940,33677.50per ton191,43816.3%11.23%0.69 Mixed Plastic240,4000.04per lb9,6160.8%0.56%0.71 High Density Polyethylene (HDPE)461,8000.29per lb133,9221.5%7.86%5.16 Glass3,238,9824.80per ton7,77410.7%0.46%0.04 Fiberboard951,16044.10per ton20,9733.1%1.23%0.39 Aluminum Cans579,2520.63per lb364,9291.9%21.42%11.20 Steel Cans638,920200.00per ton63,8922.1%3.75%1.78 Sorted Office Papers (SOP)2,101,710105.00per ton110,3406.9%6.48%0.93 Phone Books588,60049.70per ton14,6271.9%0.86%0.44 PET-2 liters659,4800.20per lb131,8962.2%7.74%3.56 Magazines740,88080.00per ton29,6352.4%1.74%0.71 Source: James Carter, Manager LFUCG Recycling Center 06/01/04 to 06/30/05, 12 months Commodities Shipped from LFUCG Recycling Center

6. Ratio of Revenues Generated to Weight for Commodities Shipped From LFUCG Recycling Center (06/01/04 to 04/15/05)

7. Beverage Can Recycling Update “ Green” Proclamation – August 24 –Mayor Isaacs, President Todd, Superintendent Silberman Calculating “True” Recycling Rate –Data available from recyclers (MRF, Wise, Baker) –Data available from distributors (AB) –Information needed from distributors (Coke, Pepsi, Coors, Miller) Collecting “Real” Data –Supermarkets –Waste Composition Analysis Six Sigma Methodology Initiated –Define Causes and Cures Find Ways to Measure and Implement Higher Recycling Rates Strategies Fayette County Program Update

8. Enhancing Aluminum Recycling in Fayette County: A Six Sigma Study Dr. Subodh K. Das, President SECAT, Inc. Dr. Pradeep Deshpande, President Six Sigma & Advanced Controls, Inc. Margaret Hughes, Doctoral Candidate, Gatton College of Business and Economics, University of Kentucky

9. Why Six Sigma for Aluminum Recycling? Every “aluminum can” not recycled is considered a “defect”. Finding causes of these defects and recommending strategies to enhance recycling rate.

10. Six Sigma Application to Aluminum Recycling Steps: 1. 1.Find “true” recycling rate (first iteration - 39%). 2. 2.Draw process map to show recycling loop. 3. 3.Find “gaps” or areas of improvement in the recycling loop. (i.e. Rosies delivered/vending machines/businesses/apartments) 4. 4.Alter the process map to plug gaps.

11. Revised Process Map

12. Going Forward…. 1.Implement Changes in Fayette County 2.Replicate Warren County project 3.Re-measure recycling rate to calculate improvement 4.Formulate plan for sustainability and replicability 5.Results will be published in August 2006 issue of Journal of Metals

13. The Economics of Aluminum Recycling: A White Paper Glenn Blomquist, Professor Brandon Koford, Research Assistant Department of Economics Gatton College of Business and Economics University of Kentucky CSAI Steering Committee Presentation January 2006

14. Review Economics Literature – Large! Aluminum: U.S. and International Markets Solid Waste Disposal and Recycling Pricing of Garbage Deposit/Bottle Bills Curbside Recycling Municipal Recycling Facilities Determinants of Recycling International Experience

16. Why the Decline in Recycling? T.Kinnaman and D. Fullerton “The Economics of Residential Waste Management” (1999, 2000) Curbside recycling factors: –Tipping fee higher, landfill savings –Population density greater, collection cost –Convenience and household’s time cost –Education, college degree –Membership in environmental group

17. Price of Recyclable Material – Factor? Price of recyclable materials falls → incentive to recycle is weaker REAL Price of used aluminum cans: –Price RELATIVE to prices of other things –US Bureau of Labor Statistics Real Price Index Value for Used Aluminum Cans = (Price Index Value for Used Aluminum Cans/CPI) (100)

19. Socially Optimal Recycling Average net benefit of curbside recycling for society as a whole is zero! (Aadland & Caplan, 2005) Recycling that leads to an 8% reduction of waste is best for society (Palmer, Sigman, and Walls,1997) Costs: $50 - $100 per ton more than landfill. Consumer time is a factor. Benefits: less of - litter, raw material use, and garbage. Willingness to Pay surveys.

20. Next Steps Results to date will be published in August issue of Light Metal Age Funding will be awarded to collect new data for one of the following two proposals to be selected for future study

21. Proposal 1: Price and Time Part of study of recycling behavior and marketing (Lexington) Investigate the role of real price of used aluminum cans on recycling rate - statistical Redemption rate experiments – individual, group Convenience & time cost experiments Reverse vending machines experiments

22. Proposal 2: Ripe Cities Identify cities with (estimated) positive social net benefits of more recycling and target efforts Cost and Benefit information from Aadland and Caplan (2005) Adjust to Midwest, Southeast, and East Compare to current recycling rates Cities with positive net benefits and low recycling rates are ripe for more recycling

23. Understanding Recycling Behavior: Who Recycles and What Motivates Them Dr. Fred Morgan and Margaret Hughes School of Management University of Kentucky January 19, 2006

24.   Older   Larger incomes   Live in households with fewer members   More liberal in political orientation Recyclers Relative To The U.S. Population: So on balance, Kentuckians will be harder to motivate to recycle because they are younger, with less wealth, larger households, and more conservative politically

25. Research indicates that the benefits of recycling (and most voluntary programs) are easy to understand by nearly everyone if the facts are presented clearly What people need is to feel “connected” to the reasons for recycling so that they will participate without dropping out

26. Explaining Recycling Behavior - Theory of Planned Behavior - Theory of Reasoned Action - Residual Effect of Past on Recent Behavior Taken together, these theories suggest that people act in ways that take into account: consequences of their behavior, ways others are likely to view their behavior, factors that help or hinder their behavior.

27. What These Theories Tell Us Behavioral Beliefs (How will I feel or what will happen to me if I act in a certain way?) Normative Beliefs (How will people I know expect me to behave and what will they think of me?) Control Beliefs (What events or results or people could hinder my acting in a certain way?) These lead to behavioral intention. Then to actions.

28. Perceived Consumer Benefits of Recycling from Empirical Research Environmental – –saving natural resources – –saving energy Economic – –savings of using recycled aluminum – –local jobs supported by recycling – –community funds from recycling programs – –Personal funds through compensation Personal – –participation in environmentally helpful activities – –sense of individual importance in a global program – –being recognized by others as being responsible

29. Reasons for Acting Intentions Overt Signal of Intentions Actions Desire Research Model to Be Tested

30. Future Research Investigate impact of economic benefit programs (ie couponing) on recycling for lower income households. Investigate education programs to translate planned behavior into action. Investigate effect of feedback processes. Action steps: test programs – economic and educational cross-sectional interviews data collection

31. Future Studies Project solicitation in progress to fund 2 PhD students for three years to produce academic research The price elasticity of supply for recycled aluminum material. The relative efficacy and cost-effectiveness of various communication strategies in promoting recycling behavior among households. An industry strategy to enhance the recycling rate for both UBC and non-UBC sources of aluminum. The project will complement Aluminum Association, CMI and ISRI activities designed to enhance aluminum recycling and draw on the background material and analyses of Sloan research completed to date and contained in three recent CSAI whitepapers

32. Emerging Trends in Aluminum Recycling – Reasons & Responses Dr. Subodh K. Das, President & CEO Secat, Inc. Presented to: TMS 2006 San Antonio, TX March 15, 2006

33. Number of Primary Smelting Plants in the U.S. 2003: Fourteen (14) Smelters Operating SMELTERS OPERATING - 2003 8 Alcoa 2 Century 1 Alcan 1 Norandal 1 Ormet 1 Columbia Falls SOURCE: LIGHT METAL AGE ?

34. U.S. Trends Of Re-Melting vs. Smelting (000 Metric Tons) SOURCE: SECAT, INC.

35. Why Recycling? National Aluminum Beverage Can Recycling Rate Trends. 1% change in recycling rate has an economic impact of approximately $12 million Trashed cans contribute about $600 million to the nation’s trade deficit each year

36. Impact of Recycled Automotive Aluminum Two largest areas are cans and autos Can recovery reached ~67% in early 1990’s – now at ~50%; cultural, societal and technical issues Auto metal recovery >90%; aided by regulations, shredders and lack of individual choice. Recovery of Al from autos has exceeded all other scrap sources since 2005 We have to learn to make as much new aluminum products as technically possible from recycled automotive aluminum in the US