By Karen Norton
LONDON (Reuters) - The United States lead recycling industry will spend hundreds of millions of dollars to comply with tightening environmental rules but the pressure of rising costs eventually may force some output cuts or closures, according to industry experts.
Some firms in the U.S., particularly those without well-established collection systems for old batteries, may struggle long term as new domestic lead smelter capacity comes on line, increasing competition for an already limited pool of the feed.
"I think it's inevitable, the situation is going to become unsustainable. You can't just continue with that trend of higher costs of producing secondary lead and more smelting capacity chasing that scrap," said Neil Hawkes of industry consultants CRU Group.
"At some point something's going to have to give and the wisdom is that it will be a smelter cut somewhere."
The U.S. Environmental Protection Agency (EPA) recently made a final revision to its air toxics standards for secondary lead smelters, which will come into force in January 2014.
A crackdown last year by Chinese authorities on lead-acid battery plants after incidents of lead poisoning provided a stark reminder of the dangers of exposure to the metal.
U.S. lead recyclers, who produce the metal mainly from breaking old batteries, acknowledge domestic environmental rules will tighten further. The EPA has to carry out a technology review every eight years under the Clean Air Act and the deadline for the next review is early January 2020.
Competition for spent batteries in the United States inevitably will get harder too as new capacity starts and particularly if exports of used batteries remain high to Mexico, where environmental rules are more lax, analysts say.
U.S. auto supplier Johnson Controls Inc is starting up a new smelter in Florence, South Carolina. The 132,000 tones per year (tpy) facility is due to come on line around June, according to Mike Carr, Johnson Control's vice president and general manager for lead Americas.
This follows on the heels of an expansion by Gopher Resources, which replaced a 26,500 short tons a year plant in Tampa, Florida with a new 150,000 stpy facility.
Johnson Controls estimates the North American lead recycling industry will spend nearly $600 million on meeting the new environmental standards. It alone is spending $162 million on upgrading its recycling facilities across the region.
"The cost is not prohibitive yet, but it is significant and there probably will be some shakeout in the industry. I just don't know what that will be," said Alex Molinaroli, president, Johnson Controls Power Solutions.
All U.S. secondary lead smelters are pushing ahead with the upgrades and seem determined to meet the new regulations.
"We anticipate that they will be able to comply," the U.S. EPA told Reuters in an email.
Producers who responded echoed this view.
"Our senior management is committed to continued operation of our secondary smelter and has approved the expected expenses to comply," said Steve Arnold, general manager of Doe Run's Buick Resource Recycling Division.
The Buick facility produces around 145,000 tones a year of secondary lead.
Compliance costs meanwhile are feeding through to consumers.
In early March Johnson Controls, citing the investment required by increasing environmental, health and safety standards announced an 8 percent increase in prices for lead-acid batteries sold in the U.S. and Canada for orders starting May 1.
Gopher Resources' Chief Operating Officer John O. Tapper said: "Consumers in this country want responsible environmental service companies like ours to do business and create high paying jobs in this country."
The United States produced 1.296 million tones of refined lead last year, according to the International Lead and Zinc Study Group (ILZSG), around 90 percent of which was secondary.
Global refined lead output last year was more than 10.0 million tones.
(This story corrects capacity of Florence smelter in 9th paragraph of Monday story)
(Editing by James Jukwey and Anthony Barker)