Facility Closures: Turning Metal into Money

In today’s economic slowdown and closures of facilities, owners are looking for ways to stop financial deficits. The demolition of idle facilities offers the benefits of decreased liabilities while providing owners an opportunity for positive capital.

High labor and power costs in the United States, and the rise of newly built, low-cost facilities in Third World countries, have accelerated the closures of U.S. plants. As these plants remain inoperative, they continue to represent a significant cost burden due to taxes and maintenance cost, while also posing liability concerns.

Dam 2 posed a separate set of challenges to create access for dredging behind the dam. A steep, narrow, one-lane road leading to a powerhouse on the downstream side of the dam made mobilizing the site with equipment particularly difficult. Due to these limited access issues, Envirocon implemented a solution that required demolition of the powerhouse to build a crane pad to position a 350-ton crane.

Facility owners are finding new, profitable options are available and having access to the right markets and the know-how to maximize assets is crucial. Recycling used materials, for example, should always be considered during demolition as the vast majority of process and electrical equipment on site can be sold as scrap metal.

“Depending on the facility being demolished, revenue from scrap metals will offset the costs of demolition at minimum,” said Envirocon Demolition Project Director Bud Stevens. “As an example, scrap revenue from aluminum smelters and chemical manufacturing units can ultimately cover the cost of demolition entirely, plus present additional profit.”

Today, foreign buyers are offering to purchase entire facilities at attractive prices. The foreign buyers agree to disassemble the facility and ship it to a Third World country for reuse. Yet, frequently, profits are not maximized during this process. Scrap pieces usually can be sold individually, which is typically more lucrative than the foreign buyer’s price.

The best course of action begins with securing the services of an experienced and highly qualified demolition and asset recovery services company that possesses the knowledge and skill sets to identify whether recycling scraps individually or in bulk makes more financial sense. An experienced contractor has the ability to sequence a demolition schedule to match the needs of each project and maximize profit. This process ensures all assets are recovered without delaying the project schedule and provides the owner a comprehensive plan for the demolition and the recovery of all assets. Taking time to evaluate all product return prior to demolition saves both the owner money and the contractor time.

“Once identified, the salvage items can be incorporated into the contract language,” said Envirocon Business Development Manager John Gorman. “If the asset is in a location that causes the contractor to alter the methodology of the demolition project, it could add some cost. However, the asset may be of high enough value that it is justified.”

Facility owners can also gain bottom line profitability by selling functional equipment. Although assets can be recovered, liability exposures do exist and selling the equipment will not always yield maximum return. In fact, it may lead to expensive liability suits.

“You need to have a strong legal department to exclude yourself from liability when selling used equipment,” said Stevens. “Most of these sales are ‘as is, where is,’ and the buyer is responsible for removing the item. This presents its own difficulty because now you have people working on your property who are exposing themselves to the risks inherent in dismantling.”

The best option for the owner is to identify if the functional equipment can be used within the organization’s facilities as a replacement or a spare. This eliminates the dismantling liability exposure and can ultimately save the client money because, in many cases, it’s less expensive to move a piece of equipment than it is to purchase equipment new.

Given today’s rising commodity values and lower demolition costs, now is the time for owners to turn their idle facilities into assets.