Outward Bound

Although his university degree and early career were in computer science, when a friend of Ram Guru’s explained the potential opportunities available in scrap commodities, he paid close attention and decided to act.

In 2002, Ram, a native of India who was living in the suburbs of Washington, D.C., began trading scrap metal, acting as a link between scrap processors in North America and consuming destinations in Asia and other parts of the world.

Six years later, Ram’s company, Milestone Metals, has been listed by an American business magazine as the 38th fastest-growing small enterprise in the United States, and Ram, his wife, Sumi, and other key staff members manage a truly global scrap metal brokerage business.

When Ram founded Milestone Metals in 2002, he and his wife, Sumi (who also has a master’s degree in computer science), already owned a successful computer consulting business based near Washington.

"A friend of mine from India came to the United States and he had been trading in commodities for about 20 years," recalls Ram. "Although I was in computer consulting, I was looking to diversify. He said commodities trading was an age-old business and warned that there would be price and demand volatility."

His friend also advised, though, that the time to enter scrap trading might be right. "With all these infrastructure projects going on in countries like Russia, China, India and Brazil, he said that every country would need metals and scrap."

Looking back, Ram realizes he founded Milestone Metals and started trading at an ideal time. "It was being in the right business in the right time; copper scrap was then about 50 cents per pound, and demand was just starting to build."

In 2003, Milestone’s first year in business, "we did about $800,000 in revenue," says Ram. He says 2004 brought similar results, but in 2005 revenue jumped to $3 million, followed by a $9 million year in 2006 and a $27 million year in 2007. Despite the setback in the fourth quarter of 2008, Ram foresees Milestone reaching $45 million for the 2008 calendar year.

Such growth earned the company high ranking (No. 38 measured by revenue percentage growth) on Inc. magazine’s "Inc. 5,000 List of the Fastest Growing Private Companies in America."

The list, which the business magazine has published since 1982, is compiled by comparing annual revenue figures for a span of four years. For Milestone, tripling its revenue figure in 2005, 2006 and 2007 made it a natural candidate to rank high on the list, competing with health insurance, energy and retail companies for one of the top 50 slots on the 2008 list.

While taking pride in the company’s growth, Ram is quick to add that how the company has grown will help dictate its ability to remain an active scrap brokerage business into the next decade.

Ram says vibrant scrap industry conditions from 2003 to 2007 helped Milestone Metals grow at such a furious pace.

But to take advantage of those conditions, he cites hard work, integrity, low overhead, strict payment terms and keeping debt off the balance sheet as important Milestone Metals priorities.

"Our debt is extremely low," Ram says regarding Milestone’s finances. The only loan Milestone has taken to add to its initial capitalization, Ram says, was a $300,000 loan in 2002. "We haven’t been back to the bank since, so we’ve been able to grow to $45 million in annual revenue while managing our debt."

With the scrap market having shifted so suddenly in late 2008, Ram is grateful that Milestone took the approach that it did. "We’re adequately capitalized, otherwise our business would be at risk in these market conditions," he notes.

Ram says his stringent credit terms have helped him not only in the current market but also in the long run in that he does not chase less desirable business.

Milestone can take this approach in part because it maintains low costs. The company keeps its overhead low in part because Ram, Sumi and one other co-worker are the only employees in the United States. The rest of the company’s billing, logistics, import/export documentation and other work is done by staff from an office in India.

Management knowledge when running a brokerage has been helpful, but gaining market knowledge has been critical. For scrap-specific knowledge, Ram says getting away from his desk to seek out scrap suppliers in North America and consuming facilities throughout the world as well as to attend trade shows where the markets come together have all contributed to his ability to navigate the world of scrap metal.

He visits consuming facilities in Asia and scrap processing plants in North America to understand the needs of consumers and the quality capabilities of suppliers. "The most important thing is to buy good quality scrap," says Ram. "As the broker, you are responsible for the contract and you have to bring value to the supplier and the buyer."

Milestone Metals has been able to export container loads of nonferrous and ferrous metals to destinations throughout the world, including India, China, Taiwan and the Middle East. "We specialize in copper, brass and steel," says Ram. Much of the red metal goes to China, while many of Milestone’s ferrous scrap buyers are in India and Taiwan.

Regarding quality, Ram says, "It’s not like I can check each and every container." But what he strives to do is work with suppliers who will listen when there is a quality concern and who will compromise on price if necessary and work to correct a shortcoming in the next shipment.

"With suppliers, intention is the most important thing," he says. "If everything goes well on the next transaction, then you regain momentum and trust with that supplier." Ram continues, "But if there are too many quality issues, you have to stop doing business; there is no other way."

The quality problems are not widespread, Ram is happy to report. Milestone buys some scrap from South America, but has largely found what its buyers want in North America. "I am very comfortable about the quality and reliability of scrap produced in America," he says.

From starting relationships to connecting buyers and sellers, Ram says the last few years have been an ongoing commitment to "keep building and keep building" the Milestone Metals business.

Having spent more than five years building a business, in late 2008 Ram was confronted with the situation of protecting Milestone Metals in the face of a rapidly changed scrap market.

The recent combination of slower melt schedules in China followed by the global credit crisis and then by plummeting prices for scrap metals had caused many buyers to curtail purchases—some in mid-transaction.

"It’s a testing time; it’s obviously not the end of the world," he says. "You find out in these testing times which buyers are reliable and have integrity and which ones are going to run away."

A downturn that lasts a year or so also creates a "cleaning-up process" among recyclers and brokers, says Ram, that eliminates "fly-by-night operators in this industry."

While Ram’s prediction is that "it is going to take another three to six months for the situation to subside," he already sees a silver lining in the form of pent-up demand from melting facilities that have pulled out of the market this fall. "I think there is already a backlog of demand that has been created," says Ram.

While not wishing to minimize the difficult conditions of the current market, Ram says it can be more encouraging to think about what lies ahead after a market downturn. "Whenever there is a global slowdown, it means phenomenal growth after the lull," he says.

When the lull is over, Ram says Milestone Metals will be there. "The most important thing is integrity," he says. "The market is volatile and can change rapidly; if you have integrity, then you can depend on a solid base of buyers and suppliers to develop your business for the long haul," Ram adds.

The author is editor in chief of Recycling Today and can be contacted at btaylor@gie.net. This feature first appeared in Recycling Today’s sister publication, Recycling Today Global Edition.