Yard rules

If the ability to profit from one’s mistakes were a commodity, Andrew Gongola of Elkins Metal Recycling, Elkins, W.Va., might be able to corner the market. Still, learning is a key to succeeding, and what he has learned will help others improve their bottom lines.

“In 2010, half our scrap came from peddler business,” Gongola says. “We just didn’t have a lot of manufacturing-type businesses in central West Virginia.

“Today, 80 percent of our scrap comes from commercial generators, and most of that from the energy sector. Even the machine shops we service build components for coal miners, power plants and gas drillers,” he says.

The logistics behind receiving and processing materials from these two sources are strikingly different. As a result, Gongola instituted a program in 2012 called “97 Percent Right Place,” which governs material flow in the company’s yards.

“The basic idea is that the customer (or our own trucks) will unload in a place that is one handling away from the ‘right place’ for the material,” he says, explaining that, for example, shearing scrap is unloaded within 50 feet of the shear. That requires just one swing for the crane into the charging box.

Prepared scrap is unloaded within 50 feet of the rail siding—again, one swing into the rail car.

“While all yards try to achieve this, we made it our first goal,” he says. Sometimes customers have to wait to get to the right place, or Gongola finds he has to pour more concrete so that the right place isn’t in the mud, he says. In one particular case, the company’s operations manager made five employees move their vehicles across the street because the only remaining area within 50 feet of the rail siding was in the parking lot, and he had a load of prepared scrap to dump.

“Right Place” always comes first. “When we started the program, we thought that we would be forced to put one out of 30 loads in a place that wasn’t right, but our exception rate is more like one out of 100,” Gongola says.

Even that doesn’t cut the mustard. “When we get an exception, the managers discuss it. We take it seriously,” he adds.

Gongola’s operations also handle C&D work. Typically, the company only demolishes steel-intensive structures. These include tipples, pipeline compressors, big boilers and similar industrial scrap. “It is the most profitable thing we do, but it also bears the most risk,” Gongola says. “If we stay within our capabilities, then it is good business, regardless of the transaction price for ferrous scrap.”
 

Scrap specs

The company is specific about the materials it handles, Gongola says. Prepared No. 1 HMS (heavy melting scrap) can be any metals smaller than 2 feet by 3 feet in size. It must be free of nonferrous attachments, such as lead, aluminum, brass or copper. The company does not accept sealed containers, such as car shocks, torque converters, belt rollers and tanks. However, any sealed container that has two holes burned into the item at least the size of a 50-cent coin are acceptable. Of course, the load must be free of excess grease, oil or other contaminants. Prepared plate and structural (P&S) comes in the form of I-beams, channel, angle, plate or pipe. It must be a minimum of one-quarter inch in thickness and no larger than 2 feet by 5 feet. Pipe cannot be larger than 8 inches in diameter.

“The overly detailed descriptions of prepared scrap on our websites are an attempt to prevent disagreements at the yards,” Gongola says. Those websites, he says, are a key to the company’s profits.

“They became a great marketing tool,” Gongola says. “If you read it on the website (grade, specs, pricing), then we’ll honor it. If ‘someone told you ... ,’ we probably won’t be able to help you,” he says.

If there is a dirty word at any of the yards, it is “downtime,” as is the case with most scrap yards. “As our volumes grew, we couldn’t afford downtime,” Gongola says. “We found that we were hard-pressed to honor our service commitments when our equipment went down. Since we kept getting more business by promising big, we either had to buy reliable equipment or shut up.”

Helping the company meet the challenge was Reco Equipment, Gongola says. “They helped us chose the right-sized equipment with important features for scrap yard use. While other dealers tried to woo us by offering comparable machines at 5 to 10 percent less than the Liebherrs, Reco sold us on value, longevity and fit,” he says. Reco also helped find financing and, for the oldest units, the company offers support with prompt parts and service, Gongola adds.

“We operate five Liebherr machines and two Terex machines, which Reco supports,” he says. “While we love both brands, we more satisfied with Reco than nuts and bolts of the machines.”

Elkins runs identical equipment at all of its facilities in the name of efficiency. “This is easy when you buy everything new, but we still buy used equipment for half of our needs,” he says. Therefore, the company matches brands and (as best they can) models. Across the company, Elkins operates:

• Two Sierra shear/logger/balers;
• Two E-Z log balers from R.M. Johnson;
• Five Liebherr material handlers;
• Two Terex excavators;
• Two John Deere wheel loaders;
• One Liebherr wheel loader; and
• One SSI Shredding Systems 100-horsepower shear shredder.

The shredder is used to process 60 tons of material per month from a single commercial customer.

Gongola says he fears his company is below average at maintaining its equipment. “We are usually reactive and pay too much in repair expenses every year,” he says. That is another point on his to-do list.

“It’s not very exciting,” Gongola says of his business. In fact, it is a well-thought-out operation that uses planning to overcome other shortcomings, including market changes. Gongola says he finds himself frequently learning from his experience in other industries, such as the microbrewery in Morgantown, W.Va., that he was involved in.

There is little doubt that, as a seasoned businessman, his success today is based on lessons learned from diverse business ventures, including residential real estate in Elkins. When he looked at career opportunities, he never imagined himself discussing shredders and hopper cars.
 

Growing pains

Although his family has a long history in recycling and scrap, Gongola did not see himself as part of that game. “I wanted nothing to do with the dirty, parochial junk yard,” he says. “I kept as much distance as possible between my family, that business and myself.”

He went away to private school in Baltimore and then studied finance at college with a tract towards becoming a bond trader in New York.

He chuckles. “It turned out that junk—not junk bonds— was my future,” he says. “Early in my senior year, while recovering from a bout of food poisoning, I had an epiphany and decided that I would go to work for my father in the family business.”

Gongola worked for his dad, Jim, for 10 years, then bought him out. Today, he owns three companies—Elkins Metal Recycling, Clean Metal and a new venture, a yard Gongola opened in 2013 in Oakland, Md., called Double M Recycling. As a group, the companies process mostly ferrous scrap (90 percent by volume) and handle nonferrous metal as a complement to the ferrous business.

“We still look a lot like the traditional mom-and-pop yard at all three locations,” Gongola says.
 

Ups and downs

Gongola would be the first to tell you that the company’s growth was not all smooth sailing.

“On the back of my Christian conversion in 2000, I started a company called Clean Metal that recycled postburn municipal scrap in Fairmont, W.Va,” he says. Clean Metal attempted to recover scrap metal from incinerator ash. That enterprise rewarded him with a full year of poor results.

“I moved the operations away from the mill (Weirton Steel) to a facility adjacent to the generator (Covanta) in Chester, Pa., near Philadelphia,” he says. “With some equipment and people I left in West Virginia, I started Three Rivers Iron & Metal in Fairmont, W.Va.

“Clean Metal was a complete failure by every measure,” Gongola says. When the processing facility burned down in 2005, he was forced to broker (not process) the raw municipal scrap to the emerging new breed of shredders called mega-shredders.

“I made enough money in this new brokerage business to pay off most of my debts and put some money toward buying out my father’s business in Elkins,” he recalls. In 2006, he closed Clean Metal and began operating Elkins Metal Recycling and Three Rivers Iron & Metal.

Things couldn’t get worse, could they? Lurking around the corner was the market crash of 2009. “We barely survived that market collapse, but in the last three years we have increased our volumes by 50 percent,” Gongola says.

Almost all of the companies’ volume growth has come from new operations in West Virginia that drill, develop, support and move gas from Marcellus shale formations to market.
 

Family history

The family got into the business when Gongola’s great-grandfather, Esrael Miller, and great-uncle, Morris Miller, started a scrap yard in Clarksburg, W.Va., called Miller Metals.

“They helped my grandfather—Bill Lefkowitz—open Elkins Iron & Metal Co. in Elkins in 1957 to take advantage of a booming local foundry and a vibrant coal industry in this area,” Gongola recalls. The foundry was Kelly Foundry, which is still in business today. In 1979, terminally ill Bill convinced his son-in-law, Jim, to leave his middle-management position at Fannie Mae in Washington, D.C., and move to Appalachia to run and eventually own the scrap yard. Jim purchased the business and operated it until 2006. In 2006, Gongola, purchased the assets of the business and renamed it Elkins Metal Recycling.

In January 2009, Elkins Metal Recycling began offering certified asbestos abatement services and demolition services for commercial, municipal and individual clients. Elkins Metal Recycling is now a turnkey contractor for asset disposal services in central West Virginia.

“The metrics of business are financial,” Gongola says, adding, “By most business measures, we’re not really successful.” He says in a five-year period, the company will break-even for three years, lose money one year and make money one year.

“My background is in finance, so I know what the limits of our debt service are, and I understand how to manage cash flow. We’ve enjoyed growth since 2010, but some of it was dumb luck,” he claims.

Luck, however, favors the prepared. And as golfer Gary Player famously said, “The more I practice, the luckier I get.”

Gongola says, “Most of my victories are private,” noting employees he helps, personal relationships built with vendors and customers, honoring his faith at work and doing work that is fulfilling and improves the communities where his companies operate.

“Take great pride in private victories and run your business in such a way that Recycling Today will never take notice of you. If you get to own or manage a scrap metal business, then you are truly blessed. Count your blessings,” he concludes.

The author is a contributing editor to Recycling Today and can be contacted at curt@curtharler.com.