Memories and Insight

On April 28, 2009, Recycling Today convened nine scrap industry veterans for a discussion called the Heritage Roundtable. The event, sponsored by Metso Recycling, was held at the Mandalay Bay Resort & Casino during the 2009 Annual Convention of the Institute of Scrap Recycling Industries Inc. (ISRI). Moderators Brian Taylor and Jim Keefe of Recycling Today asked the assembled panel to consider several aspects of how the industry had changed and how they might advise those who will be in scrap industry leadership positions today and in the future.

No Small Change
Recycling Today: Looking back at the past 50 years or so, what is the biggest change you have seen—a business condition or a work practice—that is very different from what was going on 40 or 50 years ago?

Stanley Kramer: One of the greatest things that we all recognize is the mechanization. When I started in this business, the only tools I had were a hammer and chisel. Today, no one uses a hand tool. It goes into a machine and gets processed. I think the machinery has made some huge differences to the look of what our industry has become. Also when I started in this business, often when you sold aluminum, it was aluminum. Today, what alloy it is and whether it’s new or used, or whether it’s industrial scrap or from a demolition job—it’s critical. There are a lot of specifics, and I think that’s a huge difference in the scrap business.

Stanton Moss: My opinion is that the biggest change is the shredder. The shredder has done wonders for our industry, and the downstream separation equipment has really made a tremendous change. So I agree with mechanization, like Stanley mentioned, and the shredder and downstreams are part of that. In the next 50 years, I think we’ll see equipment that analyzes downstream, so when a recycling company ships a product, it will meet a specification that will increase the value of its material. I think we have only seen a very small portion of the technology we’ll see in the next 50 years, and it will change our industry completely.

Larry Sax: One of the major differences I see today that is a hindrance to dealers is the lack of consumers. The number of brass and bronze ingot makers, small foundries, cast iron foundries and steel foundries that have closed over the years make markets very slim, and there are very few places to go. I think that hurts the average scrap processor today.

Richard Abrams: Most of the steel was made in BOFs (basic oxygen furnaces) and even open hearth furnaces in our area, and their scrap buying was sporadic. But when local mills like Lukens Steel put in their electric furnaces, demand became more consistent. Demand worldwide has been more consistent for the last eight or 10 years, especially from China. And increasingly sophisticated shredding plants, especially the downstream technology and eddy currents, have brought major changes. The shredder has made the scrap industry more of a manufacturing process. The product is consistent, and the quality is consistently high. The mills like the material.

Irving Ehrenhaus: I started on my own as a broker and an aluminum specialist. But I learned over the years that you have to change. Although I was always looked at as an aluminum exporter, I’ve handled every metal when it’s become practical, whether it be copper/brass, lead, zinc, stainless. I changed because there were just certain times when you couldn’t make a living [as a specialist].

Yale Dorfman: Regarding China, I think there are about 20 percent of foreign attendees here at [the 2009 ISRI Convention and Exposition], and they’re here to buy whatever they can get their hands on. They can take a load of mixed aluminum [and] sort it by hand. When I was in China, I saw them strip copper by hand with a penknife, and it was amazing how fast they were doing it. I saw smelters that were very updated, but their method of preparing the scrap was very ancient. Where we might have 100 people, they might have 2,000 people. They’re going to be a major factor not just overseas, but over here. We’re going to have to contend with it. We’re going to have to be better.

Ira Moskowitz: The decline of manufacturing and the decline of industry in our country have changed the way we have operated. The shift of this country being to one of service industries, we’ve lost labor markets to Mexico, and they’ve lost them to China.

Panelists on the Heritage Roundtable, sponsored by Metso: (back row from left) Harry Kletter, Richard Abrams, Stanton Moss, Ira Moskowitz, John Duncan of Metso, (front row from left) Yale Dorfman, Stanley Kramer, Irving Ehrenhaus and Larry Sax. Not pictured: Kalman Gordon.

Pass it On
Recycling Today: How can businesses be structured nowadays so that veteran wisdom can be passed on to younger managers? Is the family business model best for this?

Kalman Gordon: I’m third-generation in our business. My son has been with the business for about 12 years after he had been away at an accounting firm and with a paper company. He came back, and it has been great. We also have two nephews from the fourth generation. And now we have the fifth generation working with us. I think it’s a great thing, and I hope we can continue that way. My grandson, who is 10, says he wants to come into the business. But the old saying goes: the first generation originates, the second generation operates and the third generation liquidates.

Harry Kletter: It’s subject to the person having the ability and desire to want to be in the business. I do not think you can grow in the new era we’re in—sometimes the family model is not going to work in the environment we’re in, even with good kids who are good fighters. You’ve got to build staff beyond family ties. And family situations are the downfall of a lot of businesses.

Yale Dorfman: I have three sons; one of them chose not to go with us, and two of them are with me. They’ve taken it up pretty well—they’re way ahead of me and they’re involved with all the young people coming into the business and are doing business with that generation.

Stanley Kramer: The scrap industry in my entire life has always been more of a family business. That’s all changing—corporations are coming in and taking it over. But there is still a strong family trend in this industry. Our sons were born into their businesses, they have come into our scrap yards ever since they were little boys and they have learned and watched how their fathers operate. And your children become professionals. They attend college and they learn things that we never knew.

Over-Arching Lessons
Recycling Today: Is there any single lesson that you’ve learned in your career that seems important to pass along to others?

Stanley Kramer: The conclusion is that there is no single lesson—that’s the lesson that I’ve learned. Every single day of working in this industry has brought a new and important question, and I continue to learn every day. Now I have my sons working with me, and they bring a new and different perspective on what’s going on. So I feel that there is no single, important lesson. Every day has been a learning experience and every day has brought a new lesson.

Stanton Moss: The quality that I have always run my business on is honesty. I was hit with a couple of major bankruptcies [of consuming facilities] at one point, and I made a decision that everybody that I owed money to would be paid according to terms. A lot of my customers didn’t even know that I had been hit by those bankruptcies. I could have gone out of business and come back later, like we’ve seen other people do, but I made the decision to make sure that everybody got paid and to keep my reputation and my name. That name on the door is my name.

Ira Moskowitz: Stay true to yourself and be confident in yourself; that would be the best thing that I can say.

Irving Ehrenhaus: If you have to narrow it to one word, I would say integrity. In the relationships I had on both the buying and the selling side, it always came down to keeping my word. I think that is what has allowed me to survive for all these years.

Larry Sax: I don’t think in this business you ever stop learning. I have found that each and every experience I have had has been a good one. The philosophy I recommend is that if you make a mistake, well that’s fine, but don’t make it a second time.

Remapping
Recycling Today: How has the geography of scrap and scrap flows changed during the time you have been involved with the scrap industry?

Richard Abrams: Demand worldwide has been more consistent for the last eight or 10 years, especially from China. The Chinese phenomenon is going to continue for a while until their infrastructure and their middle class’ demand for consumer products is satisfied, and I think they’re a long way from that. I haven’t visited there, but I understand it’s quite a sight to see an entire highway system being built at one time.

Yale Dorfman: Many years ago, the Japanese came in and bought a lot of scrap. Now the Chinese are coming in and they are establishing footholds, buying scrap yards in New York and elsewhere all through the country. They’re staying here and opening up their own operations. I don’t recall that happening previously when other nations like Japan and Taiwan were emerging as buyers. It gives Chinese buyers the ability to buy small loads and a lot of different materials—motors, aluminum, wire. They’re buying mixed loads.

Irving Ehrenhaus: I think our industry is suffering similarly as all other industries in this country. All have the same basic problem. You can talk about efficiency, but the United States can’t compete with those labor rates they have. We thought we couldn’t compete with Mexico, and then China came in, and Mexico couldn’t compete with them.

Stanley Kramer: I’d like to make a comment about the cheap labor they have in China and how we can’t compete. It seems to me that all the American automobile manufacturers decided that to compete with the foreign automakers they would open plants overseas, and they have built plants in China and Mexico and other nations using cheaper labor to make their products. But that hasn’t stopped them from entering into bankruptcy. The Japanese companies opened plants in the U.S., and they’re making cars and making millions of dollars. I don’t think it’s a matter of cheap labor as much as it is efficiency. The Asian companies are running efficient plants. I think what it really boils down to is that we have to adapt to that kind of concept—being efficient.

Rolling Out New Models
Recycling Today: How has the scrap industry business model changed during your years in the industry? Is the model still rooted in family ownership?

Stanton Moss: One of the problems some of these big consolidated companies have is that they’re being run by professionals who are not scrap people. They don’t have the feel of a scrap processor—a scrap processor who has grown up in the business and who knows the feel of a piece of scrap steel or aluminum. So many of the consolidators over the past number of years—starting with Diversified Metals 30 years ago or Recycling Industries Inc. last decade—where are they? They’re gone.

Stanley Kramer: Looking at the people sitting around this table, I would say all of our grandparents came from somewhere other than the United States. They were Jewish people who built businesses around garbage and rags and scrap material out of necessity. The scrap industry in my entire life has always been more of a family business and, despite many changes, that’s what it still is.

Irving Ehrenhaus: I have thought long and hard about whether I should bring one of my children into the business. But look at what has happened [to so many of] the trading companies—they’re gone. The margins did not allow them to stay in business, especially if they had Park Avenue offices with overhead. Whether we want to admit it or not, there are buyers that are cutting out the middleman. I fume when commercials make fun of the middleman—that’s me!

Ira Moskowitz: There have been trends such as auctioning scrap over the Internet. That’s a very impersonal way to trade. I’m not sure any of it replaces close, careful small business management.