World of alternatives

Since starting a metals trading business in 2000, Dan Jones has been presented with opportunities and challenges that have prompted him to make decisive choices to expand and protect his company.

The different paths that Export Global Metals (EG Metals), Portland, Oregon, has explored during its 16 years in business have sometimes been part of a long-term strategy, Jones says, but also have been the result of accommodating a changing marketplace.

The recycling industry, as it does to most business owners and managers who survive it, has provided Jones with ample experience in commodity markets, technology research, regulatory regimens and international trading, all gathered in 16 years of guiding EG Metals into becoming an established buyer, processor and trader of ferrous and nonferrous metals and electronic scrap.

SCALING UP

The roots of the company that would become EG Metals “started about 15 years ago back in 2000,” recalls Jones. “On a visit to India, an acquaintance approached me about buying used computers from the United States for resale in India.”

Although this initial venture focused on new electronics, it soon inadvertently turned into a lesson on used equipment. “Back in the U.S., I started looking for computers to buy, but by the time I had enough for a shipment seven months later, my friend in India had lost interest and backed out of the deal, so I was stuck with a bunch of computers. Luckily, after a lot of research, I found a buyer in Romania, who a few weeks later asked for more computers. That’s when I realized there is a business opportunity in used electronics.”

Soon, Jones, who says he started “essentially in his garage,” was collecting and exporting used electronics to several nations. He also found that nonworking or unwanted components often contained metals that could be recovered. “We didn’t know what to do with the nonworking ones, so one of my customers from Hong Kong would come in and take it away. Basically I was giving away scrap the first two years of the business—I didn’t know any better,” Jones says. “When we realized there was value—precious metals and copper—we changed our procedures.”

From his location in Portland, Jones steered the company into new directions. “By 2003 we started to focus on both sides of the business—reusing and recycling electronics. A couple years later, when China was booming and buying all kinds of recyclables, we expanded more into metals. Currently, we handle ferrous and nonferrous scrap and electronics.”

On the sales side, Jones’ company was global from the beginning. The next growth step was to expand the buying footprint of EG Metals. “By 2007 we started to focus on the brokerage side of our business,” he comments. “We started to buy materials from all over the U.S. and Canada.”

EG Metals has long outgrown Jones’ garage in Portland and at one time occupied a 40,000-square-foot office and plant facility there. As the volume of materials handled by the company grew, Jones became convinced that an electronics shredding plant was the necessary next step.

“We saw a shift in policies that made us want to do the shredding within the U.S.,” says Jones, citing “data security issues [and] the handling of the materials” as reasons to opt for installing a shredder.

The company shopped for a shredder and installed it in its Portland facility, but what happened next would lead to one of those clichéd problems that ultimately proved to be an opportunity in disguise.

FORKS IN THE ROAD

Operators of metals and electronics shredding plants soon become accustomed to regulatory scrutiny, and Jones found that in Oregon the scrutiny was particularly intense.

“One of the best things that happened to us has been moving the shredder from Oregon to Texas. We now have a state-of-the-art facility, all under roof, and it’s centered in the middle of the country.” – Dan Jones

In 2013 and 2014, as EG Metals built up the inventory to feed to its new electronics shredder, it was visited more than once by Oregon Department of Environmental Quality (DEQ) inspectors, who expressed concerns and issued fines relative to stockpiling and stormwater runoff issues.

By mid-2015, after more DEQ inspections, fines and appeals, Jones and his colleagues made the decision to move the company’s shredding operation out of Oregon and to an EG Metals branch location in Carrollton, Texas, near Dallas.

“In a way it was a blessing for us,” says Jones. “One of the best things that happened to us has been moving the shredder from Oregon to Texas. We now have a state-of-the-art facility, all under roof, and it’s centered in the middle of the country.” (See the sidebar, “A New Perspective”.)

He continues, “In Oregon, at the western end of the U.S., there were freight situations that didn’t work out. Plus, we have four times more space in our Texas facility compared to what we had in Oregon.”

He says the move wasn’t easy but credits “a great staff that has helped us navigate through difficult times and all the challenges that have been thrown at us. We have a great group of people.” Jones continues, “We have a few core people who are traveling back and forth from Oregon to Texas, and one did move there, and now we have great staff that we have hired in Texas.”

Regulators in Texas “also pay close attention,” he says. However, Jones adds, the communication is better and the expectations clearer from regulators in the Lone Star State.

“I personally think because of a lack of industries [remaining in Oregon], whoever is left is being overly scrutinized. Our brand new facility there attracted every regulatory agency you can think of, and they came through and wanted us to do more and more. That was one of the reasons we decided we could just not operate under those conditions.”

Jones adds, “We learned from Oregon and have applied that to Texas. The regulatory climate anywhere is not going to get easier, it’s just going to get stricter and stricter. I think it’s the best thing we did to have everything under roof in Texas and to go beyond what is required.”

At the same time EG Metals was moving its operations halfway across the country, the company also was faced with rapid changes to commodity prices and global trading patterns.

The commodity price slump has caused EG Metals, like many e-scrap processors, to turn to more unit repair and component harvesting activity. “Our focus for the last one-and-a-half years has gone back to our roots in used computers, where we started. We are going back into that side of the business quite a bit,” Jones says, adding that the Texas facility now hosts a computer repair center and has set up space for cellphone assessment and repair.

STAYING POWER

The shifts in geography and business models keep Jones and his colleagues busy and also point to a management task in determining what needs to remain consistent and what can be rapidly changed when necessary.

Part of the core focus for EG Metals has been the same throughout its existence, Jones says. “Our business was always focused on the overseas export market and finding the right products and solutions for buyers and suppliers,” he explains. “We add value to our suppliers by providing the best service [and] best price and [by] minimizing their export risk.”

When selling either scrap or usable units, Jones says, “Our buyers overseas trust us to supply them with the right products that they are looking for and use us as an agent to make sure they will be receiving the right product they are paying for to import into their countries, minimizing their risk too.”

He describes EG Metals as currently having four operating sectors: 1) a trading business for ferrous, nonferrous and electronic scrap; 2) electronics processing at its Texas facility; 3) preparing shipments for its core smelter customers overseas “with whom we have had long-term relationships,” says Jones; and 4) its repair and reuse business. “We have buyers overseas who are looking for tested, working reusable computers, servers, laptops, tablets, cellphones and much more,” he says.

The diversity in operations is important to the future of EG Metals, Jones says. “One thing I learned being in this business for 15 years is that the market always changes and, if you are not ahead of the change, it will be very difficult to catch up.”

He adds, “It’s a very difficult and challenging time for our business these days. Because of the commodity prices dropping since 2013, it’s difficult to navigate through these times.”

In addition to the move to Texas and falling commodity prices, Jones says EG Metals (and other recyclers) also have had to adjust to slumping demand for secondary commodities from China. “The economic growth in China, which we depended on for several years, has changed. The volume of our materials that we shipped to China has fallen from 80 percent three years ago to 40 percent now,” he states.

Jones anticipates more changes and more adjustments in the future. “We are always ready to explore and take advantage of any new opportunity when it presents itself,” he says. “We maintain a very large network of customers and suppliers all over the world and, when economic conditions overseas improve, we will be in a good position to capitalize on these connections and grow our business.” He concludes, “We always try to adjust our business model to be able to navigate those challenges and stay competitive.”

The author is editor of Recycling Today and can be contacted at btaylor@gie.net.