Poised to compete in better times

Features - The State of the Scrap Recycling Industry

Making capital investments and new hires in 2020 may seem like a gamble, but several scrap recyclers say it can be an ideal time to do so.

August 31, 2020


The peaks and troughs of the cyclical scrap recycling sector present an array of questions to scrap company executives each time the industry experiences volatile pricing and volume conditions.

The global economic slowdown caused by the pandemic and accompanying restrictions presented a dramatic trough in volumes for scrap recyclers, along with accompanying price volatility.

"Once you have your ‘degree’ in scrap, you’re super valuable, and the growth potential for your career is huge.” – Jacqueline Lotzkar, vice president, Pacific Metals Recycling International

However, panelists said they felt that now was a good time to make capital investments and hire talented employees who have become available as other firms have had to reduce their payrolls. Some even acknowledged that they no longer feel bound by certain norms, such as having all their employees on-site.

“I think, over the next year, we’re going to be in an unprecedented opportunity to gobble up talent,” Matt Kripke of Kripke Enterprises Inc., Toledo, Ohio, said. “There is going to be an incredible amount of people—really talented ones—from within our industry or other industries whose companies just didn’t make it. Maybe it’s scary to grab them at a time like this, but you could have an opportunity—that once in a lifetime opportunity—to get someone in this type of market. There have been skilled labor shortages, but I think it’s going to go the other way, and if you have the guts, it’s going to be a great opportunity,” he added.

Edward Kangeter of CASS Inc., Oakland, California, agreed. “Here in the Bay Area, the unemployment rate was below 3 percent, but it’s significantly different now; it’s double digits. And, believe it or not, we’ve been actively hiring through this process to fill some long-term positions that we’ve been looking for,” he said.

In CASS’ case, most of that new talent is from outside of the scrap industry. “There are really smart people who have worked in disruptive technologies that are very difficult to hire normally. And I think it’s an incredible opportunity for all of us.”

However, when it came to filling labor roles, as Jaqueline Lotzkar’s firm, Pacific Metals Recycling International, Vancouver, British Columbia, was attempting, challenges of a different form remained. “We are having a huge challenge because our provincial and federal governments have been extremely generous, and anybody who has been laid off is currently being paid CA$2,500 per month to stay home and not work,” she said. “So, for us, motivating people to come back to work has been a major challenge.”

However, she said her company has realized that when it comes to office personnel, “we don’t all need to physically be in the office. And so, when it comes to recruiting, you now don’t need to find someone physically close to you. You can actually look farther away, and the technology that we’ve adopted, I think, will allow us to recruit great candidates moving forward.”

Chad Olgin of Phoenix-based Olgin + Efune Recycling Co., said, “[W]e’re also hiring, even management roles, and we’re able to show that we’ve treated our employees well over this time. And other companies or places that have not done the same with their employees, I think some of those employees are looking for a change. They want somewhere that they can grow some new roots in this new norm, and [we can] offer that. I think that’s going to be an exciting opportunity for us in the future.”

When it comes to attracting young talent to their businesses, the panelists spoke of the factors working in favor of the scrap industry.

“Recruiting younger people, that is something that really kind of excites me,” Rick Dobkin of Shapiro Metals, St. Louis, said. “We really stress the dynamics of the business and how it is constantly changing, and you could walk into the office one day needing to sell your metal to a customer X and the next day it’s going to customer Y.

“There’s a huge amount of creativity needed as well. And, I think for most of us on this panel, at least if you have an interesting creative idea, typically any of us can walk around the corner and talk to the owner of the company about it,” he continued. “Plus, the owners of the companies are typically risk-takers, and they’re interested in trying new and different things. So, we like young people, and we like having them bringing their technical expertise to our company.”

“Investing now [is] what’s going to make you money when the economy and the flow of the market turn around.” – Kevin Gershowitz, president, Gershow Recycling

He also mentioned that “sustainability is sexy, and recycling is sexy,” adding, “When our company started out in the early 1900s, that wasn’t what it was all about; it was about supporting a family. Now, it’s a great dynamic and allows for a lot of creativity, and hopefully that is attractive to younger folks.”

Joel Fogel of Middletown, Ohio-based Cohen added that the culture of a company can aid in recruiting young people, whose reasons for accepting a job extend beyond salary and benefits. “We like to refer to our industry as Wall Street in jeans, and it’s something different every day,” he said. “One day, you’re not sitting behind a desk at a computer all day, another day you might be. The other day you might be in the yard doing something or managing some process.”

While Fogel said it is “an interesting industry,” few people know about it, “and you really have to sell yourself, your company and the industry.”

Lotzkar said, “A selling point for me, I think, is the recycling and sustainability ‘do good’ side of our industry. I think young people want to feel like they’re a part of a greater community, and I think our industry does that in a major way.

“It was said earlier that they don’t teach scrap in schools,” she continued. “You don’t go to school to learn about metals, so I think the learning curve is high. But once you have your ‘degree’ in scrap, you’re super valuable, and the growth potential for your career is huge. Talking about the opportunity for growth within a career is another way to entice people.”

In addition to investing in employees, Gershowitz said the downturn presents a strategic time to invest in capital equipment. “I had a conversation earlier today with [fellow panelist Ben Abrams of Consolidated Scrap Resources], and the description I used was, ‘Is your race car ready for the race?’ You don’t have to win the race, you just have to be able to get around the track in a good amount of time. So, investing now—rebuilding your mill, changing out your electric motor, putting a new plant in, fixing your trucks—whatever it is that your scrap yard needs, spending that cash now is what’s going to make you money when the economy and the flow of the market turn around.”

At the time of the roundtable, Gershow Recycling was in the midst of adding to its sorting capabilities downstream of its auto shredder in Medford, New York. “It’s going to be fairly massive,” Gershowitz said of the installation. “Our intention is to be able to process at the rate of close to 100 tons per hour of ASR (auto shredder residue). We’re moving along quite well, and we hope to be ramping up the conveyors and motors sometime in late August or early September. We are full steam ahead on the project.”

“An incredible opportunity right now exists to reinvest back in the business, and I think it’s mandatory for those of us who are taking a very long perspective,” Kangeter says. “If you’re not reinvesting in new technology, it’s going to be very difficult to compete in the future. And specifically, in California, the fifth-largest economy in the world, they’re trying to ban ASR as a daily cover at the landfills right now. And, separately, they are also trying to implement a nanogram standard [on emissions], so one in a billionth of a gram. What that means is, if you’re not actively investing in the core metrics of your business and looking forward to environmental compliance, when it hits, it’s going to be too late, and your competitor that’s already done that and thought about it will be ahead.”

“I think, over the next year, we’re going to be in an unprecedented opportunity to gobble up talent.” – Matt Kripke, president, Kripke Enterprises Inc.

However, Kangeter said he thinks it will be “impossible to achieve this standard,” adding that scrap yard operators in the state are taking legal action against California.

“Separate from that, if you’re not reinvesting in the core metrics of your business, when this other fight comes, you won’t be prepared to have the resources to make the fight,” Kangeter continued. “So, I think it’s a really smart point that Kevin made that now is an excellent time for us to be reinvesting. A little scary, I guess; but, the reality is if you have the financial ability and you’re in this business from a long-term perspective, it’s the smart business move.”