John Wayne squints over the steel barrel of his M-1 rifle, spying a Japanese tank bearing down on his position. “So that’s what those darn #$%@’s did with all that scrap metal we sent ‘em,” mutters the Duke in his celebrated cinematic tone.
Since long before World War II, Hollywood movies, or even the ancient Trojan/Greek conflict, the path of metal has forged the flow of civilization. The pen, the sword, and the integrated circuit all run on metal. So does that thing you’re absent-mindedly texting on. And the more a culture develops, the greater its appetite for things metallic.
One has only to trace the pathways of the 1,500-plus containers shipped monthly by scrap metal trader MGK International, Inc. From its headquarters at 13 Roszel Road, the company’s lean team steers these 30,000 metric tons to China, India, and Turkey. These are today’s burgeoning builders, nudging their way to the top of the global markets on all fronts. And who feeds their metallic cravings? The world’s former top builder, of course — the United States.
In 2009 the U.S. produced an estimated 56 million metric tons of iron, 2 million metric tons of aluminum, and 1.3 million metric tons of copper. Our steel production climbed 22 percent in 2010. The thirst for all metals surges on, but eventually all this metal becomes some part or machine that wears out.
This is where the vast, little known, and very profitable scrap system kicks in. A whopping 40 percent of the world’s demand for metals is slaked by reprocessed scrap. Back in 1974 Maganlal Mehta in Mumbai, India, realized this need. Forming a close, family-held firm, the MTC Group, he began trading in salvaged metals. Today, Mehta’s three sons have joined the company, helping expand it to a global presence with centers in the United Arab Emirates, Britain, and most recently, MGK International in Princeton.
Hitendra Jain, MGK’s president, joined the firm at its launch in 2007. A native of Bombay, India, Jain had befriended Maganlal Mehta II in his youth. After six years of technical computer study in his homeland and in the U.S., Jain began working in IT and sales for firms such as Motorola and IBM. “It was fun, certainly challenging work,” recalls Jain, “but then I began talking with my friends at MTC and heard their plans for an American presence. It just sounded more interesting — more direct with a real product.”
MGK initially set up temporary headquarters in Queens and then Jersey City, before finding its permanent home beside the Carnegie Center. Within a year Sailesh Datta joined the team as head of logistics and is now second in command. His expertise in supply chain commerce came from a surprising field of endeavor.
Datta had originally left India for Manhattan’s Fashion Institute of America. Upon graduation he worked for several clothing firms, bringing goods from Asian suppliers into North American outlets. Adding to his transport experience, Datta took up flying and currently holds a commercial pilots’ license.
Datta’s shift from purveyor of fancy apparel to ironmonger proved beneficial. While all the rest of the nation was plummeting economically, MGK underwent a quiet, explosive growth. “In 2007 we traded something like $16 million in sales. By 2008 that went up to $29 million, and in 2009, we finished at $48 million,” Jain says.
Late in 2010 Datta enthusiastically stated that MGK’s yearly sales would hit $70 million. Maybe even $75 million. They ended up being $82 million.
Much of this defiant success in the face of our nation’s current giant recession comes from being in the right place, in the right field, with the right mentors. For the last decade, waves of technology have fueled wildfire building and industry in previously stagnant countries. Jain ticks off his list of buyer nations in addition to China, India, and Turkey: Bangladesh, Indonesia, Pakistan, Taiwan, Thailand, Vietnam, former Soviet bloc countries. Each of these nations has been hitting the American financial pages as economists take note of their flowering commercial and industrial progress.
As all this need grows globally, the United States, with an $8 billion steel industry, is the world’s leading creator and disposer of all kinds of metals, putting MGK in the ideal place from which to take full advantage. The learning curve has been greatly shortened for this young team due to the 35 years of experience from its parent firm. From its launch, MGK International has operated as a subsidiary of the Mehta Trading Company Group, and from its Mumbai headquarters the entire Mehta family spreads a wide web for this new, resource-rich division.
Nonetheless, the establishment and growth in this industry have never been easily earned. The process is long, the risks great, and details to be mastered immense in number.
The Scrap Route. Each age has its major trade routes that unite people across the globe, based on the society’s greatest need. In the ancient world, it was amber and cloth; in medieval times, spices; in our age, it is iron. And today’s quest for iron and metals begins at a grass roots level.
Those of us who are old enough remember the local junk yard fondly as an intriguing realm that would take our old tools in exchange for a little extra pocket money.
“That goes on today,” says Datta. “One man with a pickup can spend a few hours driving around to construction sites. Or by beating the municipal trucks to the punch on ‘big item’ garbage days and make himself a couple of hundred dollars.” Before you sneer, take note that aluminum goes for nearly $1 per pound, and each pound of old copper wire and/or piping nets $3.20 from the right scrap dealer.
Of course, this ocean of scrap is not fed entirely by tiny tributaries. Automobiles and dismantled buildings provide the major tonnage of most nations’ scrap metal. With 550 autos per 1,000 Americans, cars are king for MGK. The EPA claims that each year 2 million cars are made, and approximately the same number are scrapped. Auto makers state that 75 percent of each car’s weight is recycled, and nearly all the metals. Your old Ford may soon provide siding for a Chinese chemical plant.
Demolition companies make a substantial part of their profits from the ferric scrap they recover. That old movie theater they took down in your home town may now help house Indonesian refugees from the great Tsunami. And the copper wire from your discarded power tool? It will probably go to India and return in the next power tool or computer you purchase.
After collection, the autos, aluminum, and all the metal scrap makes its way to one of the nation’s 4,500 processing plants. “These plants and scrap yards — in fact all parts of this business — tend to involve multi-generational companies held tightly within individual families,” notes Datta. Some junk yards have processing capabilities, but the machines that can gobble old engine blocks and spit out flat, palm-sized ingots are enormously powerful. And expensive. Yet despite the volume, it all takes place and each metal is sorted out according to type, purity, weight, and grade.
It’s a mammoth transformation, of which gatherers, separators, and processors may be justifiably proud. However, discerning which client, located where, wants how much of what, and for what negotiated price is an entirely separate and equally difficult challenge. And that’s where MGK steps in.
“We do everything in-house,” explains Jain. “We prepare all documents, fill in all manifests, check on the cargo every step of the way.” This hands-on, no-outsource kind of export is rare indeed in the overseas shipping world. MGK’s antennae abroad are ever sensing the market for buyers. Sometimes these buyers are users, but typically they are wholesalers and foundries that will smelt and sell to the end user within their own nations.
While metal prices, like currency, are fixed daily, this only guides, but does not dictate the transactions. “For steel, it’s the New Orleans exchange that’s the big player,” says Jain. “But we also check the Chicago Exchange, the London and U.S. Metal Exchanges, plus the Steel Index. Then, of course, we daily check the news of laws and regulations from the Institution of Scrap Recycling Industries.”
With a firm idea of buyer needs, MGK’s sales team contacts scrap processors and negotiates for a specific quantity and grade of metal to be delivered on the docks by a certain date. “We personally check out every load,” says Datta. This sets both Jain and Datta ever on the wing to processing sites, to make sure that the grade 211 (70 pounds to the cubic foot) ferrous metal is indeed of that quality, and that the shred sizes meet the buyer’s specifications.
After MGK closes the trade, the supplier is contracted to deliver the product to the required port. Most of this metal is trucked, and most goes to east coast seaports, such as Boston, New York, Norfolk, Charleston, Savannah, and Jacksonville. Midwest processors will often drop shipments at the Port of Houston. The break bulk — cargo that cannot be shipped in the 20 or 25-foot, sealed, land-and-sea style containers —- will probably go to Camden, one of the nation’s largest ports for break bulk cargo.
But as MGK’s hemispheric network expands, new ports are found. “Puerto Rico and the Caribbean have lots of metal,” notes Jain, “and the shipping is remarkably easy.” Brazil has also proved itself a profitable producer, while Argentina, though strong in metals production and processing, lacks ideal governmental stability. “But we are looking into them.”
From dockside to dockside, metal shipments may require some agents, but by cleverly having the recipients provide most of the shepherding through customs, MGK avoids as little outside expenditure as possible. At last the metals are reforged and reapplied to their new use in the hands of some new, creative builder. The process goes on.
In 280 BC, after 12 years of work, the Colossus of Rhodes was completed. It truly was one of the world’s seven wonders. Built in the likeness of the Greek god Helios, this 110-foot iron and bronze statue literally straddled Rhodes’ harbor opening, and stood tall enough for ships to pass between its feet.
Eight centuries later, the statue’s earthquake-ravaged remains were loaded upon the backs of several hundred camels and sold for scrap. Some of the pieces, doubtless, went to make swords. Others, let us hope, went to forge plowshares.
It is unthinkable to imagine the environmental disasters that would result if we simply abandon our metals and mined fresh ore the world over to meet our needs. Hopefully, we will take a page from the ancients and continue to scavenge and reuse all the other materials so that tomorrow’s progress may continue to be fed by yesterday’s.
MGK International Inc., 13 Roszel Road, Suite C 201, Princeton; 201-332-5645; fax, 646-843-4704. Hitendra Jain, CEO. www.mgkint.com.