Long Island Scrap Metal

May 4, 2011

Gershow Eyeing More Feeder Yards

Published in American Metal Market

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Gershow Recycling Corp. will continue to eye feeder yard acquisitions despite owning seven yards in New York that feed its Medford, N.Y., shredder, according to company president Kevin Gershowitz.

Echoing a strategy already employed by other major players like David J. Joseph Co. and Schnitzer Steel Industries Inc., Gershowitz said it is imperative to secure one's own raw material supply as everyone competes for the same pile of metal.

"We're constantly looking for opportunities. We have a couple of pokers in the fire, and we'll see which direction they take us," he said of the possible acquisitions in an interview with AMM. "There has been a trend by shredding facilities to own feeders. We have followed that trend also. Any opportunity that presents itself to us that makes financial sense in terms of our core business of ferrous scrap processing is one that we have looked at."

Gershowitz said the trend of shredders acquiring yards as feeders was similar to steel companies acquiring scrap companies.

"In the end, they're going to own the scrap at whatever the market is, but by owning the scrapyard, they own the scrap. So they take that aspect out of it. They control their raw material. You're still going to buy it at market, but you own it. You don't have to worry about your manager saying, 'Sorry, you can't have it this month. Someone offered me a dollar a ton more,'?" he said.

Still, steel mills looking to successfully manage scrap companies will need to be equipped with a different skill set and structure, he added. "You have to have a certain mentality to be in the scrap business. You have to have the right people, right assets and right corporate structure that can change your thought process on how to operate in this industry," he said.

One area where the company won't expand in the near term, however, is in electronic recycling, although Gershowitz didn't rule it out in the longer-term future. "I think like other parts of the recycling industry, electronics recycling is a growing field. We're not actively involved in it, but I anticipate that one day we may be—whether we do it on our own or through an acquisition," he said.

Turning his attention to this month's market, Gershowitz suggested domestic consumers won't be as successful in pushing ferrous scrap prices down in May as they'd hoped since the downward push in April has already stretched the market.

"I believe that domestic consumers will try to push down obsolete scrap grades during May. I don't think they'll be as successful as they want to be. Their push throughout April is where it's going to settle out, but there will be a downside trend," he said, adding that a stable bulk export market will also help domestic prices offer resistance. "I think the bulk export market has stabilized, and therefore the domestic push down will run into a wall."

Gershowitz noted that East Coast prices were probably lower than inland prices in April because the export market was a bit weaker. "So maybe there will be an equalization in terms of pricing (in May). My opinion is whatever May does, May is the bottom. I hope," he said.

During the interview, AMM was also given an exclusive preview of a National Geographic show about the company's shredding operation at its headquarters in Medford, slated for broadcast on May 5. The episode is part of the channel's "Break It Down" series and highlights the shredding of cars and buses into ferrous and nonferrous scrap.

"They were looking to do a show on the industry, on shredding. Some scrap companies were not willing to open their doors or some had a lot of rules, and National Geographic was concerned about editing rights," Gershowitz said. "(We felt) it was an opportunity to show ourselves and the industry in good light. It is a reputable program that would give more of an opportunity to the public to see what our industry does, and we benefit from that as a member of that industry."