Long Island Scrap Metal

January 24, 2011

The Scrap Yard Indicator: Gershow Recycling Sees Economy Continuing Slow Improvement in 2011

Housing Sector Still a Major Drag on a Local Economy Increasingly Dependent on Service Industries

 

Kevin Gershowitz, President, Gershow Recycling, says he is optimistic his company will see continued business improvements this year as the new tax law will give consumers more money to buy new cars and durable goods, as well as to make home improvements. However, he predicts that the housing market will continue to be a drag on the local economy as home sales and home improvements, while improving, are far off the mark from pre-recession levels.

The new tax law that went into effect continues the tax cuts from the previous presidential administration and the homeowner's deduction on their mortgage insurance premiums throughout 2011. The law also cuts the payroll tax from 6% to 4% in 2011. The tax cuts will put more money in people's pockets, helping them purchase new appliances and other durable goods. "This means more scrap metal should be brought in to the yards," Mr. Gershowitz said. "As people make more durable goods purchases or home improvements, we'll be one of the first industries to feel the impact as old appliances are brought in to be recycled. A scrap metal recycling plant is a great place to go to see how the economy is performing."

The National Automobile Dealers Association (NADA) estimated new car sales in 2010 to be 11.5 million vehicles, compared to 10.4 million vehicles purchased last year, but lower than 2008's figure of 13.2 million. NADA sees the upward trend continuing into 2011. "When a new car is purchased, an older vehicle is taken off the road," Mr. Gershowitz said. "As more people buy new cars, we'll see more old cars coming in to be recycled."

Feeling confident in the economy, businesses spent 16% more on durable goods - such as computers, automobiles and machinery - in November 2010, compared to November 2009, according to the U.S. Census Bureau. Consumers also expressed confidence as household appliance purchases in November 2010 increased 3.8% over October 2010, according to the Commerce Department.

"When companies and individuals buy more durable goods, then the older products come to our scrap yards," Mr. Gershowitz said. "The increase in durable good purchases shows that the economy is improving. We are hopeful that durable goods sales will continue to improve, with consumers having more money to spend and the employment picture beginning to show some improvement."

While the housing market has improved, it continues to take a toll on the local economy. Multiple Listing Services of Long Island data showed closings on home sales in Nassau and Suffolk declined in November 2010 by 36.6% and 33%, respectively, compared to November 2009.

"The lackluster housing market continues to be a drag on the local economy, considering how dependent it is on service industries, such as real estate, home improvement and finance," Mr. Gershowitz said. "To make matters worse, we feel that business for many contractors remains slow and some of them have left the industry. We see this in our metal shops, with far fewer home improvements being done, compared to pre-recession levels. Most of the activity continues to be necessary repairs, rather than major home improvements."

As the recession hit in 2007 and 2008, Gershow, like most other businesses, tightened its belt by cutting back on overtime and its Saturday hours. But, in maintaining a long-term, optimistic view of the global economy and making itself well-positioned during such economic circumstances, Gershow did not have one single layoff. In fact, the company looked upon the recession as an opportunity to expand in a down market, opening locations in Huntington Station in November 2007 and Freeport in May 2010. It also pushed forward on its modernization program, recently coming to an agreement with the Long Island Power Authority, resulting in the electrification of Gershow's Medford facility.

"We have been in business for more than 45 years, so we have seen the economy at its highs and its lows," Mr. Gershowitz continued. "The economy is very cyclic, especially in the steel recycling business. This is not our first recession and this will not be our last. We are optimistic that the housing and home improvement sectors will continue to improve this year."

 

Press:

Long Island Business News: Scrap Metal Recyclers See Sign of Rebound »

American Metal Market: Gershow Exec Sees '11 Scrap Supply Gains »

 

BROOKLYN VALLEY STREAM FREEPORT NEW HYDE PARK HUNTINGTON LINDENHURST BAY SHORE MEDFORD RIVERHEAD