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Corporations: Scrappy Market

4 minute read

Rich in folklore, controversy and profits, the scrap industry is an unglamorous giant that has been spoofed, needled and assailed by writers from Charles Dickens to Garson (Born Yesterday) Kanin. The public insists on calling its chief product junk, but this affront has not prevented scrapmen from making millions by marketing the oddments that other people throw away. To the steelmakers they sell rust-worn barbed wire from the farms, torn-up tracks from the railbeds and used appliances tossed out by housewives. They move mountains of junked cars into grasping incinerators that burn off paint, cushions and fixtures, then through presses that crumple each once pampered body into a hunk of tortured steel no bigger than a TV set. Because scrap goes back into the steel pot in a constantly revitalizing life cycle, almost every new car uses some steel from Model T days.

After earning tall profits and extravagant criticism in times past, scrapmen are now faced with soft demand and sluggish prices. No company has been hit harder than Manhattan’s Ogden Corp., the world’s biggest scrap company. Last month Ogden reported that sales—30% from scrap and the rest from other activities—dropped from $436 million in 1961 to $406 million last year; its Luria scrap division lost money for the first time in its 74-year history. Ogden’s candid President Ralph Ablon, 46, admits that the scrapmen’s current troubles stem partly from their past excesses. Says he: “During the sellers’ market of the past, scrap acquired the characteristics of doubtful quality, uncertain supply and high, fluctuating price.”

Down to Size. While steelmen in the past mixed about 50% scrap and 50% molten iron in their furnaces, they have devised ways to use only 45% scrap today. They have spent billions to build new “basic oxygen” steel furnaces that use barely 25% scrap and to open new iron mines from Labrador to Liberia. The scrap-men have also been hurt by five years of sluggishness in steel demand. Scrap prices have dropped from an average $53.50 a ton in 1956 to $28 today, and exports have plunged from almost 10 million tons in 1961 to barely 5,000,000 tons in 1962.

Ralph Ablon has no intention of letting his own company be scrapped. He has brought big company management to a fragmented, ruggedly individualistic industry that was created by penniless Jewish immigrants who scooped up junk in back alleys, made fortunes overnight and handed down their small businesses from father to son. Ogden’s Luria research department, the industry’s first and biggest, is now testing a contraption to reduce a whole auto to egg-sized pellets that could be easily stoked into oxygen converters or other furnaces. In a business long suffering from an inferiority complex, Ablon has been able to attract graduates from such schools as Harvard, Princeton and M.I.T. Once an English teacher at Ohio State, he got his own start in scrap “by marrying the boss’s daughter”—a Luria heiress.

Self Cure. Partly because of the slump in scrap and partly because the Federal Trade Commission has been complaining that the Luria division dominates too much of the industry, Ogden is rapidly diversifying. It is stepping up the activities of its Lipsett demolition division, which tore down Manhattan’s Third Ave nue el and scrapped such ships as the Normandie, Enterprise and Liberte. Ogden has also gone into shipbuilding by buying New Orleans’ Avondale Shipyards, which has a bulging order backlog of $130 million at a time when most shipbuilders are in trouble. Ogden, itself a major shipper, has bought the biggest U.S. stevedoring company. International Terminal Operating Co. Scrap, however, is still a steely part of Ogden and will probably remain so. One thing that scrapmen are unwilling to consign to the scrap heap is their belief that as long as people destroy, abandon or tire of their possessions, someone else will find a use for them, at a profit.

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