Business: Scrap

One of the most lowly looking businessmen in the U. S. is the junkman with his knobby old horse and ramshackle wagon, collecting old rags, old bottles, bones and scrap iron. Yet when Junkman Bill Kearns of Chicago died, it was found he had accumulated more than $1,000,000 (TIME, Aug. 15). There are 150,000 itinerant junkmen in the U. S. From their humble beginnings has come the half billion-dollar scrap iron and steel industry. Founded by Russian Jews who swarmed to the U. S. in the last century, it now supplies the steel industry with over 50% of its raw material. To finance large scrap dealers who have been unable to obtain adequate bank loans, Director General Benjamin Schwartz of the Institute of Scrap Iron & Steel last week sought $15,000,000 credits for his members from the R. F. C.

Though the importance of the itinerant junkman, picking up rusty chunks of iron & steel wherever he can, has dwindled, he still supplies over 10% of the total tonnage. What he collects in his backyard, he sells to the dealer for cash. Thus, dealers large & small require bank credits to carry their huge junk piles until sales in big shipments are made to the steel mills. Large dealers are generally college-bred sons of junkmen who found the picking particularly good, have considerable investments in machinery to handle and break up junk. Despite the size of the industry, there are no large units.

Every ton of steel manufactured is potential scrap. Big users of steel are big sources of scrap. Railroads, buildings, old automobiles supply immense quantities. Old rails, cars, locomotives, machinery, pipes, automobiles pour into the big scrap yards to be cut or broken up, carefully sorted. Giant shears leisurely chomp a steel freight car into bits. Oxyacetylene torches slice up rail’s, girders, beams. “Skull-crackers” shatter cumbersome castings. Twisted sheets and waste are bundled by hydraulic presses. Great electric magnets on overhead cranes pile the fragments into heaps or load them in gondola cars for the blast furnaces.

All junkmen love a big scrapping job. After the Washington Naval Conference Henry A. Hitner’s Sons Co., potent Philadelphia dealers, had tied up at their waterfront yard awaiting the torch three battleships, 26 submarines and destroyers, 55,000 tons of auxiliary vessels. Ingenious British junkmen picked the best ships of the German navy off the floor of Scapa Flow, sliced them into $13,000,000 worth of scrap. An abandoned railroad is always a juicy plum. A big deal that junkmen missed was the sale of 199 World War vessels to Henry Ford for $1,600,000. He towed them through the Great Lakes to Detroit, melted them down into Fords. One smart junkman bought 100 locomotives, but instead of cracking them up he repaired and sold them to big constructionfirms, to cinema companies to be used in railroad wreck scenes.

Because the scrap industry is composed of many small units, the market is free, highly-competitive, peculiarly sensitive to supply & demand. When the steel industry, using more scrap than ore-made pig iron, is in the market for scrap, every dealer knows it; the price responds accordingly. Keen students of business therefore keep their eye on scrap prices to get wind of imminent changes in steel production—keystone of the nation’s industrial life. Bullish brokers nodded last week when scrap prices were upped in both the Pittsburgh and Chicago districts. But some of their joy was sapped when they heard that the dealers, shrewd sons of shrewd fathers, were upping the price of their own accord, a step ahead of a real demand which they felt would soon come. To bring order and a higher brand of ethics to a cut-throat industry, Director Schwartz founded the Institute of Scrap Iron & Steel four years ago, embracing 400 of the largest scrap dealers and 90% of the business. A 36-year-old lawyer who has specialized in trade associations, he has placed the junk business on a dignified plane, has obtained the recognition of steelmen who formerly were hesitant to let a scrap dealer through the front door. The real justification of the complex system of scrap-gathering, Director Schwartz thinks, is the conservation of ore reserves. Not only is scrap steel’s biggest raw material, but it takes twice as much ore as scrap to make a ton of steel. Every important country except Canada and the U. S. regard scrap as a basic resource, forbid its exportation. Under the Versailles Treaty Germany was required to supply Poland with 300,000 tons yearly. The U. S. sells to all comers, principally Canada and Japan. The latter has recently been a heavy buyer. Some of Director Schwartz’s best efforts have been in raising the tone of the trade. Ten years ago it was not uncommon for a steel mill to receive a carload of scrap “top-dressed” with meaty chunks of good steel that concealed a load of bed steads, old fenders, tin cans, other metals and alloys which would ruin a batch of steel. One dealer foisted off a shipment of pipes filled with sand to increase the weight. All scrap is now graded, and priced accordingly. Highest grade is railroadcar axles, standard grade is heavy melting steel scrap No. 1, now worth $9.00 a ton at Pittsburgh.