More Recycling History Lessons

While reading up on Hugo Neu Corp. (having gotten to know John and Wendy this year), I ran across this excellent 2004 Article in Forbes magazine, One Man's Junk ...Companies & Strategies (John Turrettini, 01.12.04)

It is fascinating article in several respects. First, the history of Hugo Neu, an immigrant from Germany who got into the scrap metal business in NY, is another great example of the recycling history lessons from yesterdays (long long) blog.

Second, the story of how Neu Senior followed the export market... He was willing to sell steel, made from scrapped WWII bombs, to Japan. I can only imagine the contrarian vs. patriotic dialogue about selling "scraps to the Japs". But Neu saw the market and followed world demand, and Japan is one of our biggest allies today.

"Manhattan-based Hugo Neu has been turning trash into cash since 1945, when it started trading surplus equipment and materials left over from Allies and Axis alike after World War II. In the years since, founder Hugo Neu and then his son John have turned the company into one of America's biggest scrap processors and its number one exporter, hitching a ride on the surging industrial fortunes of Japan, Korea, Turkey, Mexico and more than a dozen other countries along the way...

But the article describes a turning point in Japan, when as a result of the growth (including the very industry USA scrap dealers were selling to), Japan itself developed to becoming a net exporter of steel scrap. Neu saw prices fall, local competition increase, and he started selling to new steel mills in Korea. Then Korea developed, and history repeated itself.

"The company's then-number-one market of South Korea had already peaked... After a generation of building factories and buying cars and appliances, the Koreans were replacing them at a rapid clip, creating an ever growing supply of local scrap to obviate imports, a trend that William Schmiedel, Hugo Neu's chief trader, could read in statistics from Korea's own scrapyards. That meant, at the time, a looming wipeout of 40% of Hugo Neu's revenues."

This is precisely what is happening today to the "Big Secret Factories". American recyclers are definitely seeing a huge fall in price (demand) for used CRTs. Many assume that the world has gone completely to LCDs, as if Indian and Egyptian grad students were able to spend $175 on a Best Buy sale display. Nope, the demand for CRTs is still pretty strong. But there are competing suppliers... more and more Koreans, Malaysians, and Chinese are able to afford the LCD, and they are sending THEIR (relatively newer) CRT monitors to the factories.

This is all healthy and good, but sucks for those of us accustomed to earning money from the most sophisticated, best accredited, legal and "bullet proof" reuse market for CRTs. We either have to accept a wicked price cut (the second 100,000 monitors we sold this year earned us less than 50% of what the first 100k monitors earned) or follow the Forbes story of Hugo Neu and steel bearing scrap.

"Hugo Neu tears it all apart, then resells the scrap through a global network of traders with intimate knowledge of Third World steel mills."

We need the same intimate knowledge of CRT refurbishing and demand. If it is moving to Atlantic ports next (South Africa, Brazil, North Africa, Venezuela, Cuba?) then we need to relocate the remanufacturing expertise. Easiest thing, I think, is move it to Mexico, and our factory is just ONE of the people in my industry pursuing that lead.

Personally, my vision is to include the Asian factory owners in the move. I think it's a terrific story when a Taiwanese Malaysian flies to visit Mexico to teach Las Chicas Bravas women's coop how to buy USA computer monitors and turn them into small monitor-TVs to sell to the Senegalese buyer who sets up internet cafes. The United Colors of Recycling! World Peace! Digital access to wiki-government! Kiva on Steroids! (Then we can all be depressed and despondent about important things again, like the destruction of rain forests to coltan mining, and coral reefs to copper mine cyanide tailings.)

Unlike the third world steel mills in the Forbes article, computer repair and refurbishment has a MUCH lower threshold to entry than building a steel mill, and a MUCH higher return on investment. But the risks of screwing up are high - we cannot have piles of leaded CRT glass building up in places that aren't communicating their requirements in a language the USA suppliers can understand.

Anyway, I found it a fascinating irony that someone I respect so much as Hugo Neu corp is, in the trade circles, one of the harshest critics of our "middle path" of exporting (neither export junk ewaste nor destroy repairable computers). But I have a hunch that smart people eventually hook up. We are having a great year with some of the TV manufacturers who I first met at a shrill discourse at the offices of One Winter Street in Boston MA, when I was with Mass DEP's recycling program. At the time, a simple waste ban and an invitation to participate in setting up the infrastructure seemed like an act of war to some of the TV makers. Today they are participating, actively funding our approach, and wistful for the shared responsibility model now that all the states are using product stewardship to replace local tax revenues. That's another subject for another day, I have to get on the road to New York...