Inside a legit scrap metal operation - Nadine Hamilton explains the business and its headaches

Published: Sunday | August 5, 2012 Comments 0
Nadine Hamilton, scrap metal dealer and founder of Hamilton's Demolition and Scrap Trader Limited. - File
Nadine Hamilton, scrap metal dealer and founder of Hamilton's Demolition and Scrap Trader Limited. - File

Avia Collinder, Business Writer

It only required J$100 initially to launch into business. Nadine Hamilton, one of 50 licensed scrap metal dealers, but perhaps the only one to specialise in demolition and packaging of industrial scrap, started in 2007 with an outlay of J$100 for calls to locate the required metals.

In five years, even as the industry's image disintegrated because of illicit practices, Hamilton's Demolition and Scrap Traders Limited (HDST) stayed afloat - sometimes employing as many as 50 workers during bumper seasons for scraps.

Before the last ministerial decree which closed down the industry, Hamilton's Demolition shipped three to four containers monthly. It takes 25-28 tonnes of packaged scrap to fill each container for buyers as far away as China.

Other dealers, she notes, were sending away as many as 15 containers monthly because they maintained scrapyards and bought by the pound from anyone who came to their doors.

Hamilton Demolition's business comes from companies in bauxite, the airports and other businesses which generated scrap, mostly through competitive bids, said its owner.

Employees clean and cut metal on site, with a customs official overseeing the process from start to finish.

The Government announced last month that it will soon lift the ban on scrap metal exports, but under conditions that may turn out to harm HDST's business. Companies can now export their own industrial scrap, a niche market that is Hamilton's bread and butter.

"I have my industrial licence; I have more than J$10 million tied up in deposits with companies to remove their scrap. I am out of business if only companies can export materials themselves," she told Sunday Business.

"I am asking the minister to look into my situation. I have written to him; now he has made an announcement that has cut me out totally. I don't do commercial scrap. I go around and clean up for companies, that's all I do. Now you are telling me I am out of business because of others who steal?"

The demand for scrap embraces materials with iron, steel, stainless steel, brass, copper, aluminium, zinc, nickel, and which are then sold once more to refineries or larger scrap brokers.

Steelmills, refineries and iron foundries in many industrialised nations are the buyers of the metals which is processed and prepared for new industrial use, such as cars and equipment manufacture.

Hamilton introduced the innovation of mobile homes for staff who would visit sites in remote locations where hotel rooms were unaffordable.

She is also the creator of what she markets as Jamaica's first RV, made from a converted container.

With metal prices fluctuating from week to week, she said, in some months HDST would earn J$3 million in profit on outlay of J$20 million, while in other periods, the metal was not worth packaging for export because prices had plummeted to the point of negative returns.

The volatility of the market, she said, is such that "only those who love it stay with it".

In many source nations around the world, the increase in legitimate dealers in response to rising world scrap metal prices has been accompanied by a surge in theft of valuable metals.

Think tank

According to the Caribbean Policy Research Policy Institute (CaPRI), a think tank which promotes evidence-based policy dialogue within Caribbean, a strong incentive for metal theft is expected to persist for some time as scrap metal prices in international markets remain above historical levels, buoyed by rapid industrialisation in Asia, especially China.

With tenders in progress on the ground, Hamilton was stunned when in July 2011 the Government imposed a permanent ban on the scrap metal trade in a bid to end the vandalism of millions of dollars' worth of metals from businesses and residences.

In Jamaica, it is estimated that 14,000 are employed directly to the scrap industry. However, Hamilton maintains that the Government has not examined the wider impact of the economic activity.

"The industry includes dealers, brokers, the port, trucking companies, equipment suppliers and the bank, which needs payments on its loans. The Government just saw the exporters," said the entrepreneur.

"There are families which cannot go to the hairdressers and buy other services anymore," she insists.

Now that only producers of scrap are permitted to export it, Hamilton is one of several dealers shedding tears on a daily basis as hundreds of thousands of dollars in unused equipment and bid deposits gather dust and provide no returns.

Bills go unpaid for months while she tries to earn income from other sources, such as selling homes and cars for a commission.

It was in 2006 that Hamilton first poured her energies into the search for scrap. Hamilton was previously the owner and manager of the Advance Medical Centre at Destiny Mall in Portmore, but that business was shuttered due to disagreements with partners.

After months of unemployment, the offer from a friend to pay a commission for any metal scrap she could deliver was eagerly embraced.

"I started with J$100, which was the price of a phonecard, and used it to call friends and associates to locate metal which might be available for sale. I was going through tough times and was locked up at home. I had a medical centre which went down. This man said any amount of metals I could get will pay me a commission," she recounted.

Hamilton made the first call to a friend with a solar company, who said he had a lot of copper material waste copper from installations. They were enough to fill a container.

"I received about US$1,600. I was shocked this was money for garbage?" Hamilton recalls.

She started calling households asking for old refrigerators, stoves, chairs and anything made of metal, from which she began earning money that covered her bills.

"I was earning US dollars. I took the bus to look at what people had and then I hired a vehicle to move them," Hamilton said.

Selling garbage

The scrap collector who paid Hamilton her first commissions helped with transport and encouraged her to stockpile.

She now reflects: "I used to have my own medical centre. If you told me that a few years down the road I would be selling garbage for living I would not believe. I was a doctor's wife with my education, but I was ready for anything."

In 2007, Hamilton registered the company, Hamilton's Demolition and Scrap Traders, launching out as a sole trader but continuing to sell container loads to the family of her mentor, who operated in the industry in the United States.

Business grew, she said, as each company for which she removed scrap would provide references to another.

"One company put you on to another bauxite, sugar factories, IGL, Highway 2000, the two airports, Falmouth Pier, and others. I don't buy from the general public. I sent in bids at each company's request."

Industrial scrap, she states, represents less than five per cent of the volume generated by the market for commercial scrap.

Her services gained traction because she was willing to obey industry specifications for safety, and would also find resources to pay the 50 per cent deposit on asking price, which is the standard.

Monthly overhead, she said, is J$4 million to J$5 million monthly.

"We used oxygen and gas to cut the material, which is very expensive. We also used torches, gloves and safety gear, including glasses, steel-toed boots and harnesses. Depending on the site, we might also need to rent a crane for demolition - demolition doubles expenses," says Hamilton.

"Industrial scrap also takes a longer time to demolish, prepare and package, and sent to wharf."

Expenses, she said, also include insurance for workers in case of accidents.

Scrap is prepared for export in the presence of company representatives and customs officers who inspect the packing process on site.

"They then seal, write off numbers and give a certificate to take to Trade Board or Jampro, which permits you to take the container on the port. This is different from the commercial scrap man who waits in the scrapyard for anyone to come."

Since the installation of the new administration, the entrepreneur has also tried to lobby even the prime minster to address her cause.

"I have wept for days. The bank has written to me countless times over my house, and I have also lost one of my eyes because I could not afford to pay for surgery at US$30,000. I have millions of dollars tied up on the ground. I don't want handouts. I have written letters even to Portia Simpson Miller, to everyone ... it's only the governor general who has not gotten a letter," Hamilton said.

She notes that operators in scrap cannot get loans, and that inputs are financed solely from cash flow.

"The bank gave me no money. It was scrap metal money which provided jobs for people," she said. Hamilton's Demolition hires between 15 and 50 workers, depending on the size of the jobs available.

At peak, however, the industry was a good source of cash. "If you don't have the cash, but when business was running you could leave the pot on the fire and come back with food. There are thieves in the business, but for others it was an honest source of food," she said.

Copper is the most expensive metal that can be source locally, she notes, and now retails for US$100 to US$150 per pound.

Since the start of the year, iron has seen a 60 per cent fall in price to less than US$200 per tonne. A tonne equals 2,200 pounds.

Aluminium is now selling for US$15 to US$25 per pound locally.

"Old zinc is no good unless you have a machine to compact it and arrive at a weight. Cars are also a poor source because they have lots of fibreglass and the metal is thin. Once the metal is thick it is grade one and commands a higher price. Grade one iron often comes from buildings and old equipment."

Processing centre

The entrepreneur states that the idea currently being put forward for a central processing centre for scrap might take a good year to implement, if not more.

The other proposal, she notes, that those who generate scrap should be the ones licensed to sell it, is not practical, as volumes generated may take over a year to fill one container and the process of licensing is also lengthy.

It is also fraught with risk.

"Sometimes, when the container reaches the buyer or mill, they find all kinds of ways to take back their money. If they find impurities such as dirt, oil spills, or the metal is cut too big, or underweight containers, these all attract charges. It is also rough work," said Hamilton.

"I take photographs to prove what was placed in there. They are always trying to claim back money from me. I have threatened to go to China and examine it myself. After you pay tax here, they send claims and you have to pay it back."

Hamilton, whose first career was in theatre arts, sometimes considers returning to acting, but such thoughts are short-lived - she loves being her own boss.

"Since the closure of the industry, I have been doing anything - selling properties, houses ... once it's work and I can get money, I am ready and willing," she said.

"I am excellent at sales, but I am really best at running my own business."

business@gleanerjm.com

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