Metal Exchange: Ready to Make a Deal

If you have ingot to sell and need some aluminum scrap, or you have scrap that’s just been rejected by the mill and needs to be reworked, or you want to deal directly with a plant that consumes can scrap, Metal Exchange can make it happen.

Although Metal Exchange offers a number of other services, ranging from scrap processing to aluminum fabrication, the heart of the company is in trading all types of aluminum materials.

Trading at Metal Exchange doesn't mean simply buying and selling a load of scrap or doing the same with a primary aluminum product. Instead, as the company name implies, it also exchanges metal units--scrap for prime, prime for scrap--depending on its customers' needs. For example, Lefton explains, if a primary producer is overstocked with a certain type of scrap that it wants to sell but also needs some primary ingot, Metal Exchange can satisfy both requirements in one exchange transaction. The company can even make scrap disappear from a producer's West Coast facility and have those metal units reappear in the form of a finished product at the producer's East Coast plant. This, points out William J. Aronson, executive vice president, eliminates the customer's freight costs and the expense of processing and melting the material. Furthermore, through the expertise of Metal Exchange traders, a manufacturer's surplus inventory can be turned into needed coil sheet, billet, primary ingot, or scrap.

The key to making these transactions work, Lefton notes, is the ability of the company's traders to be "equally as conversant in prime as they are in scrap." It's a rare capability, Lefton believes, but one that he has required of his traders since the company's formation in 1974. "What we've found is that many of the trading companies are very efficient and very effective as prime traders, but not scrap," he says. "And there are scrap companies that are very knowledgeable about scrap, but not necessarily about prime." Therefore, he explains, "one of the niches we have developed is a group of people who are equally as comfortable with scrap as they are with prime."

Of course, few traders have that two-sided skill when they start their work with Metal Exchange. The company has "brought aboard traders who have expertise in scrap and people who have a similar background in prime," Lefton says, "and they have worked with each other, learned from one another, exchanged knowledge.”

"We have a very well-rounded group here," adds William L. Paradoski, a vice president. "There's not much about the aluminum industry that somebody here doesn't have a strong background in. So we all have to know a lot of things, but we also have to know the right person to go to in our organization, because the expertise is here.”

Moving Scrap

When it comes to scrap, Metal Exchange's expert is Frank C. Jurena, the company's vice president who coordinates scrap prices, inventory, transportation, and processing operations.

The majority of the scrap transactions handled by the firm move directly from scrap processors to scrap consumers, with the traders who are conducting the transactions looking to Jurena for guidance on what to buy and sell and what to offer or accept in exchange. However, Metal Exchange maintains two scrap storage/processing facilities, located in Moulton, Alabama, and Madisonville, Kentucky, through which some of the scrap purchased by the corporation passes before it's transferred to end users.

These warehouses, as they're known, come into play in a variety of instances. The company will buy and send to the warehouses, for example, mixed loads of scrap from dealers that either don't have the equipment Capability to sort and process the scrap or can't afford to wait as long as would be necessary to accumulate a full load of each of the scrap items.

The equipment list at these facilities is not unusual: Between the two warehouses, the company employs five shears, four balers, three briquetters, two spectrometers, two magnetic sorting belts, and a fines screening device. However, scrap processing is, most of all, a service Metal Exchange provides its scrap customers, not its primary function. Having processing and storage capacity, Jurena points out, "gives us the flexibility to keep the scrap dealers happy, which is our prime goal." The storage role, in particular, he notes, "puts us in a position to buy when others aren't buying because of market conditions." Adds Aronson, "when a scrap dealer is ready to sell, we want to be there to buy.”

Handling Rejection

Metal Exchange's warehouses also are important to the company's relationships with scrap processors whose loads have been rejected by a nearby scrap consumer. The Alabama warehouse operation, for instance--which is located 20 to 90 miles from such plants as Reynolds Metals, Fruehauf, Doehler Jarvis, and Norandal--will rework rejected loads destined for one of those facilities if at all possible.

The warehouse staff, after examining the rejected load, also might tell the scrap shipper that there's nothing that can be done to the load that will ever make it acceptable to that mill. However, says Lefton, in those cases, the company will service its customers by letting them know which mills will take the scrap and how it would have to be reworked for the mills to accept it. This ability, Aronson points out, offers scrap processors "a whole dimension of expertise above the average trader," since operating manufacturing plants gives the Metal Exchange employees "intense end-use knowledge."

Not only does this aid the scrap processing company by finding a home for its scrap, but, Lefton notes, it also saves that processor transportation dollars since the scrap isn't being shipped from mill to mill in search of a willing buyer.

Everything that's done at Metal Exchange, in fact, according to Lefton, revolves around satisfying "the lifeline of our business”--scrap processors. "The importance of the scrap dealer to our business is stronger today than it ever has been in the past," he says. "As the concept of recycling has spread, and aluminum producers have increased their use of scrap, there are many more scrap consumers dm there ever were. It has become relatively simple to sell our products because there are so many buyers." Therefore, he explains, Metal Exchange needs large quantities of scrap to satisfy those buyers, "and the ability to acquire scrap is dependent on our ability to provide scrap dealers with the best service and the best price."

In addition, Aronson says, the company wants it to be seen as part of its "culture" that it is a steady scrap buyer that pays promptly and evaluates loads with a high level of integrity.

Outlining Abilities

Describing Metal Exchange Corporation isn't easy, if for no other reason dm its size and diversity. When Lefton and his late partner Howard A. "Curly" Estabrook founded the company in November 1974, it was a single trading office located in St. Louis. Since then, the company has added five manufacturing operations, some through acquisition and some as startups:

Electro Cycle Inc., Madisonville, Kentucky, consumes light-gauge aluminum scrap, such as new production can scrap, in an electric induction melting system and produces sows used primarily in can stock applications.

Continental Aluminum Corporation, Detroit, supplies aluminum deoxidizers to the steel industry. The 100-percent scrap-based operation consumes old sheet, painted siding, and virtually any other kind of low-silicon, low-copper, low-zinc aluminum scrap.

Tower Extrusions Ltd., Olney, Texas, produces and extrudes billet made from scrap and prime aluminum, and also offers toll conversion of scrap generated by other extruders that lack remelt capabilities. The company's products are consumed by the electrical, truck trailer, and residential building industries.

Pennex Aluminum Company, Wellsville, Pennsylvania, like Tower, operates an extrusion and remelt plant with electrostatic paint-line capabilities, but also includes a fabrication plant that produces semifinished and finished products, ranging from specialized poster frames to elevator thresholds.

Atemco, a Bryan, Texas-based joint venture between Metal Exchange and Redmond Industries, produces a secondary billet that Redmond, its captive user, extrudes and fabricates into products, including modular homes.

Metal Exchange also owns a portion of Metal Commodities Inc., which trades in copper and other red metals out of offices in St. Louis and Omaha, Nebraska, and has just opened a copper granulating operation in St. Louis. This company is headed by Stan Shanker and Marvin Polikov.

Through the last 16 years, Metal Exchange also has added 10 trading offices across the country and in Europe and two scrap warehouses, because, Lefton says, “it’s impossible to cover a large area from one location. There's no substitute for the personal contact people in the field can offer.” Besides St. Louis, which also handles Japanese and South American transactions, these trading offices are located in Los Angeles; Las Vegas; Chicago; Louisville, Kentucky; New Orleans; Moulton, Alabama; Miami; Philadelphia; London; and Antwerp, Belgium.

Furthermore, the company has its own trucking division, which handles all types of transportation needs with 165 of its own trailers.

In all, the company employs 30 traders and 320 other employees.

Relying on Independence

It would be difficult--if not impossible--for one person, or even a few people, to manage a corporation of this size, geographic range, and product diversity. Morris Lefton knows this and therefore allows each trading specialty, each warehouse, each plant to operate autonomously. He describes them as "independent businesses, funded and supervised by Metal Exchange." The manufacturing plants, for instance, have total responsibility for their own sales and materials acquisition. Even though the company's traders could supply all the materials the plants need, Lefton explains, "they buy their metal where they can buy it best--that may mean us or that may mean our competitors." Since he requires each operation to look to its bottom line, Lefton continues, "it wouldn't be logical to give them that task and then say, 'but you must buy the raw material from the parent company.’”

Although the Metal Exchange sites are connected to each other and the St. Louis headquarters through a number of devices--such as a weekly teleconference call among all the traders, including those who work for the manufacturing operations, to bring everyone up to date on what's happening in and out of the company--Aronson believes that allowing the top person at each site to make his or her own daily decisions means those decisions will be carried out with complete enthusiasm. "We would rather support their decisions," he says, "than have them supporting ours."

One way of ensuring that those choices are the most appropriate ones falls back on the individuals making those decisions. Much of their compensation is tied to the profitability of the area they're responsible for, and each knows exactly how he or she will be rewarded, depending upon achievement. "I think it's important to spell out in the beginning what the incentives will be,” Lefton says. "When you tell key people they are going to have a percentage of the profits, unless you identify exactly what the percentage is and what the expected performance is, you're offering them the prize after they've run the race. If you want them to run with enthusiasm, they have to understand what the reward is before they start."

The other way the Metal Exchange headquarters ensures that the outside offices and plants make the best decisions is by hiring the best people it can find to run those sites "We spend a great deal of time selecting our people, and we use as many tools as we can to do that as efficiently as possible." For example, in addition to scrutinizing a candidate's experience, the corporation employs the services of Psychological Associates Inc., a St. Louis firm, to conduct an intense, two-day test to measure that person's math skills, people skills, and other aptitudes necessary to successfully manage the position for which he or she is being considered. "That way," Lefton explains, “we hope to avoid pushing a square peg in a round hole.”

Answering Opportunities

Ironically, it's been an inability to find enough good people, Lefton says, that has held the company back more than any other thing. When he and Estabrook started the firm, he recounts, they anticipated that they would not be offered opportunities because the company wasn't big enough. That lack of offers never happened, however. Instead, he notes, through the years, the corporation has been given "an enormous number of opportunities--more than we ever dreamed of." The problem has been finding "enough good people to take advantage of those opportunities," he says.

What kinds of opportunities would Metal Exchange like to pursue? Lefton says he'd like to open offices in other cities, and Aronson points out that the company would like to upgrade its expertise and presence on the international scene. Another potential area of growth is in more involvement in secondary grades of scrap and foundry ingot.

Most of all, the Metal Exchange executives note, they're looking for opportunities that Aronson describes as "fitting well within the company's expertise." Lefton explains that he "learned a lesson" from a widely diversified company he worked for prior to founding Metal Exchange. "When they stayed in the scrap business, or in closely related businesses, they always did fine. But they started having problems when they went into other fields."

If you have ingot to sell and need some aluminum scrap, or you have scrap that’s just been rejected by the mill and needs to be reworked, or you want to deal directly with a plant that consumes can scrap, Metal Exchange can make it happen.

Although Metal Exchange offers a number of other services, ranging from scrap processing to aluminum fabrication, the heart of the company is in trading all types of aluminum materials.

Trading at Metal Exchange doesn't mean simply buying and selling a load of scrap or doing the same with a primary aluminum product. Instead, as the company name implies, it also exchanges metal units--scrap for prime, prime for scrap--depending on its customers' needs. For example, Lefton explains, if a primary producer is overstocked with a certain type of scrap that it wants to sell but also needs some primary ingot, Metal Exchange can satisfy both requirements in one exchange transaction. The company can even make scrap disappear from a producer's West Coast facility and have those metal units reappear in the form of a finished product at the producer's East Coast plant. This, points out William J. Aronson, executive vice president, eliminates the customer's freight costs and the expense of processing and melting the material. Furthermore, through the expertise of Metal Exchange traders, a manufacturer's surplus inventory can be turned into needed coil sheet, billet, primary ingot, or scrap.

The key to making these transactions work, Lefton notes, is the ability of the company's traders to be "equally as conversant in prime as they are in scrap." It's a rare capability, Lefton believes, but one that he has required of his traders since the company's formation in 1974. "What we've found is that many of the trading companies are very efficient and very effective as prime traders, but not scrap," he says. "And there are scrap companies that are very knowledgeable about scrap, but not necessarily about prime." Therefore, he explains, "one of the niches we have developed is a group of people who are equally as comfortable with scrap as they are with prime."

Of course, few traders have that two-sided skill when they start their work with Metal Exchange. The company has "brought aboard traders who have expertise in scrap and people who have a similar background in prime," Lefton says, "and they have worked with each other, learned from one another, exchanged knowledge.”

"We have a very well-rounded group here," adds William L. Paradoski, a vice president. "There's not much about the aluminum industry that somebody here doesn't have a strong background in. So we all have to know a lot of things, but we also have to know the right person to go to in our organization, because the expertise is here.”

Moving Scrap

When it comes to scrap, Metal Exchange's expert is Frank C. Jurena, the company's vice president who coordinates scrap prices, inventory, transportation, and processing operations.

The majority of the scrap transactions handled by the firm move directly from scrap processors to scrap consumers, with the traders who are conducting the transactions looking to Jurena for guidance on what to buy and sell and what to offer or accept in exchange. However, Metal Exchange maintains two scrap storage/processing facilities, located in Moulton, Alabama, and Madisonville, Kentucky, through which some of the scrap purchased by the corporation passes before it's transferred to end users.

These warehouses, as they're known, come into play in a variety of instances. The company will buy and send to the warehouses, for example, mixed loads of scrap from dealers that either don't have the equipment Capability to sort and process the scrap or can't afford to wait as long as would be necessary to accumulate a full load of each of the scrap items.

The equipment list at these facilities is not unusual: Between the two warehouses, the company employs five shears, four balers, three briquetters, two spectrometers, two magnetic sorting belts, and a fines screening device. However, scrap processing is, most of all, a service Metal Exchange provides its scrap customers, not its primary function. Having processing and storage capacity, Jurena points out, "gives us the flexibility to keep the scrap dealers happy, which is our prime goal." The storage role, in particular, he notes, "puts us in a position to buy when others aren't buying because of market conditions." Adds Aronson, "when a scrap dealer is ready to sell, we want to be there to buy.”

Handling Rejection

Metal Exchange's warehouses also are important to the company's relationships with scrap processors whose loads have been rejected by a nearby scrap consumer. The Alabama warehouse operation, for instance--which is located 20 to 90 miles from such plants as Reynolds Metals, Fruehauf, Doehler Jarvis, and Norandal--will rework rejected loads destined for one of those facilities if at all possible.

The warehouse staff, after examining the rejected load, also might tell the scrap shipper that there's nothing that can be done to the load that will ever make it acceptable to that mill. However, says Lefton, in those cases, the company will service its customers by letting them know which mills will take the scrap and how it would have to be reworked for the mills to accept it. This ability, Aronson points out, offers scrap processors "a whole dimension of expertise above the average trader," since operating manufacturing plants gives the Metal Exchange employees "intense end-use knowledge."

Not only does this aid the scrap processing company by finding a home for its scrap, but, Lefton notes, it also saves that processor transportation dollars since the scrap isn't being shipped from mill to mill in search of a willing buyer.

Everything that's done at Metal Exchange, in fact, according to Lefton, revolves around satisfying "the lifeline of our business”--scrap processors. "The importance of the scrap dealer to our business is stronger today than it ever has been in the past," he says. "As the concept of recycling has spread, and aluminum producers have increased their use of scrap, there are many more scrap consumers dm there ever were. It has become relatively simple to sell our products because there are so many buyers." Therefore, he explains, Metal Exchange needs large quantities of scrap to satisfy those buyers, "and the ability to acquire scrap is dependent on our ability to provide scrap dealers with the best service and the best price."

In addition, Aronson says, the company wants it to be seen as part of its "culture" that it is a steady scrap buyer that pays promptly and evaluates loads with a high level of integrity.

Outlining Abilities

Describing Metal Exchange Corporation isn't easy, if for no other reason dm its size and diversity. When Lefton and his late partner Howard A. "Curly" Estabrook founded the company in November 1974, it was a single trading office located in St. Louis. Since then, the company has added five manufacturing operations, some through acquisition and some as startups:

Electro Cycle Inc., Madisonville, Kentucky, consumes light-gauge aluminum scrap, such as new production can scrap, in an electric induction melting system and produces sows used primarily in can stock applications.

Continental Aluminum Corporation, Detroit, supplies aluminum deoxidizers to the steel industry. The 100-percent scrap-based operation consumes old sheet, painted siding, and virtually any other kind of low-silicon, low-copper, low-zinc aluminum scrap.

Tower Extrusions Ltd., Olney, Texas, produces and extrudes billet made from scrap and prime aluminum, and also offers toll conversion of scrap generated by other extruders that lack remelt capabilities. The company's products are consumed by the electrical, truck trailer, and residential building industries.

Pennex Aluminum Company, Wellsville, Pennsylvania, like Tower, operates an extrusion and remelt plant with electrostatic paint-line capabilities, but also includes a fabrication plant that produces semifinished and finished products, ranging from specialized poster frames to elevator thresholds.

Atemco, a Bryan, Texas-based joint venture between Metal Exchange and Redmond Industries, produces a secondary billet that Redmond, its captive user, extrudes and fabricates into products, including modular homes.

Metal Exchange also owns a portion of Metal Commodities Inc., which trades in copper and other red metals out of offices in St. Louis and Omaha, Nebraska, and has just opened a copper granulating operation in St. Louis. This company is headed by Stan Shanker and Marvin Polikov.

Through the last 16 years, Metal Exchange also has added 10 trading offices across the country and in Europe and two scrap warehouses, because, Lefton says, “it’s impossible to cover a large area from one location. There's no substitute for the personal contact people in the field can offer.” Besides St. Louis, which also handles Japanese and South American transactions, these trading offices are located in Los Angeles; Las Vegas; Chicago; Louisville, Kentucky; New Orleans; Moulton, Alabama; Miami; Philadelphia; London; and Antwerp, Belgium.

Furthermore, the company has its own trucking division, which handles all types of transportation needs with 165 of its own trailers.

In all, the company employs 30 traders and 320 other employees.

Relying on Independence

It would be difficult--if not impossible--for one person, or even a few people, to manage a corporation of this size, geographic range, and product diversity. Morris Lefton knows this and therefore allows each trading specialty, each warehouse, each plant to operate autonomously. He describes them as "independent businesses, funded and supervised by Metal Exchange." The manufacturing plants, for instance, have total responsibility for their own sales and materials acquisition. Even though the company's traders could supply all the materials the plants need, Lefton explains, "they buy their metal where they can buy it best--that may mean us or that may mean our competitors." Since he requires each operation to look to its bottom line, Lefton continues, "it wouldn't be logical to give them that task and then say, 'but you must buy the raw material from the parent company.’”

Although the Metal Exchange sites are connected to each other and the St. Louis headquarters through a number of devices--such as a weekly teleconference call among all the traders, including those who work for the manufacturing operations, to bring everyone up to date on what's happening in and out of the company--Aronson believes that allowing the top person at each site to make his or her own daily decisions means those decisions will be carried out with complete enthusiasm. "We would rather support their decisions," he says, "than have them supporting ours."

One way of ensuring that those choices are the most appropriate ones falls back on the individuals making those decisions. Much of their compensation is tied to the profitability of the area they're responsible for, and each knows exactly how he or she will be rewarded, depending upon achievement. "I think it's important to spell out in the beginning what the incentives will be,” Lefton says. "When you tell key people they are going to have a percentage of the profits, unless you identify exactly what the percentage is and what the expected performance is, you're offering them the prize after they've run the race. If you want them to run with enthusiasm, they have to understand what the reward is before they start."

The other way the Metal Exchange headquarters ensures that the outside offices and plants make the best decisions is by hiring the best people it can find to run those sites "We spend a great deal of time selecting our people, and we use as many tools as we can to do that as efficiently as possible." For example, in addition to scrutinizing a candidate's experience, the corporation employs the services of Psychological Associates Inc., a St. Louis firm, to conduct an intense, two-day test to measure that person's math skills, people skills, and other aptitudes necessary to successfully manage the position for which he or she is being considered. "That way," Lefton explains, “we hope to avoid pushing a square peg in a round hole.”

Answering Opportunities

Ironically, it's been an inability to find enough good people, Lefton says, that has held the company back more than any other thing. When he and Estabrook started the firm, he recounts, they anticipated that they would not be offered opportunities because the company wasn't big enough. That lack of offers never happened, however. Instead, he notes, through the years, the corporation has been given "an enormous number of opportunities--more than we ever dreamed of." The problem has been finding "enough good people to take advantage of those opportunities," he says.

What kinds of opportunities would Metal Exchange like to pursue? Lefton says he'd like to open offices in other cities, and Aronson points out that the company would like to upgrade its expertise and presence on the international scene. Another potential area of growth is in more involvement in secondary grades of scrap and foundry ingot.

Most of all, the Metal Exchange executives note, they're looking for opportunities that Aronson describes as "fitting well within the company's expertise." Lefton explains that he "learned a lesson" from a widely diversified company he worked for prior to founding Metal Exchange. "When they stayed in the scrap business, or in closely related businesses, they always did fine. But they started having problems when they went into other fields."