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Starting from scrap
YOUNGSTOWN
At a house on Lockwood Boulevard, in a small garage just off the living room, motors are yanked from refrigerators and wires are stripped down to the precious light copper waiting underneath rubber and insulation.
A profit is turned with one small part or by one old rusting appliance at a time.
Dim lights flicker over Michael Kohuth, 20, and Michael Kosach, 19, as they work to build a business from the ground up with their truck, their hands and the word-of-mouth referrals that have thus far given them a running start.
Kohuth and Kosach, both graduates of Boardman High School, have jumped into the country’s $100 billion scrap-metal industry, one that employs 137,000 Americans and indirectly supports another 450,000 jobs across the country.
Metal recycling has been around for thousands of years, but with a boom in overseas construction and a dearth of raw materials, prices for scrap metal have surged in recent years, opening a window for guys such as Kohuth and Kosach to make either a simple living or a fortune, depending on how they approach their new profession.
The Boardman natives are known as “peddlers” to industry insiders. They have just one role in an industry with a long line of duties, from the traders on the London Metal Exchange or the New York Mercantile Exchange who set scrap prices by the minute, or the smelters who melt down the junk metal so that manufacturers can turn what were once useless heaps of metal into high-grade raw material with countless applications.
“These guys are part of the manufacturing process now, and they’re filling a really important niche by getting things back into the chain of commerce,” said William Johnson of the Institute of Scrap Recycling Industries. “They’re helping to protect the environment and every time they bring a load of scrap metal into the yard, they’re helping to create jobs.”
Back in June, Kohuth and Kosach, acting on years of recreational scrapping, decided to start Iron Man Recycling and extend their services, free of charge, to residents and businesses throughout Mahoning County.
The two will pick up almost anything, from an old dryer taking up space in the basement, to a car overrun by tall grass in the back yard. After loading it on their truck, the two will take it to one of several area metal recycling yards for a small or large profit, depending on whatever they haul in a given day.
“Our biggest advertisement is word of mouth. People are so happy when we come in and remove their products for free,” Kosach said. “They’ll tell everyone they know, and the calls just keep coming in.”
The industry that Kosach and Kohuth have entered is an extremely competitive one. Prices are set daily, in reaction to global indexes and market demands. Metal yards set new payout prices every day and try to beat the minute-by-minute spread that traders create. If they set prices too high, they lose money, if they’re too low, companies such as Iron Man won’t bring their scrap in.
They’re not alone, but Kosach and Kohuth saw an unchallenged opening in the local market, and with the metal they haul on a daily basis, it allows them to establish relationships with area recycling yards in order to secure better deals.
“There’s a little bit of timing on our end of it,” Kohuth said. “When prices go up, we’ll take in what we have; when prices go down, we’ll really cut back on what we bring in. It’s about getting the best deal.”
But the volatility hasn’t deterred them. The owners plan to expand as soon as they can. Both envision a company with a central office, a fleet of trucks, equipment such as an automated wire stripper that makes life easier and high volume pickups that find metal yards coming to them for product.
Iron Man specializes in ferrous metals, such as steel recovered from automobiles, appliances, railroad tracks and other structures. This fall, such steel has been fetching between $200 and $280 per ton. One refrigerator brings in between $15 and $25.
Nonferrous metals, such as copper, brass, nickel and others that don’t degrade or lose their chemical or physical properties in the recycling process are far more valuable. Clean copper is earning about $2.85 per pound and brass is priced at about $1.70 per pound. At those rates, a rare truckload of copper can easily bring more than $1,000 in one trip.
If Iron Man can grow to rid commercial offices of old steel desks and filing cabinets or even expand demolition at local job sites, profit margins could skyrocket for the Boardman natives, something they have their eyes on.
“On the other side, we’re able to take care of things that people don’t know how to,” Kosach added. “Refrigerators have Freon in them, batteries are hazardous to the environment, and we recycle those things in an environmentally friendly manner.”
The extent of Ohio’s manufacturing sector means Iron Man has a legitimate shot at growing the business. Last year alone, Ohio employed 7,560 in a scrap-metal industry that produced $1.6 billion in economic activity for the state, according to the Institute of Scrap Recycling Industries.
In fact, demand for scrap metal is at an all-time high. In 2010, steel produced by scrap-fed electric arc-furnaces accounted for nearly 60 percent of the total raw steel produced in the U.S., while scrap metal was a leading export for the country that same year.
When residential business slows down this winter, Iron Man plans to grow its relationships with area businesses, such as the body shops and garages that have an abundance of metal on hand.
They’ve been busy passing out business cards and establishing a Facebook page online, in addition to relying on customers to spread the word. Both Kohuth and Kosach agree their business is nearly a full-time affair and their schedules have filled with more calls and pickups since they started operations in June.
A recent decision by the Mahoning County Green Team, a division of the county’s waste management district, to include Iron Man Recycling and its services on the county website has helped attract more customers.
“It’s a tough business,” Johnson said. “But if they play by the rules, treat people fairly and market themselves right, they could become the millionaires next door.”