A Trader's Tale

In more than four decades in the metal trading business, Sheldon Tauben has worked for some big names and has become quite a big name himself along the way.

By Si Wakesberg

Si Wakesberg is New York bureau chief for Scrap.

When Sheldon Tauben decided to switch jobs in 1951, the teaching profession lost an able and promising history teacher, but the metal industry gained one of its most insightful and sophisticated traders.

Sheldon, founder and president of Metalsco Inc. (St. Louis), is today an internationally known copper trader. At one time, though, he planned to teach youngsters American history. To this day he remains a history buff and at the time of this interview was reading Shelby Foote’s massive history of the Civil War. “If I hadn’t gone into the scrap business,” he reflects, “I definitely would have chosen to teach.”

In a way, Sheldon does teach—only instead of retelling the stories of Valley Forge and Gettysburg, he dispenses knowledge about trading scrap, especially copper. His “students” include his own employees as well as attendees at professional seminars.

This love of both teaching and learning has defined Sheldon’s career and helps explain how he managed to establish himself as a well-known figure in the scrap recycling and metal brokerage businesses for the past four decades.

The Mettle of a Metal Man

Born in New York City, Sheldon’s life and career opportunities have transported him to Boston, Chicago, and finally St. Louis.

Before pursuing his love of teaching and, later, metals, however, Sheldon was a decorated World War II veteran. As a soldier in the 75th Infantry Division, he earned three Combat Stars and a Combat Infantry Badge, while surviving the Battle of the Bulge, as well as a hospital bout with trench foot and pneumonia.

Leaving the Army in 1946, he earned a degree at Adelphi University on the GI Bill. Three years later, he entered Cornell University for a master’s program in modern European history and, in 1950, began to study for his Ph.D. at New York University.

Sheldon took up teaching while attending the university at night, but soon realized that he had “accumulated too much schooling” and wanted to step from academia into the business world. His first foray led him to work for about three years in a small import-export house that dealt in metals and ores. “I think I was paid $63 a week,” he recalls.

His real break came in 1954 when he was hired as a trainee by the American Metal Co. (which later became American Metal Climax Inc., or Amax). “In those days, the copper producers ruled the roost,” Sheldon recalls. “There were just a handful of metal brokers, large merchant houses held a dominant position in the metal industry, and stainless was still in its infancy.”

Sheldon’s boss was Mel Kriegel, then known in the industry as an empowered scrap manager. “I’d say that I learned the scrap business from Mel Kriegel,” he admits. “He was an excellent teacher.”

Sheldon spent three months working at American Metal’s huge copper refinery in Carteret, N.J., where he became familiar with the physical properties of copper scrap. “When I completed my three months’ training at Carteret,” he recalls, “I had to write an essay describing what I had learned. It turned out to be 40 pages!”

Initially assigned to purchase scrap in a southern territory, Sheldon was transferred in 1956 to serve as office manager of the firm’s Boston operation. That relocation established a personal presence in New England that continues today. “My sons are buying scrap from grandchildren of people I did business with in Boston,” he notes.

Taken With Trading

In 1960, Sheldon moved again—this time to manage American Metal’s Chicago office. But the times they were a-changin’. Due to recession and retrenchment, the company began to close some of its offices, first in Detroit in 1962, then in Chicago in 1964.

At that point, Sheldon moved to New York City to work in Amax’s headquarters office, a challenging task after serving 10 years in its branch offices.

The following year, however, he was offered a job by Ben Fixman, who had established a powerful company called Diversified Metals Corp. “It was a great opportunity for me,” Sheldon says. “Diversified was one of the first major wire choppers in the country. It was a company that introduced me to domestic brokerage, futures contracts, and conversion deals. It broadened my horizons.”

He took to trading with an enthusiasm that sometimes misled him. For example, he recalls how a telex machine stood outside his office at Diversified. When important news came over the machine, three bells rang. For exceptional news, five bells would sound. One day, those five bells did ring. Sheldon glanced at the news, ripped the paper from the machine, and ran into Fixman’s office, all excited.

“Ben,” he cried, “copper’s up half a cent a pound” (a big jump in those days).

Fixman took the paper out of his hands and examined it. “Idiot!” he bellowed. “That’s coffee, not copper.”

In his enthusiasm, Sheldon had misread the alphabetical listings of the two commodities, both of which were about 45 cents a pound that day. Although Sheldon counts Fixman, like Kriegel, as a mentor in his long and varied career, he concedes that “you had to have a thick skin to work with Ben Fixman. He was tough, but he was fair-minded and generous.”

Hired as a scrap buyer, Sheldon rose to purchasing vice president and eventually executive vice president and head of Diversified’s trading department. He left the company in 1976, before its demise from proxy fights and internal dissension, and established his own company, Metalsco Inc., in St. Louis. Initially, Sheldon launched the firm with a 50-percent partner—Chicago Extruded Metals—but Jim Anderson, CXM’s CEO, sold the company’s half to Sheldon in 1987.

Why did Sheldon go into the merchant business? “I wanted to avoid the problems of scrap metal processing,” he admits. Plus, he loved the complexities and subtle- ties of merchant trading.

When he began managing his own company, Sheldon was guided by several key principles: Buyers and sellers must honor their obligations. Everyone must be paid when due. Don’t tout the market. And treat both suppliers and consumers with respect. The formula obviously worked, as evidenced by Metalsco’s track record for performance. “Metalsco is successful because we really do what we say we’ll do,” he explains.

Along the way, Sheldon has had both high points and low moments at the helm of Metalsco. One of the higher ones came in 1993 when the firm received one of the largest bid awards of brass scrap shell cases ever given by the U.S. government—1,270,000 pounds. Incidentally, the company bid 61 cents a pound, which meant it had to lay out more than $777,000 before picking up a single pound of brass.

But business hasn’t always been that rewarding, especially on the export side, Sheldon concedes with a grimace, telling of customers who reneged on contracts as well as a shipment of scrap sent overseas but never paid for—“the material just disappeared,” he says.

A History of Participation

While Sheldon has certainly had his hands full over the years running his own brokerage and trading company, he has always found time to actively participate in industry trade associations. For instance, he served on the merchant-broker committee and foreign trade division of the National Association of Recycling Industries (NARI), an ReMA predecessor. In 1987, he was elected a NARI national vice president. Later, he also represented the association during its merger with the Institute of Scrap Iron and Steel, another ReMA predecessor.

Among his other contributions, Sheldon was actively involved in the association’s educational seminars in the 1970s at the University of Wisconsin and helped produce two volumes describing the scrap metal business. These books, published by the National Association of Secondary Material Industries—as NARI was previously called—in 1973 and again by NARI in 1982, are still considered valuable sourcebooks in the trade.

Thanks to his extensive experience in wire chopping through his days at Diversified Metals, Sheldon also had an active role in developing some of NARI’s and, subsequently, ISRI’s specifications that are still widely used in the international trade of copper scrap. For instance, he wrote the spec Cocoa for copper wire choppings and was instrumental in establishing several other new copper scrap specifications, such as Clove and Cobra.

Today, Sheldon still enjoys discussing these specifications. For instance, he asks, “Why do ReMA specifications—like Birch, Cliff, Berry, and Honey—all have five-letter words?”

His explanation: Years ago, the only way to communicate quickly with overseas customers was by cablegram, an expensive method that charged the sender in five-letter increments. So someone invented a code and published a code book in which five letters, such as AAAAA, might mean “I am offering material for your reply tomorrow.” Merchants all used these code books when they wanted to send a cable. As scrap specifications were developed, the code words representing different grades were also assigned five letters.

In addition to his work for ISRI’s predecessors, Sheldon has been—and continues to be—equally involved in other industry groups, such as serving as a charter member of the American Copper Council (he also was a guest lecturer at the council’s first Copper College in 1976 and again in 1982.), as well as being a member of the Copper Club and the Canadian Association of Recycling Industries.

Trends and Prognostications

Asked what changes he has seen in his 43 years in the scrap industry, Sheldon replies, “When I first entered the business, the merchant sector was dominated by large companies such as Philipp Brothers, Associated Metals & Minerals, Brandeis Goldschmidt, C. Tennant & Sons, Amalgamated Metals, Commercial Metals, and a few others.

“Most of these companies are gone or have altered their business,” he says. “In the late 1960s, Comex began to supplant the producer price of copper and the LME became more influential. But to my mind, the major change occurred when scrap processors first began to want to sell their scrap on futures price contracts and needed merchants to handle their transactions.”

Looking at the nonferrous scrap industry, Sheldon notes the change in insulated copper wire processing from the old burning method to the more environmentally sound high-speed chopping process. Companies are also upgrading their equipment for competitive and productivity reasons, he observes, and more and more scrap processors are using futures contracts to manage risk in their day-to-day business.

In the ferrous scrap industry, the recent rash of mergers and acquisitions concerns Sheldon, who feels that some of these consolidations contain inherent serious problems because they depend on stock deals, which he calls “often a weak reed to lean on.”
   Turning to the bigger scrap recycling picture, he predicts continued strong demand for scrap, though he sees a diminishing number of merchants and brokers in the market.

As for his own firm, he sees Metalsco expanding, with an increase in overseas business in the near future. Perhaps that helps explain why, despite all his reminiscing, Sheldon insists that he doesn’t miss “the good old days. I’m enjoying the good old days right now,” he says. And at 72, he has no plans to retire.

And some final words of wisdom from this veteran to those just entering the scrap business: “Go to work for a scrap processor and learn the integral elements of the business,” he says. “But also become acquainted with the practices of trading.” 

Then, with more than a hint of pride in his voice, Sheldon states, “Remember, you’re in an important and vital industry that has contributed much to the economy of this country.” •