July/August 2006
The success of Pacific Metals as a diversified recycling and trading company is due as much to the benefits and challenges of its Vancouver, British Columbia, locale as it is to three generations of family leadership.
By RACHEL H. POLLACK
Historians like to say that geography is destiny—that nations are shaped by their access to natural resources and the challenges of their environment. On a much smaller scale, the same is true of Pacific Metals Recycling International. The geography, economy, and culture of Vancouver, British Columbia—as well as the vision of three generations of Lotzkars—have shaped the company’s growth from a single scrap pushcart to the diversified recycling company it is today.
What’s so special about Vancouver? About 140 miles north of Seattle on Canada’s West Coast, it’s the North American city closest to the Pacific Rim, making it the gateway to Asian trade and a multicultural city with an Asian flair. Its mild climate and the natural beauty of its parks, harbor, and nearby mountains have led to the development of a strong environmental movement. With Vancouver consistently rated one of the world’s most beautiful and livable cities, it’s no surprise that the population—more than 545,000 in the city and 2 million in the greater metropolitan area—continues to grow. Hosting the 2010 Olympic Winter Games will likely bring the region even more attention. These characteristics have helped define Pacific Metals’ workforce, its business opportunities, and its future.
The Early Days
Pacific Metals is “the largest integrated scrapyard in the city of Vancouver, and I can say that because there are no other scrapyards in the city of Vancouver,” jokes Mark Lotzkar, the company’s president and general manager.
The company got its start soon after Leon Lotzkar, Mark’s grandfather, arrived in Vancouver from Bulgaria in
the early 1900s. After working in construction for a few years, Leon Lotzkar became a scrap peddler. In 1912 he founded Pacific Metals on a small piece of land near the Canadian National Railway yard. Even then, Vancouver had a well-established scrap industry related to its fishing, forestry, and shipbuilding industries, Lotzkar notes.
The high price of land was a factor from the beginning of the company. “Because we’re in the city of Vancouver, and with the confines of real estate, my grandfather decided early on that nonferrous was the [right] business,” Lotzkar says, though “it’s difficult to turn anybody away from your door, so he did everything—ferrous, nonferrous, he even did hides at a point.” In 1966 the company moved about 4 miles south of its original downtown location to the 2 1/2-acre site it occupies today.
With so little space, efficiency is essential. “It’s like Hong Kong here—everything’s vertical—because there isn’t any more room,” Lotzkar says. “In my grandfather’s day, we used to be able to drive a truck into this yard, turn around, and come out. Today everything backs in and drives out.” The company uses its rail spur as much as possible, especially for ferrous, to minimize truck traffic.
Quick turnaround also is important. “If we were to speculate and sit on everything, 2 1/2 acres would fill up pretty darn quick,” Lotzkar says. He estimates the entire yard turns over two and a half times a month. The company leases land from a sawmill a block away to store some of its 180 roll-off containers and 12 trailers.
Still, a lot of product makes it through the small yard that Lotzkar describes as “cutting-edge low-tech.” The company’s 1/3-acre steelyard processes about 1,600 tons a month, primarily foundry supply. At the back of the yard is a Northwest 80D cable crane, maneuvering finished scrap away from a 65-year-old Richards 300 Iron Shark shear that makes two cuts per stroke. A second, identical machine is being reconditioned for installation in August, when a new Sierra 500 T guillotine shear and a new material handler will join it.
Nonferrous metals, paper, and plastics run through a 24-year-old Harris HRB-NF baler—a piece of equipment that “revolutionized our yard back in the ’80s,” Lotzkar says, because of its ability to quickly process a variety of commodities without cross-contamination. These commodities comprise the bulk of the 10,600 tons of nonferrous and nonmetallic scrap the firm processes annually.
Banking on Trade
Vancouver’s high real estate and labor costs drove nearly all manufacturing out of the city by the middle of the 20th century. “To move a commodity, you have to have a destination,” Lotzkar says, but “Vancouver is not a market. It’s a beautiful place to live, to go to school, and to work, but very few things are made here. There are no [scrap]
consumers.”
Faced with that circumstance, Lotzkar says, “you go establish relationships with people around the world. For my entire life, and my dad’s entire life, and the latter part of my grandfather’s life, [our goal] was getting out, meeting people, and finding markets.”
Because of the natural barrier of the Canadian Rockies, only about 5 percent of Pacific Metals’ scrap goes east into the rest of Canada. The easier rail route is south or southeast, into the United States. In North America the company ships ferrous, aluminum, copper, and nickel products as far south as Los Angeles and as far east as New York state. The bulk of its exports move by sea out of every major North American port. About 30 percent of its exports stay in the Americas, but the majority heads across the Pacific Ocean.
With Vancouver as the North American gateway to Asia, Pacific Metals’ trade with that region goes back more than 50 years. “We’ve been doing business in Taiwan for three generations,” Lotzkar says. “We have customers in Japan to this day that we’ve been doing business with since before [World War II].” The company has also traded with China for about 16 years—it says it was one of the first North American companies to receive AQSIQ certification—and it has established trade relationships with firms in Indonesia, Japan, Malaysia, South Korea, and India, among other places.
Under the 17-year leadership of international trade manager Antonio Chow, Pacific Metals has parlayed its knowledge of Asian and other international markets into an extensive trade brokerage business that moves about 32,000 tons of scrap a year and now accounts for more than half of the company’s revenue. The company moves more than 250 containers of scrap a month “anywhere on the face of the earth,” Lotzkar says. “We’ll do business with the smallest of companies and the biggest.”
The keys to the company’s trade success, he notes, are “genuinely really good” relationships with buyers and sellers, a willingness “to work for a little bit less” to consistently get the materials it needs, and the fact that “we pay our bills.” Overall, he says, “we only do business with people we feel are reputable, that will [provide] good-quality scrap products, and—should there be any kind of an issue—that are willing to resolve it to the benefit of all the parties.”
Expanding Through Retail
Though trade has given Pacific Metals new consumers of its scrap, local suppliers are still few and far between. Over its 94-year existence, the company has moved in and out of processing various nonmetallic commodities to supplement its ferrous and nonferrous business. A generation ago, under the leadership of Joe Lotzkar, the company began building its paper and plastic recycling operations. In 1983, Mark’s brother Rod, a former restaurateur, took on the management of two Pacific subsidiaries, Canadian Fibres and New West Glass. In 1992 the two brothers
decided to sell the subsidiaries and take the company in a new direction. “We wanted to reverse-integrate into the supply stream,” Lotzkar explains. “Instead of worrying about more real estate and a bigger facility for Pacific, we wanted to build something called Regional Recycling, which is basically a one-stop-shopping recycling facility.”
The concept hinges on one outgrowth of British Columbia’s environmental heritage: The province has deposit laws for nearly every type of beverage container. Deposits range from 5 to 20 cents, plus recycling fees of up to 5 cents, per container. Consumers who want to recoup their full deposit have to return their containers to an authorized bottle depot.
The Regional Recycling approach is to make those bottle depots as clean, uniform, and family-friendly as possible; build them in convenient locations in regions with dense or growing populations; and have them share space with small-scale commercial scrap operations. From its first location in the suburb of Richmond, less than three miles from Pacific Metals, Regional Recycling has since expanded into downtown Vancouver, to the adjacent suburb of Burnaby, and to Abbotsford, a town 60 miles east. Each location is near a major intersection and near home-improvement or other big-box stores. Each has a slightly different set of commercial customers, but the retail sides are nearly identical. “Every brochure is the same, everybody’s uniforms are the same, all the dollies are the same, and everybody gets treated the same way,” Lotzkar says. Rod Lotzkar oversees the Regional Recycling operation primarily from his “mobile office”—a Ford F-150 pickup truck.
Behind the scenes, Regional Recycling is a labor-intensive operation. Each day hundreds of retail customers arrive, sort and tally their own containers, and receive the deposit refund from the cashier. Workers in each warehouse sort containers coming from commercial or municipal customers. Sorted nonalcoholic containers are counted and bagged in clear plastic sacks for return to the stewardship program that pays the deposit and handling fee. Domestic single-serving alcohol bottles, if undamaged, are sorted and returned to their respective breweries through a separate stewardship program. Wine and imported alcohol bottles are sorted by color, crushed, and sent for recycling. Aluminum beer cans and food containers are briquetted, bundled, and sold to aluminum processors.
Lotzkar admits that all the counting and sorting—as well as the transportation of whole, unpackaged beverage containers—does seem a little strange, but the deposit laws and the handling fees make it work. At the Abbotsford
location, the largest Regional Recycling facility, the volume of bottle-depot traffic generates CN$25,000 to CN$30,000 in handling fees each month—more than enough to pay the rent, says Paul Shorting, the site’s manager.
Beyond beverage containers, the Regional Recycling operations purchase nonferrous metals and sorted paper and accept ferrous metal, appliances, electronics, and mixed paper. The metals and paper are sorted, baled, and sold to Pacific Metals. This backward integration has given Pacific consistent supplies of various commodities, and it has allowed the company to expand its commercial operation without expanding its facilities. “Instead of putting more infrastructure into Vancouver, we moved the infrastructure to different areas where the development growth is,” Lotzkar says. “We made a concerted decision to spread ourselves out.”
For commercial customers in the greater Vancouver area, the convenience of taking their scrap to a suburban Regional Recycling location outweighs the lower price they might get, Shorting says. “You can go another 50 miles into Vancouver and get 15, 20, 30 cents more a pound, but your fuel [cost] is going to outweigh what your net gain is on your metals,” he explains. Thus in mid-May, when copper was hitting north of $3.50 a pound, his profit margin was a dollar or more.
The Regional Recycling facilities are a service to the community, Lotzkar points out. They make it convenient for residents to redeem their bottle deposits and, at the same time, recycle other items they’d rather not throw away. “The province of British Columbia’s recycling program is all about convenience,” he says, “so it’s up to people like us to provide facilities that are extremely convenient [that people] can get in and out of quickly. That’s our motivation. One, we want to provide a service, and two, we want the handling fees.”
Genuinely Green
Pacific Metals’ environmental commitment extends well beyond its involvement in the bottle depot program. Mark’s father Joe was an avid environmentalist. During his 20 years as a director of the Federation of British Columbia Naturalists—including one term as president—Joe Lotzkar established the FBCN Foundation and advocated greater protection for the province’s wildlife and other natural resources. Rod Lotzkar posts his nature photography on the Regional Recycling Web site, and Mark Lotzkar speaks with pride about the mating pair of bald eagles that has taken up residence in his backyard.
In the scrapyard, that commitment means scrupulously following storm-water protection measures. Pacific Metals also has two special environment-related business licenses: one for the storage and handling of lead-acid batteries, the other for the treatment of wastewater. The automated wastewater treatment plant—“a centerpiece of our recycling facility,” Lotzkar says—allows the company to do specialized container recycling: Pacific disposes of full beverage containers that distributors have removed from store shelves. The water, soda, liquor, wine, and beer go into a holding tank and get treated with caustic soda to reduce their acidity, protecting the city’s sewage system. The treatment system also regulates the quantity of wastewater that enters the sewer to maintain an even flow.
“It’s an understatement to say that we’re an environmentally aware company,” Lotzkar says. Because of Vancouver’s climate and the wide array of outdoor activities, “the environment plays a major part in our everyday lives,” he says. “When I walk through the operation and see something I don’t like, if I’m doing something that’s wrong for the environment, then I’m motivated by that.”
Employee Empowerment
Lotzkar says the secret to Pacific Metals’ success is its staff. “The people here make this company,” he says. “I’m certainly the leader, but these guys actually propel it, and that’s crucial.”
Though few in number, the company’s staff is amazingly diverse. The 12 people in the office and 21 in the yard originate from North America, Central America, Asia, and Eastern Europe, and they speak several Chinese dialects, Vietnamese, Japanese, Spanish, French, Russian, and English. “It’s just very interesting, the cultural diversity of this company, the languages we can do business in, and the number of regions of the world that we can buy and sell scrap in,” Lotzkar says.
What Pacific Metals offers its staff, first of all, is challenging, creative work, Lotzkar says. Also, employees “like the team, they like the environment, and they like the customers,” he says. “They know that if they have a question, [they can ask] their fellow teammates because there’s a wealth of experience here, and no [one person] has all the knowledge.” He fosters this teamwork through activities such as a half-dozen “staff and customer appreciation” cookouts in the yard each summer.
Other benefits include competitive salaries, full medical and dental care, vacation time, dollar-for-dollar pension matching contributions, and somewhat flexible scheduling: The trading department operates from 7:30 a.m. to 6:30 p.m. Pacific time, and the yard is open on Saturday for special customers. The yard crew can qualify for productivity and attendance rewards, and each manager gets money for annual bonuses to distribute among his or her staff. Staffers can travel to attend ReMA conferences or other training, or they can visit suppliers and consumers around the world to understand their needs and provide assistance when possible.
What really sets the company apart, Lotzkar says, is its openness to innovation. “If somebody wanted to try something different,” he says—be it opening a new Regional Recycling facility or working remotely from another country—“my first response wouldn’t be ‘No.’ My response would be, ‘Are you sure?’ and ‘How could we do it?’” That philosophy stretches back to the beginning of the company, he says. “For three generations this has been a family-run business,” he explains, “but in every generation, people were allowed to stretch out and do things, be creative and entrepreneurial, and that’s allowed the company to grow. It’s given us a good foundation.”
Both he and Rod “like to empower people to do a good job,” he says. “We want them to strive to do good things and great things and move forward.” The result is managers and staff who do “amazing work” and enjoy the freedom, the flexibility, and the opportunity—and who share in the profits.
Looking Back and Ahead
Pacific Metals’ creed, on the back of every business card, reads, in part, “…be honest, be fair, work hard, and treat your customers well. Stick to that belief, and business will look after itself.”
Though Mark and his father wrote the creed about 18 years ago, it codifies the philosophy Leon Lotzkar followed from the beginning. “It’s easy to get into this business, but to really do it well and stay in it for decades, I think you have to have something bigger to fall back on,” Lotzkar says. “My grandfather passed away when I was 16, but the memories I do have of him are that he was a very outgoing, gregarious type of person and very honorable. I think in our industry, being honorable and doing what you say you’re going to do, those are crucial things.”
Lotzkar learned the scrap business as a teenager from its second generation of leadership. Joe Kettleman, his uncle, “taught me all about operations; my dad taught me about the finance and trading sides; and both of them, the leadership side.” After college and an internship under Harry Brown at Intermetco (Hamilton, Ontario), Lotzkar returned to Pacific as a full-time employee, moving up over 28 years to become president of the company. Joe Lotzkar, who gradually retired from the company over a 14-year period, died earlier this year.
Joe Lotzkar’s death raises questions about the next generation. Together, Mark and Rod and their wives Brenda and Renie have a total of five teenage children, all of whom work for the company on occasion. They will be free to choose any career, just as he and his four siblings were, Lotzkar says. “Should any of them want to come back at the appropriate time, as we’re all getting older and retiring, if there is somebody who is passionate about it, we’d be open to some transition of power and ownership.”
Whether Pacific Metals continues within the family or not, he says, “this company is full of opportunity, so we’re always looking for young people who want to come in and create a place for themselves—people we can bring in and train, and create opportunity for not just a job, but a career.”
With Pacific Metals now 94 years old, “within our grasp is a century,” Lotzkar says. “To be part of that is humbling. I hope I can leave something behind that was significant and that was beneficial to everybody we came in contact with.”
Rachel H. Pollack is editor of Scrap.
The success of Pacific Metals as a diversified recycling and trading company is due as much to the benefits and challenges of its Vancouver, British Columbia, locale as it is to three generations of family leadership.