MAY/JUNE 2007
In the Middle East and Northern Africa, Sharif Metals has virtually cornered the scrap recycling market with an unflagging devotion to quality and solid supplier relationships in even the most conflict-ridden countries.
BY ADAM MINTER
Wearing a finely cut off-white suit and cowboy boots, Salam Sharif steps out of his late-model Mercedes onto al-Jubail Street in the middle of Industrial Area No. 2. We’re just a few miles from Dubai, the gleaming financial powerhouse that has transformed the United Arab Emirates into one of the world’s most dynamic economies. For the moment, though, the only thing gleaming is the sunlight reflecting off of Sharif’s suit. Otherwise, the scene before us—municipal workers tearing up the main entryway to his scrapyard—is all grit. We’re in Sharjah Emirate, Sharif tells me. “It’s kind of like Irving to Dubai’s Dallas.”
The Texas analogy comes easily to Sharif, 43, who earned his civil engineering degree—and his love of country music—at Texas A&M University. As his boots scuff the dusty, torn-up road outside his offices, Texas comes across in his manner—confident, proud, and large—and frequently in his conversation, including the state’s unofficial motto: “Everything’s bigger in Texas.” Whatever the truth of that adage, Sharif Metals is a notable exception. This family-owned scrap business might very well operate in more countries that any other scrap company. With yards and subsidiaries across the Arabian Peninsula, down to Sudan, and north to Jordan and the Iraqi border, it is by far the biggest scrap recycler in the Middle East and Northern Africa. To be sure, the lessons the company has learned during its relatively brief history (such as how to operate in war-torn Sudan) might not apply to most European and North American recyclers, but its globalized operations—still run by the tight-knit Sharif family—have redefined markets in a place that many international traders are only beginning to appreciate as a source of scrap.
Western Technology, Eastern Labor
Sharif pauses to watch a truck full of aluminum extrusions stop on a truck scale that abuts the headquarters, then he leads me onto a street where additional trucks are lined up awaiting unloading, some by hand and some by mechanized loader. We head through one of the yard gates, stopping briefly to see peddlers unload bags of UBCs onto retail scales and laborers crack and drain batteries (the company stores and recycles the fluids). We take in the neatly partitioned, 18,000-square-meter yard. At first glance, it looks much like the machinery-driven yards in North America and Europe. Two mounted hydraulic cranes outfitted with grapples swing back and forth, feeding piles of aluminum window frames into European-manufactured briquetters.
But as we approach the machines, we see workers run a hand-held magnet over each briquette—an unlikely practice in the West. “We are the perfect balance between East and West,” Sharif explains. “We have Western mechanization but Eastern labor rates that allow us to do things that just aren’t possible in the U.S. and Europe.” Average pay for the 180 employees in the Sharjah yard is US$500 a month, and such rates allow Sharif to mandate such labor-intensive quality-control measures before certifying the aluminum ready for shipment. “A Western yard can’t do that,” Sharif says, “and that’s why our quality is often better.” Despite operating in countries with wildly different economic and political circumstances, the company’s operating principle is the same: Use relatively low-cost labor to enhance the quality and value of machine-processed scrap, then sell it for a premium on the international markets.
Due to the UAE’s booming construction, demolition, and automobile sectors, aluminum scrap constitutes more than half of the volume of the Sharjah yard—and of the company’s total nonferrous output, Sharif says. It arrives via peddlers and the company’s own trucks and drivers. We watch workers unloading aluminum pots and pans from a small truck. They pile the scrap in front of a partly enclosed aluminum furnace that produces 1,100 mt of high-quality ingot a month for export to quality-sensitive markets like Japan. Salam picks up a teapot that tumbled to the ground next to a stack of ingots bearing the Sharif stamp. “In the UAE and other Arabian Gulf countries, a teapot might end up being scrapped after a year or two,” he says. “But in Yemen, the life cycle is longer, maybe 10 years or even more. Each of our markets is a little different.”
The company’s sizable quality control staff is charged with accounting for those differences to ensure that each Sharif yard produces similar products. ISO 9001 certified, and proud of it, Sharif believes that careful management of his company’s product has helped change the negative (or even nonexistent) perception of Middle Eastern scrap metal. Standing beside a neat stack of UBC bales, he points out the consistency and notes that the company will ship the entire stack to a consumer in the United States. “And I know if I don’t have enough here, I’ve got the same product in another yard that I can ship out,” he says. “That’s the advantage to being so international.”
We return to the three-story headquarters building, entering a small lobby where a receptionist sits flanked by photos of Mecca and Jerusalem. In an adjoining room, seven men sit patiently, drinking tea while they wait to be paid for their scale tickets. Sharif leads me up a flight of stairs, past a room packed with logistics, accounting, and sales staff. Before we enter his office, he stops at a small photo of a younger version of himself and a man that he identifies as his brother. Behind them is a rusted, burnt-out ship carcass. The ship once housed the Marriott Salam Kuwait, he says. After Marriott moved out of the vessel, during the first Persian Gulf War, “someone hit it with a shell,” he says. The year was 1991, and the Sharifs had just returned to Kuwait after the successful American military eviction of the Iraqi occupying force. “We bought the ship for scrap,” Sharif says. The six-month salvage job was the first—and only—shipbreaking operation the company ever attempted. Sharif laughs wearily at the memory of gutting the hotel bedrooms.
Today Sharif Metals runs three yards in Kuwait, including a ferrous operation. “You need to be adaptable in this part of the world,” Sharif explains, as he takes a seat behind his large desk. “After the Iraqis invaded Kuwait, everybody expected us to declare force majeure. But because we had yards in other countries, we were able to fulfill 2,000-ton orders with almost no delay.”
Dominating Sharif’s office are large windows that overlook most of the yard; a large, flat-screen TV tuned to MSNBC; several stuffed falcons; family photos; and a massive dome partly filled by two large blue crescents that replicate the logo of the Bureau of International Recycling, where Sharif is well-known as an ambassador for the Middle East. After a brief phone conversation with a city building inspector about an ongoing expansion, Sharif leads me into a smaller, more spartan office. Seated at a desk with a hands-free cell phone earpiece on one ear and a regular phone cradled against the other is Monir Sharif, 37, one of Salam’s three younger brothers and the one charged with running the day-to-day operations of the Sharjah yard. Salam takes a seat at the desk that he maintains next to Monir’s and takes another phone call, this time to discuss expansion plans for the company’s 100,000-square-meter yard in Jeddah, Saudi Arabia. The yard is getting a new shredder to supplement the company’s already significant business shredding the Saudi kingdom’s end-of-life vehicles.
While Salam talks on the phone, Monir finishes his call and explains that—even though the Saudi government recently lifted its export ban on ferrous scrap—the company primarily ships its ferrous from that yard to Saudi Arabia’s two domestic mills. This is a rare exception to the international focus of the Sharif yards and subsidiaries; typically only a small percentage of their scrap remains in their home markets. In part this is a result of necessity: Many of the countries in which Sharif operates simply do not have large-scale consumers who need or can handle the volumes and quality the company produces. In the Middle East, if you stay local, you’ll stay small.
Following Opportunity
Just after 1 p.m., Salam excuses himself to go to lunch with the manager of Sharif’s subsidiary operation in Aden, Yemen. It’s an important, regular visit, he explains, and he needs time to review drawings and specs for the grapples he’s sending to the 10,000-square-meter, 70-employee yard. Monir and I sit down for a lunch of hummus, flatbread, and rice with chicken and beef. To understand the business, Monir tells me, I must understand the history of the Sharif family.
“We are Palestinians, originally from Nablus,” a city in the now-Israeli-occupied West Bank, Monir recounts. “That’s where my grandfather made brass handicrafts in the blacksmith market, the Souk al-Haddada.” In 1956, at the height of the Suez Canal crisis and the Israeli conflict with Egypt, the blacksmith’s only son, Mahmoud al-Sharif, fled to Kuwait. He founded a scrapyard in 1963, led the foundry alloys division of the country’s Ministry of Public Works for seven years, and later headed the ministry.
Much of the Sharif family remained in Nablus until the Israeli occupation began in 1967. After that, the Sharifs relocated to Amman, Jordan, and Kuwait. Mahmoud expanded scrapyards in both countries and brought his growing family—four sons and four daughters—into the business. Now 72, he serves as the company’s chairman from Amman, and he still spends a few hours in the office every day.
The company established the Sharjah yard, then under Salam’s direction, in 1987, three years after the family relocated to the UAE and just as the country was beginning its transformation into one of the world’s most dynamic financial centers. International trade was nothing new to Sharif Metals—it has shipped to Europe and Asia since the 1970s—but the UAE’s new low-duty, tax-free environment created opportunities to source and import material from places, such as Sudan, largely unknown in the international scrap trade.
“The Sudanese guys were bringing scrap into Dubai in ’86 and ’87, looking for buyers,” Salam recalls after he returns from lunch. He personally taught the Sudanese suppliers how to handle and price their material, he says. Eventually they formed a partnership, and “we taught them that it was easier to process their material in Sudan.”
Sharif Metals lent the Sudanese yard a few quality-control employees for six months to teach the partners how to handle material to Sharif’s—that is, ISO 9001—standards. Like all of the company’s subsidiary yards, the Sudanese yard then had to ship without claims for six months before Sharif allowed it to ship direct to customers. “It used to be that all of [Sudan’s material] came here,” Salam says. “Now quite a bit of it goes abroad.” The company carefully tracks the inventory for Sudan and all of its other yards at the UAE headquarters. On short notice, the company can tap that inventory for shipping globally.
When I suggest that operating yards in underdeveloped, impoverished, war-wracked countries such as Sudan and Yemen could be dangerous, Salam smiles. “As a business transaction, I would say they are adventurous.” He laughs. “You gotta know who you’re dealing with,” he says. “Sudan and Yemen, those are relationships that have grown over 20 years. We love it.” Pausing, he then adds: “Look, people get married on the basis of far shorter relationships than we have with some of our subsidiaries.” The marriage metaphor is apt: If a family member is not available to operate a subsidiary, the Sharif family offers the facility’s leaders equity in the company. “In this day and age, you must,” Salam asserts.
The Byproducts of War
About 1,200 miles northwest of Sharjah, on the rolling Jordanian plains, the 5-acre Sharif Metals yard in Amman is piled with well over 100 tons of aluminum window frames. Amman and Jordan are in the midst of an economic boom, driven in part by the vast amounts of U.S. money flowing into the war in neighboring Iraq, says Ahmed Sharif, the thoughtful and frank 38-year-old Sharif brother who directs the Amman operation. Sharif Metals is the lucky recipient of much of that boom’s scrap. “People are building in Amman,” he tells me, nodding at the window frames. “So everyone is tearing down old buildings, and that benefits us.”
Inside a small, dark warehouse filled with 1.5-mt bales of mixed copper bound for China, Ahmed opens large bags filled with gunmetal and shell casings the company receives from the Jordanian military’s training exercises. “Of course, because of the political situation in the Middle East, there is a lot of this kind of scrap here, too,” he says. In fact, brass and copper constitute roughly 45 percent of Sharif’s global nonferrous volume, and though conflict scrap can be a significant part of that volume, such material is highly dependent upon the Middle East’s political situation. Two days earlier, when I asked Salam about conflict scrap, he smiled ruefully and nodded. “What I tell people is that the Middle East is in a great deconstruction and construction period,” he said. “The scrap business benefits from that the most.” He calls politics a “losing arena” and asserts that “business is the only way to get people closer together.”
After touring the main yard, Ahmed drives me to the larger, 12-acre “bulk yard” scattered with heavy equipment and, prominently, a scrapped flight trainer from Royal Jordanian Airlines. Next to the yard is a two-lane highway; not far down it, a sign informs travelers—in Arabic and English—that they’re heading toward the Iraqi border. Fruit trucks with black Iraqi license plates thunder past, and Ahmed glances at them with a wary eye.
Two years ago, large amounts of scrap were flowing out of Iraq, and Sharif Metals set up a processing yard on the border, in the al-Karameh Free Trade Zone, to capture it. In the immediate aftermath of the U.S. invasion, until mid-2005, Karameh was the highest-volume Sharif facility in the Middle East, Salam says, and 75 percent of the material was brass. “But when the civil war started, the volume dropped off, and now the yard is idle,” Ahmed explains. Reportedly, Iraq’s smelters are now sending that material to Turkey via Kurdistan, thus avoiding the need to truck the material through the fractious Anbar Province, which extends the full length of the Iraqi-Jordanian border. Occasionally brass ingots from Iraq still appear in Jordan (and in Sharif’s yard), Ahmed says, but they’re often plugged with iron bars.
Walking through the Amman yard the next day, I find a stack of UBC bales that look precisely like the ones I saw in Sharjah a few days earlier. When I mention this to Ahmed, he smiles the same proud smile Salam did when I openly admired the Sharjah bales. We step back as an employee begins to wash the bales with a high-pressure hose. With worker wages averaging US$200 a month, he says, “our labor is cheap enough that we can do that here.” And the customers love it, he says. “Nobody has ever seen such clean can bales. They are the same in all of our yards.”
Not far from the cans, two men sit on the ground, breaking motors with hammers. Though Sharif Metals has ready Asian markets for this material, labor costs again dictate that the work remain in the Middle East. In Amman and Dubai, the company hires contract labor for such material, paying roughly US$300 per mt in Amman.
“I don’t want to pay guys to drink tea,” Ahmed chuckles. “This way, the guys who do this kind of work have a reason to do it.”
Past them, we emerge on the far side of the yard, where a burly man with a bushy mustache operates a balance scale. Retail business is maybe 15 percent of the Amman yard’s operations, though Ahmed says he doesn’t care much for the “arguing over one kilo” part of the job. As we watch, several men arrive with plastic sacks filled with an assortment of brass lamps, teapots, and clean copper wire.
Like other Sharif yards, the Amman yard is export-oriented, thus removing it from heated—and often dishonest, Ahmed says—local markets. But there are disadvantages, too, starting with the fact that Amman’s only shipping option is Aqaba, a small Red Sea port three hours south of the city, and that the country charges a US$42-a-ton export duty on unprocessed scrap. “Jordan has a lot of government regulation,” Ahmed concedes, “and that can slow things down.” Like its operations in the more developed UAE and Kuwait, Sharif’s Amman yard receives regular visits from health and safety inspectors, including those concerned with air quality. At the same time, Ahmed concedes that Amman’s less-developed economy means environmental regulators have tougher battles. “If you look at how cars are burning exhaust on the street, and then you come here,” he says, nodding at his yard, “you can see that the government has bigger problems than me.”
As we return to his office, Ahmed points out the desk his father still maintains. “He has his own back door so people can’t see him coming and going,” he says with a smile. Meanwhile, inside Ahmed’s large office, Monir Sharif, who flew in from Kuwait the previous evening, is sitting at a small table going over papers with Lana Sharif, one of his younger sisters, and the only one of Mahmoud al-Sharif’s daughters involved in the business. Married and in her late 20s, Lana handles an assortment of tasks primarily related to logistics. “It’s important to have family involved,” she says, “because that is who you can trust.” (Mohd, the second-oldest Sharif brother, heads the Kuwait yard’s operations. The yard endured hardship during and after Operation Desert Storm, Sharif says, but it’s now Kuwait’s leading scrap processor, generating 2,000 mt of scrap a month.) The three siblings shift into a brief conversation about their father, who is busy overseeing construction of a new family home, then go back to business.
Looking East
Two days later, Salam Sharif is at his desk in Monir’s office in Sharjah. It is just after 1 p.m., and he’s already spoken to Sharif employees in Riyadh, Jeddah, and Amman; a European broker; and a constant procession of staff members. In his right hand are several pictures of an unusual alloy and a lab report. The staff metallurgist enters, and Salam hands the paperwork to him. “What do I pay for this?” he asks. Another employee enters with a company human resources chart that contains several soon-to-be-filled slots for employees related to the company’s expanding China trade.
Later, sitting in his own office with a lunch of grilled fish, salads, flatbread, and fresh vegetables, Salam tells me that the company is increasingly China-focused. For years, India had been the Middle East’s top destination for its considerable brass exports (India’s top import from the UAE is scrap metal). Recently China has become competitive on the material, though, and Salam is actively looking for ways to expand and improve his company’s position in the country. At the same time, he remains focused on the company’s important European consumers, and he briefly interrupts our lunch to speak to one in Italy. When he finishes, he explains that shipping between Sharif’s Cairo yard and most ports in Europe costs a mere US$250 a container—roughly the same as shipping between Dubai and China.
Generally, Salam prefers not to ship between his yards unless there’s some benefit to doing so, such as when he can combine smaller amounts of rare commodities to produce a full load. “If
we spend $50 [per mt] to send something from Kuwait, the margin accommodates that,” he says with a shrug. “It’s all logistics, really,” he adds, while glancing outside his window at the construction of the new offices, which will accommodate logistics staff. “The market makes decisions, not me,” he adds. “I don’t get involved in pricing very often unless somebody needs me to sign off on something to keep a competitor from taking business.”
Monir returns to the office later in the afternoon, and with Salam away, he mentions that the two brothers initially disagreed on the Sharjah building expansion. “Salam says that it reduces the area for scrap processing, and that’s a bad thing,” he explains. “But I said that’s a good thing because it means that we have to be more efficient with the material, move it in and out” more quickly. Though the Sharifs prefer not to state their scrap volumes or earnings, they are comfortable acknowledging that they and their nearly 500 employees handle a “significant percentage” of the material flowing out of the Middle East, and that percentage is growing along with the volume of Middle Eastern scrap.
Above all, Sharif Metals is a family business, and each family member takes pride in the way the siblings work together, still report to their father, and—they hope—will maintain the business in the family for generations to come. Still in his early 40s, Salam isn’t immediately concerned with successors, but when the time comes he has seven children, including four boys, whom he has begun to expose to the business. The kids love it, he says. “If they’ve been bad, the worst thing that I can tell them is that they can’t come to the scrapyard on Saturday,” he chuckles. “No pocket money, then.”
At the end of the day, after workers have cleaned the yard and readied it for the next morning, Salam tends to remain in his office, one of the few people left in the building. It’s an opportunity for him to think, catch up on e-mails, make phone calls, and plan the company’s future. Though he is not ready to reveal those plans, he is unambiguous in his belief that Sharif Metals’ already considerable international experience will allow it to grow as the Middle East’s economies develop. Experienced at adapting to the cross-currents of the region’s politics, the Sharif family business is now big enough—and stable enough—to take a prominent place in defining the Middle East’s future as a metal market.
Adam Minter is a journalist based in Shanghai, where he writes about business and culture for U.S. and Chinese publications.