The Manganese Steel Fiasco Story
1968
A lesson on how to go bankrupt quick
Written 7/9/2013 and Re-written 2/ 2016
Howard Yasgar
In 1968, I was in Port Au Prince Haiti helping my friend Lou Gladstein disassemble the Haitian railroad.
The railroad had been abandoned many years ago, and under the craziest set of circumstances Lou had purchased the entire railroad from Haiti as scrap.
Now once he owned it, the logistics of disassembly stacking and the selling of the track became an immense project.
That was the reason Lou had called me in Miami to come and assist him.
The taking apart and preparing the railroad track for shipment was no easy task. It required lots of labor, and it required stacking the rail somewhere near a port.
It would need to be stacked neatly where the boom of a self loading ship could reach it.
Lou had planned everything down to the last detail, but like any major project nothing went the way he had planned it.
Lou planned to take apart the track, and stack it at the dock at Port Au Prince, but it wasn’t quite that simple.
We didn’t have a buyer for the rail yet, and the Port Au Prince Harbor Master was already giving Lou a hard time.
Lou always knew that in Port Au Prince he was dealing with a corrupt system, he just never realized how bad the system really was really was.
Eventually someone suggested to Lou that he look for an alternative place to stack up the rail.
So Lou started looking around Haiti and he discovered “Cement Haiti”, they were a French Owned Cement Company. That was located on several acres of land and they had their own long concrete dock .with deep water anchorage for ships to load and unload.
The manager of Cement Haiti was a nice enough fellow that sympathized with the problem that Lou was having with the Port Au Prince Harbormaster, and they offered to let Lou use their property to stack the rail until a buyer was found.
When Lou saw their property, he couldn’t believe his eyes and he called me immediately in Miami to fly over there.
The next day I flew to Haiti and Lou immediately took me to the Cement Haiti property.
Piled up all over the property were what looked like worn out cast steel liners.
Cement Haiti had a huge limestone roasting kiln on their property which they used to make cement, it appears that as the kiln liners wore out, they were reordered from France, but the used liners were just removed and piled up on the property everywhere.
There were hundreds of piles of liners everywhere. They appeared to be about 3 feet long and two feet wide they were curved to fit together inside the huge tubular kiln.
Lou said the Cement Haiti Managers would accept any price for the scrap metal as it would help them clean off the property.
There must have been hundreds of tons of scrap metal liners all over the place.
Lou said that if we could sell the scrap, it could make us a fortune and help finance the entire railroad project.
We drove up to Lou’s house in Fermathe, where he had an oxygen acetylene cutting torch.
We loaded it into the car and headed back to Cement Haiti.
Once we were at Cement Haiti I looked closely at one of the pieces of liner. At first I thought it was cast iron, but I knew cast iron would be too soft, to be a kiln liner so it must have been cast Steel.
I proceeded to lite the cutting torch and cut out a two inch square sample, but the metal didn’t cut like steel, it melted just like cast iron did.
Anyway I now had a sample to take back to Miami.
The managers at Cement Haiti said, that as soon as any part of the liner wore down to about 2 inches thick, they knew they had to replace them. They had been piling the used removed liners up on the property for over 30 years.
Lou said he thought they were all cast iron. I thought they sure looked like each plate was poured cast iron, so I had no reason to disagree with him,
At the time cast iron, which a highly magnetic form of iron was worth considerably more than regular steel, so we both felt that Lou had financially hit a home run, by finding all this cast iron.
It looked like a perfect deal, Cement Haiti was more than happy to sell the metal cheap, and the huge piles of metal liners were mostly located about 500 yards from their dock.
Unfortunately all the piles of metal were just far enough away from the dock that a lot of hand labor in moving each piece of metal closer to the pier would be required.
Lou said that all I had to do was find a customer for around 100 tons of very clean cast iron, and then I needed to find a way to ship the metal from Haiti.
It all sounded pretty easy, but I knew it would be best for me to bring the small piece of the metal back with me to Miami, as a sample to show potential buyers,
The next day I flew back to Miami with the sample.
At the time scrap steel in Miami was bringing about one cent per lb. or $20.00 per ton, but Cast Iron was valued at two cents per lb. or $ 40.00 per ton.
To maximize profits, I knew that I needed to sell the cast iron direct to a foundry and eliminate the middle men.
My first thought was to call one of the largest companies in the business, Bethlehem Steel, located at Sparrow Point Maryland.
I got on the phone and spoke to a head buyer at Bethlehem, and after explaining everything to him, and I asked him how he thought we should do the transaction.
He said if we could get the cast iron sent to Sparrow point by barge, they would unload the barges using magnetic cranes, and they would pay us $60.00 per ton.
He said the barges would be unloaded quickly so we would not incur any demurrage charges.
Demurrage charges incur when a ship or barge is delayed over and above the time allotted to load or unload it.
The Bethlehem buyer suggested that I contact “The Feldman Barge Service Co.” so I did.
Mr. Feldman said he was elated to receive my phone call. Because he was presently hauling wooden telephone poles to Haiti, and he could have his barges at Cement Haiti right away as he was coming back to the States with empty barges now.
But Mr. Feldman said he had a tight delivery schedule and he could only allow us two days to load each barge and two days to unload them. After that we would have to pay demurrage, which was several hundred dollars a day per barge.
I immediately called Lou in Haiti to tell him the good news, he said it all sounded good, but we had no way of loading the cast iron pieces onto the barge at Cement Haiti in only two days.
Lou thought about the problem a while and he called me back. He said he would hire about 100 Haitian laborers and have them stand in a line from the pile of cast iron plates all the way to the barge, by handing each metal plate from one laborer to another laborer, we could load at least one barge every two days.
Lou said, that the cost of Labor in Haiti at the time was about $1.00 per man per day, so it wouldn’t cost us more than $100.00, per day to load a barge.
Everything sounded perfect, the next day I would call Feldman to have him deliver the first Barge to Cement Haiti, Feldman said I could use my American Express Card.
That evening I was in a meeting with two fellows, both of whom that were managing a big scrap yard in Miami.
One of the fellows was named Norton Blum and the other was Arthur Pepper, we sitting at my desk discussing a project that I was doing with them in Miami.
On my desk was also sitting the sample piece of cast iron from Cement Haiti.
Norton Blum, having been in the scrap business a long time, had small magnet attached to his key chain.
Like many scrap iron dealers do, Norton was touching his magnet to everything on my desk.
When he touched my Cast Iron sample the magnet didn’t stick.
I was watching and I said, do that again, that’s a piece of Cast Iron your magnet should stick to it.
Norton tried it again and the magnet definitely did not stick, I didn’t know what to say.
Arthur picked up my sample and said, “The reason the magnet doesn’t stick is because this is Manganese Steel, not Cast Iron”.
He said, Manganese Steel is used in cement making rotary kilns.
When Arthur said that my heart nearly stopped.
It meant that my sample wasn’t Cast Iron and that meant it wasn’t magnetic and there would be no way to unload the barges at Bethlehem Steel.
That meant I would be stuck paying demurrage on the barge as long as it sat there, I didn’t sleep all that night.
First thing in the morning, I called the buyer at Bethlehem Steel, and he said “No they didn’t want to buy Manganese Steel.
So next I called Feldman and stopped the barges, and then I called Lou in Haiti and told him not to hire anyone because the barges weren’t coming.
Lou was shocked, he was sure it was Cast Iron, but I could have kicked myself in the butt for not trying a magnet on the sample the first day, I knew better.
I told Lou, the sample was non magnetic Manganese steel.
Being nonmagnetic it couldn’t be unloaded by a magnet at Bethlehem steel.
Mr. Feldman and his barge company would have bankrupted me, if they couldn’t unload it with a magnet at Bethlehem Steel.
I would have been stuck paying demurrage on the barges as we would have no way to unload them.
I knew that the demurrage could run into the thousands of thousands of dollars, and the barge contract was on my personal American Express card.
I also knew that probably the only way to unload the barges at Bethlehem Steel would be by hand, using Long Shore men in the United States. They would also charge me thousands of dollars.
I knew that Mr. Feldman would have sued me for loading his barges with scrap that he couldn’t unload, I was sure lucky that we didn’t ship any of it
The stuff may still be sitting at Cement Haiti today.
