The Manganese Steel Fiasco Story

1968

A lesson on how to go bankrupt quickly

Written 7/9/2013 and Re-written 2/ 2016* 1,777 Words

#110 By 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 then, under the craziest set of circumstances, Lou had purchased the entire railroad from the Haitian Government as scrap.

Once Lou owned it, the logistics of disassembly stacking and then selling of the track became an immense project.

That was the reason Lou had called me up in Miami to come and assist him.

Lou admitted that taking apart and preparing the railroad track was no easy task. It required lots of labor, and it required stacking the rail somewhere near a port.

The rail would need to be stacked neatly where the boom of a self-loading ship could reach it.

Lou thought he 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 corrupt the system really was.

Eventually someone suggested to Lou that he look for an alternative place to stack up the rail.

So, Lou started looking around the country, and he discovered “Cement Haiti”, they were a French owned cement manufacturing company.

Cement Haiti 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 who sympathized with the problem that Lou was having with the Port Au Prince Harbormaster, and he 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 up to immediately fly over there.

The next day I flew to Haiti and Lou took me to the Cement Haiti property.

What I found all over the property were what looked like piles of worn-out cast-iron liners.

Cement Haiti had a huge limestone roasting kiln which they used to make cement, it appears that when the liners wore out, they were reordered from France, but the used liners were just piled up everywhere on the property.

The liners appeared to be about 3 feet long and 2 feet wide, and they were curved to fit together inside the huge tubular kiln.

We asked the company what they intended to do with all the scrap metal liners.

Lou said the Cement Haiti Managers would accept any price for the scrap metal as it would help them clean up their 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 liners, it could make us a fortune and help finance the entire railroad project.

Next 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 they were 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 cut out a two-inch square sample, but the metal didn’t cut like steel, it melted just like cast iron.

Lou said he thought the liners were all cast iron and I thought they sure looked like each plate was cast iron, so I had no reason to disagree with him,

At the time cast iron, 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 first huge pile of metal liners were 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 would be involved in moving each piece of metal closer to the pier.

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 good way to ship the metal from Haiti.

It all sounded easy, but I knew it would be best for me to bring the 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 1 cent per lb. or $20.00 per ton, but Cast Iron was valued at 2 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 middleman.

Bethlehem Steel said they would be 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 immediately, as his barges are returning from Haiti empty 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, and he said it all sounded good, but we had no way of loading the cast iron pieces of metal onto the barges at Cement Haiti in only two days.

Lou thought about the situation and he called me back.

Lou said he would hire about 100 Haitian laborers and have them all stand in a line from the piles of cast iron plates all the way to the barge, by each laborer 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 little 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 were managing a big scrap yard in Miami, named Metro Iron and Metal.

One of the fellows was named Norton Blum and the other was Arthur Pepper.

We were all sitting at my desk discussing a future 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 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 at the Bethlehem Steel dock.

I didn’t sleep all night.

First thing in the morning, I called the buyer at Bethlehem Steel, and he said “No they didn’t want to buy our 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 nonmagnetic Manganese Steel.

Being nonmagnetic it couldn’t be unloaded by a magnet crane at Bethlehem steel.

Mr. Feldman and his barge company would have bankrupted me, once they found out they couldn’t unload the barges with a magnet crane at Bethlehem Steel.

I would have been stuck paying demurrage on the barges as we would have no way to unload them ever.

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 who probably wouldn’t do it, or they could 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 Manganese Steel may still be sitting at Cement Haiti today.