It’s a cold, battleship-gray Vancouver morning, and everything appears to be running smoothly at Pacific Coast Shredding.
Giant rigs growl as they offload junk cars.
The dangling claw of a crane-truck opens, and big chunks of metal cascade onto a conveyor belt, rattling eardrums.
The belt carries everything from pretzel-shaped rebar to discarded lawn mowers into the maw of a massive water-cooled shredding machine, steam wafting around it.
It’s all in the service of preparing hundreds of thousands of tons of recycled scrap metal for shipment overseas.
Problem is, the Port of Vancouver — Pacific Coast’s landlord — has plans that could get in the way.
Construction of a key, 600-foot-long rail segment of the port’s West Vancouver Freight Access project will cut into just over an acre of the metal processer’s operations.
That doesn’t seem like much. But Victor Winkler, president and CEO of Pacific Coast parent Metro Metals Northwest Inc., said it’s enough to upend operations, forcing him to spend millions on rearranging his well-positioned equipment instead of on building up his business.
It’s only fair, Winkler said, that the port foot the bill for all of Pacific Coast Shredding’s costs.
Larry Paulson, the port’s executive director, said the port and Winkler are still working out the cost issue. “I’m not sure what all of his costs are and how they’re related to our project,” he said. “We need to have further discussions on what those costs may be.”
Port officials said they’ve made concessions, including adjusting the timing of their project, to reduce the impacts to Winkler’s business. Paulson said he expects negotiations to continue over the next several months in hopes of reaching an agreement that suits both parties. “We are having, I think, a much better discussion on all sides,” Paulson said.
Winkler’s business, despite a feeble U.S. economic recovery, is growing as Asia gobbles up his scrap metal exports and melts them into products, including new cars.
About seven years ago, Metro Metals pulled in revenue of $30 million annually. Nowadays, it rakes in $750 million. Pacific Coast Shredding, launched in 1997 on a 7-acre site at the port, now takes up 20 acres of waterfront property. It employs 110 people. That’s up from 22 workers in 2000.
Now, Winkler said, the port wants him to reshuffle his operations to make way for a rail expansion that will bring him zero benefit.
Take, for instance, the company’s hulk of a shredding machine, rising on top of about 70,000 yards of concrete. Inside the machine, 13 hammers, spinning at 475 miles per hour, shatter iron and steel objects into smithereens.
Because of the port’s project, Winkler said, he’ll have to lift and move the shredder around so that it faces the opposite direction, its funnel for depositing metal shreds into piles no longer pointing toward the waterfront.
Suffice it to say, no small task.
For now, Winkler has only begun crunching the numbers on how much it will cost him to reorganize the physical layout of his operations.
“We have to move piles of steel and tear down the office,” he said.
The situation illustrates the difficult balance the port must strike between facilitating the movement of freight and keeping its industrial tenants happy.
The port sees itself as a bastion of economic development, armed with industrial land, and rail and water access.
To that end, it’s focused on its most important initiative: the $150 million West Vancouver Freight Access project.
The port expects to create 1,000 permanent jobs in the next five to 10 years as it increases its rail capacity, helps existing companies expand their operations, and builds out Terminal 5 — where Australian mining giant BHP Billiton plans to construct a potash export facility.
Port officials forecast that the freight rail project, to be completed by 2017 and which the port has already been constructing incrementally, will create about 4,000 construction jobs.
The piece of the project that has Winkler bristling involves creating an unobstructed rail entrance to the port to reduce congestion on the regional rail system. The port needs right-of-way along the waterfront on the back part of Pacific Coast Shredding’s operations to dig a trench and install tracks that will allow trains to pass under the BNSF Railway bridge.
“It’s an essential segment,” Paulson said.
Winkler said the port didn’t understand the impacts its project would have on his company until he put out pylons, based on the port’s own survey data, showing the drastic alterations Pacific Coast Shredding’s tightly run operations would have to undergo.
Early on, he said, the port told him his business would become more efficient after all the dust settled. “We already are efficient,” he said.
Paulson said it helped that Winkler showed the port how its rail project would affect his operations.
“To be fair,” Paulson added, “I would say that we both needed to come to a better understanding about what each of us wants to do.”
An important tenant
Curtis Shuck, the port’s director of economic development and facilities, said the port has worked to keep Pacific Coast Shredding at its current site, including consolidating its lease agreements into one master lease.
Winkler said that was an important step.
“They want us here, we want to be there,” he said. “That’s done. Now the question is, what is this going to cost and how much time is it taking?”
To give Pacific Coast Shredding more time to prepare for the rail project’s footprint, Shuck said, the port agreed to a phased approach that pushes the construction work that will have the biggest impact on the company’s operations to June 2013. Shuck said the company is a large and very important tenant for the port. “We want (Pacific Coast Shredding) to be successful, and we want them to grow,” he said.
The port estimates it will collect about $415,000 in rent from the company in 2012 alone.
Except for its negotiations with Pacific Coast Shredding, the port has all but secured every piece of land it needs to make room for its freight rail project. “Everything else seems to be coming right along,” Paulson said. “Most of the major acquisitions have been done.”
Winkler said he’s had, over the years, a pretty good relationship with the port. And the port hasn’t been shy about lavishing public praise on Pacific Coast Shredding. Last year, it bestowed its “Tenant of the Year” award upon the company.
These days, however, it wouldn’t be too much of a stretch to say Winkler isn’t feeling the love.
He said he’d much rather focus on acquiring another facility and creating jobs. In April, he expanded Metro Metals by acquiring a controlling share of a scrap metal company in Denver, a deal that prompted the hiring of six or seven employees at Winkler’s Vancouver operation. “What’s stopping us from doing that again?” Winkler said. “The only thing stopping us is the port.”
And the question of how much the port will pay Winkler for its project’s impacts looms.
“We believe the port is 100 percent responsible for our costs, and the port’s going to come up with some cockamamie idea that we are,” he said.
Theresa Wagner, the port’s communications chief, said the port has, over the past several years, completed some 16 negotiations with tenants to acquire property to make room for the West Vancouver Freight Access project.
The amounts the port has paid, determined by a process that includes evaluations based on fair market value, have ranged from several thousands to many millions of dollars. That includes the port’s agreement, in November 2009, to pay Great Western Malting Co. $32.46 million to retake more than an acre of the company’s operations.
Winkler said he’s prepared to duel the port in court over the cost issue, if necessary.
“The port has a sexy project they’re doing, and they’re under a heavy time constraint,” Winkler said. “I know I’m in for a big battle over compensation.”