It would be difficult to find a greater number of scrap wire and cable bales in one place than on the 29 acres of land and warehouses in Sihui, Guangdong Province, China, operated by Grand Metal Group.
Raymond Li, president of Grand Metal, began buying and trading scrap metal in 2003 as a way to diversify his outdoor lighting fixture business.
Grand Lighting Co. was already a consumer of recycled-content aluminium and a generator of die-cast aluminium scrap, providing Raymond with his initial familiarity with the scrap recycling business.
In the 10 years since starting Grand Metal, Raymond has overseen the company’s tremendous growth, and in 2013 he is continuing to invest in buildings and equipment to enable Grand Metal to handle even larger volumes of scrap in the future.
An Illuminating Thought
Raymond Li established Grand Lighting Co. Ltd. in 1994 with operations in Nanhai, Guangdong Province in South China. “Grand Lighting makes aluminium die-cast outdoor lanterns, garden lights and light posts,” says Raymond. “We sell to the export market and to retailers such as Home Depot and Lowes. America has been the biggest market for us.”
Grand Lighting (www.grand-lighting.com/company_eng.asp) is “still doing quite well,” says Raymond, despite a drop-off in export orders that began to be felt in 2006 and 2007. Although the plummet in the U.S. housing market caused short-term turmoil, Raymond says Grand Lighting has recovered nicely over the last few years. “We recorded a sales record high in 2012,” he adds.
While one might think running a sizable manufacturing company would provide enough to do, Raymond says a desire to diversify his business holdings prompted him to enter the scrap industry.
“From 2001 to 2003, when the lighting business was at a reasonable scale, with about 500 employees, I began to research if we should expand our lighting business as a next step,” says Raymond. “I concluded that the manufacturing business for export in China looked like it was going to get tougher and tougher. Labor costs were getting higher and also I found every year that material prices were getting higher and higher. It squeezed our margin.”
He continues, “Because I’m from Nanhai, which is a scrap center in China, I was also considering that business. As well, I could see that the aluminium ingots we bought for our lanterns were made from recycled aluminium, imported from Europe and America. So I realized that China needs this material and the resource will become more important. I decided to keep the lighting business at a reasonable scale and build up a scrap business.”
The scrap business, Grand Metal Group, started in Nanhai in 2003, says Raymond. Initially, the company operated from leased space near the lighting plant. “In 2006, the government built up a scrap industrial park in Sihui,” says Raymond, referring to a city about 70 kilometres (43 miles) from Nanhai. “There, we could buy land and build a plant in a place that is easily qualified to get a license and can obtain high-volume scrap import quotas.”
The 120,000 square metres of land in the Zhaoqing Asia Metal Recycling Resource Park was purchased in 2006, with construction completed and the plant opening in 2008. “The first half of 2008 was good,” notes Raymond. “Unfortunately, the second half brought the financial crisis.”
Recyclers use any number of words to describe the turmoil that took place in the fall of 2008, as commodity prices plummeted and unprecedented numbers of attempts were made to renegotiate or void transactions.
Raymond is among those who can look back at that timeframe and use the word opportunity. “The financial crisis created many opportunities for us, because we built up our reputation during the crisis,” he comments. “We did not ask for discounts for the contracts—and this was while some people even walked away from contracts at that time.” The decision not to do so caused short-term financial hardship for Grand Metal Group, Raymond acknowledges, but he says he was not tempted to make a different decision. “In my concept, I never thought about walking away or asking for a discount. Those who did were not thinking about the long term.”
Raymond says a price drop in 2005 had previously caused some cancelled contracts and some scrap buyers took a hit to their reputations in both years. “I could see some of the same companies that were doing that in 2005 tried again in 2008 and lost their reputations.”
He credits his experience in the lighting industry, dealing with large multi-national retailers, as one of the influences on his decision. “I had been conducting international trade for a long time, having been in the lighting business since 1994. In that sector, you wouldn’t even think about changing terms. You have to honor a contract.”
Hedging also played a role in his survival through the crisis, says Raymond. “I was always careful and conservative and was doing some hedging by 2008. I think the biggest risk in this industry is the fluctuation of prices.”
“By the end of 2008 we were low on cash,” says Raymond, who notes that by November of that year he “hedged everything” in his transactions. He also credits his scrap suppliers around the world who extended credit terms, “which provided very good support. Thanks to these credit terms we were able to keep going.”
Since rebounding from the late 2008 crisis, Grand Metal Group has continued to bring large volumes of material both to its original plant in Nanhai and its resource park location in Sihui.
Projecting an Image
Growing rapidly in just one decade, as Grand Metal Group has done, provides plenty of challenges, including convincing others that the growth comes with good intentions.
Regarding scrap recycling in China, Grand Metal Group President Raymond Li says, “Some people understand the benefits of scrap recycling in China, but others still don’t. We try to build up a good business and a good image. We need to prove that we are devoting value to society. It is true that not many people [in China] are familiar with what we are doing. They may even think recycling is polluting the environment. But Grand Metal is working in a professional way of recycling the material and is trying to change the old time image of recycling in people’s mind, just like what is in the Western countries.”
As well, says Raymond, “We are doing it with a nice factory, good treatment of employees and sound environmental practices,” he continues. “That’s why we have a nice plant. It’s not just for making money, but it’s very devoted to society.”
In the international trading arena, Raymond says that he quickly learned that his most trusted colleagues and suppliers in the scrap business were involved with organizations such as the Institute of Scrap Recycling Industries Inc. (ISRI) and the Bureau of International Recycling (BIR).
“Our key suppliers, they are all BIR or ISRI members, so we joined those organizations and have tried to let people know we are serious in the market,” says Raymond, who has become a regular attendee of the conventions and events hosted by the two trade groups.
A visit to the Sihui facility reveals warehouse and processing space overflowing with bales of wire and cable brought in from Europe, North America, Australia and Japan. A tour of the 29-acre property demonstrates the great extent to which Grand Metal Group’s business now focuses on wire and cable. It also shows why the company has purchased an additional 173,000 square metres (42 acres) in the same resource park.
Large warehouses and processing buildings take up most of the space on the Sihui property, along with an office building, a dormitory building and paved outdoor storage areas that hold bales of material awaiting processing.
Eight wheel loaders maneuver around the property bringing entire bales from storage areas to processing zones, while workers with wheelbarrows transport the smaller loads.
The processing equipment includes some 700 wire and cable stripping machines, staged in more than 200 work stations where work crews operate these machines in sets of three.
The stripped copper and aluminum will be baled and sent to a smelter directly, while the thin cable will be granulated and sent to the next processing stage: a set of 15 water-based separation lines that identify chops that still have plastic attached that are sent through for further cleaning.
The pure metal chops are laid out and fan-dried in their last stage before being packaged for an end consumer.
One warehouse building in Sihui is devoted to the plastic that is recovered. Raymond says there are many manufacturers in China who will use this material as feedstock. “That is one of the advantages of operating in China,” says Raymond. “In America or Europe, still not many manufacturers want it.”
Raymond says he did not set out with the intention of having Grand Metal Group focus on wire and cable, but instead he developed a profitable business model that has caused it to become a priority.
One extent to which Grand Metal Group now takes wire and cable seriously can be seen in the Sample Room at Sihui, which contains several dozen shelves worth of wire and cable samples sorted by country of origin.
An even more concrete sign (literally and figuratively) is the 42-acre construction site across the street from the current Sihui plant.
Scheduled to open in July 2013, the new land will house four large processing and storage buildings and a new dormitory.
It’s clear Grand Metal has already grown into the new space, judging by the number of bales of material waiting to be processed on the company’s current grounds—even in the courtyard in front of the office building and on the basketball court now acting as temporary storage space.
Systems in Place
In order to grow so quickly in one decade, says Raymond, Grand Metal Group has adhered to core philosophies and also has paid attention to the business systems it puts in place.
While the customs and inspection agencies in China can be an obstacle to conducting business for many recyclers, Raymond says, “We feel very comfortable with Customs. We have a clearance area located right inside our yard, where we can clear the materials and move them straight into our processing facility.”
Grand Metal Group is running on enterprise software made by one of the global leaders in that category. “It provides a stable system from buying to assessment to processing to inventory control,” says Raymond.
The enterprise software is providing “shared management concepts” for Grand Metal Group’s growing management team, says Raymond. “It is part of what we are doing to build a good team for the business,” he comments.
Raymond cites conducting business in good faith as another key philosophy. “People trust us when we report on quality,” he says. “The claims process goes smoothly. When you build up a good reputation, it’s much easier to communicate with a supplier.”
Integrity is a two-way street, adds Raymond. “As well, we are happy to be doing business with honest suppliers who take responsibility for their quality. We are always looking for long-term business. Short-term business deals are not our type. We don’t want to buy just one or five loads in six months and then stop.”
The author is editorial director of Recycling Today Global Edition and can be contacted at email@example.com.