BIR Singapore 2024 - Non-Ferrous Metals Division: Opportunities and challenges in establishing new operations outside China
Pioneering Chinese companies with overseas operations set up in response to China’s restrictions on scrap imports have shared the secrets of their success at the BIR World Recycling Convention in Singapore. The Non-Ferrous Metals Division session on 28 October was opened by divisional President Paul Coyte, Managing Director of F. Hayes and Company (NZL), who spoke about opportunities and threats in general.
Introducing the guest speakers, he said: “What's important is how we manage these opportunities and de-risk these threats, learning from others, reflecting about how we can improve our own approach and, as a result, create intergenerational companies and success.”
Anthony Wong, Executive Board Member of Delta Metal (Holdings) Co. Ltd. (CHN), said his company was still recruiting for its first facility outside China. It already has four in China with an annual total installed capacity of 420 000 tonnes importing scrap from 44 countries worldwide. Delta has offshored for several reasons, with China’s rules and regulations over scrap imports since 2020 heading the list. Mr Wong explained that further amendments to the regulations were rumoured, creating uncertainty. Domestic recycling companies faced added costs to meet the new rules, he added, and trade disputes between China and the United States had also had an effect. The supply of recycled materials within China was also tight. “We had to look at opportunity so we're moving out.”
He listed those opportunities as access to new markets, cost efficiencies, a global talent pool, diversification, supply chain optimisation and strategic positioning. Another is that Chinese car manufacturers are also offshoring to southeast Asia and Delta has BYD as a key customer. “We are taking first-mover advantage to go to Thailand to support them and grow together. We have to give ourselves a cost advantage. If our costs are lower, it helps us to have more competitive edge over the other people.”
Challenges
On the other hand, said Mr Wong, there are several challenges. “You don't know the people, you don't know the country, you don't know the language, you don't know the culture, you don't know the rule. Walk in there like an idiot, you will get killed in no time.”
And the lessons learned? “Number one, have a very good feasibility study. Secondly, be very agile and have a plan B to mitigate any political instability or changes.” The speaker also recommended local partnerships. For Delta, that has meant working with Japanese-headquartered Daiki Aluminium Industry Co Ltd, a long-term partner. “Daiki has operated in Thailand for over 20 years. They have lots of experience. They guide me along. They tell me about the bad experiences so it's very helpful.”
Another company offshoring in Thailand is Ningbo Jintian Copper (Group) Co. Ltd, which specialises in copper processing and manufacturing. It has eight production bases in China, Vietnam and Thailand and more than 7,000 employees. Vivian Jiang, General Manager of Ningbo Jintian’s import and export subsidiary (CHN), said the company had invested US$ 28 billion in upgrading its processes to achieve high copper content and reduce emissions as part of a “low carbon development path”, assisted by offshoring some of its operations.
Thai hub
During questions, Ms Jiang explained her company chose Thailand because it was an important hub connecting southeast Asian countries. “This gives Thailand a natural geographical advantage in raw material procurement and product sales in the copper processing industry. And it is easier to import recycled copper raw materials from Europe, America, Japan and South Korea and other regions.” The Thai government had provided a series of preferential policies to attract foreign enterprises to invest in copper processing and renewable resources.
Sean Davidson, CEO of Davis Index (Canada) anticipated “a massive surge” in demand from China in the coming months as its economic situation improved with the stimulus of substantial Government investment. There was also a demand challenge for the US market in getting sufficient copper. “With all the capacity additions that are coming online in the US, depending on who you talk to, they expect copper scrap supply in the US to be net short by 2030. The analysis suggests that No 1 and No 2 copper will be extremely difficult. In about four to five years, it will become a price war for sure. It's going to get harder. I think you're going to have to get more creative.”
Mr Davidson said the US aluminium industry had invested over US$ 10 billion during the past decade and much more capacity was coming online. He argued that greater secondary billet capacity in Asia would further increase competition for US and European scrap. “So when we talk about a coming squeeze of supply, it's almost here already."