May/June 2011
The scrap processors and consumers in this Southeast Asian nation hope to use their ties to China, India, and the rest of the region to become the bridge between developed-world scrap supply and developing-world demand.
By Adam Minter
According to the conventional scrap wisdom, the world is neatly divided between First World countries, which export scrap, and Third World countries, which import scrap. Right between the two, however, is Malaysia, positioned figuratively and geographically between affluent, highly developed Singapore on one side and China, the rapidly developing but still poor industrial behemoth on the other. The scrap industry in this Second World country is easiest to define in terms of what it does not have: You won’t find developed-world quantities of industrial and consumer scrap, for one. Nor does it have the plentiful, low-cost labor force that would make it the processor of choice for low-grade scrap material. And consumers of nonferrous metals (with the exception of aluminum) are few. Even without the supply, processing, and consuming advantages of First and Third World scrap industries, however, scrap processors and consumers here are surprisingly bullish about their future. The Malaysian scrap industry is “making a bridge, west to east,” says C. Baskaran, president of Global Metal Source Holding (Rawang, Malaysia). “We provide the quality that other Southeast Asian nations need by procuring [scrap] and processing it here.” In other words, Malaysian scrap companies buy scrap from the developed world, process it, and sell it to the developing world. With close cultural and geographic ties to other Asian countries—as well as cheap shipping—industry participants say they have a commercial advantage over scrap exporters in the developed world.
The extent of the country’s scrap exports might come as a surprise, for another piece of conventional scrap wisdom is that rapid economic growth drives scrap demand, and Malaysia is one of Southeast Asia’s most dynamic economies, growing 7.2 percent in 2010. With that level of development, why does GMS—an expanding Malaysian scrap metal empire with its headquarters just outside of Kuala Lumpur—export 60 percent of its nonferrous scrap and 10 percent of its ferrous scrap? To some extent, it has to, Baskaran says. “Malaysia is a middle country,” he reminds me. “It’s still developing, but Malaysian industry isn’t growing fast enough for our growth. So we look outward.” In other words, Malaysia’s fast-growth economy isn’t generating or demanding enough scrap for the country’s ambitious scrap processors and consumers.
For U.S. and other exporters, this is both a Malaysian and a Southeast Asian opportunity. Figures on total Malaysian nonferrous imports are unavailable (despite personal appeals to the National Statistics Bureau), but U.S. Department of Commerce data show that U.S. exports of aluminum scrap to Malaysia, though quite modest, are rebounding from the beating they took during the global financial crisis, rising 59.5 percent from 2009 to 2010, to 6,219 mt. U.S. ferrous exports to Malaysia, which reached a record of 1.26 million mt in 2008, totaled 803,000 mt in 2010, up 16.5 percent from 2009 and poised to grow further.
Malaysia’s total imports of ferrous scrap grew from 2.2 million mt in 2008 to nearly 3 million mt in 2010, according to Tan Ah Yong, secretary general of the South East Asia Iron and Steel Institute (Selangor, Malaysia), though there is widespread disagreement on the quality of Malaysian import statistics—some market participants suggest imports last year reached 3.5 million mt. Those are modest volumes compared with China, the gold standard for export demand, but to focus on that is to miss the bigger picture. Malaysia is increasingly entwined with the economies of the other Southeast Asian nations, the countries with which it maintains its closest trading relationships—just as much as a U.S. state or a Chinese province is entwined with its neighbors. And Southeast Asia as a whole is an impressive importer: The ferrous steel imports of the 10 members of the Association of Southeast Asian Nations grew from 1.3 million mt to 9.8 million mt between 1999 and 2008, according to SEAISI’s Tan.
To be sure, Malaysia’s scrap metal industry has its peculiarities, none of which is more significant than the ambitious expansion of its scrap processing and consuming companies in the absence of sufficient domestic supply—and these companies’ focus on exports despite the country’s rapidly growing economy. Those dynamics, more than any others, rule life for the nation’s mills and processors. But for developed-world exporters eager to tap Southeast Asia’s markets and wary of the uncertainty of dealing with some of the region’s other countries, they are an invitation to trade.
The Scrap Hierarchy
From its lowest rungs, Malaysia’s scrap industry doesn’t look much different from what I’ve found in other semi-developed Asian nations. That’s what I’m thinking, at least, as I peer nervously out of a taxi window on Jalan Kempas Lama, a busy, dangerous, four-lane highway in the southern-peninsula state of Johor. My journey is stalled by trucks delivering or departing with metal from the small scrapyards that line one side of the road. There are no smelters here, no global players, but rather roughly a dozen collectors and processors arrayed along this one-kilometer stretch of highway who carry on the work that has supplied Malaysia’s manufacturers with metal for much of the country’s industrial history.
At the far end is a middle-aged woman in a secure shed covered with steel bars. From inside the shed, she weighs scrap and pays the people who arrive in cars, trucks, and garbage trucks with loads to sell to her. ANI (all caps, no last name) doesn’t invite me into her shed, but she’s happy to talk to me through the steel bars. She explains that her company, P&H Recycling Enterprise (Gelang Patah, Malaysia), operates three yards that buy, process, and sell 50 to 60 mt of plastic, 100 mt of ferrous, and MR50,000 (US$16,835) worth of nonferrous each month, all culled from a smelly pile of municipal waste that grows as I stand there. “I buy from the government garbage program,” she tells me, as a station wagon packed with aluminum cans arrives. Farther out, among her piles of pots and pans, dartboards, television sets, video games, and plastic bottles, I see workers rummaging, presumably picking scrap out of the inventory. Somehow, from all of this, emerges occasional quality: Nearby, I see a neat pile of cut-up window frames, ready for shipment. “I got into this business after my husband died,” she says. “No husband, what else to do?”
Two lots farther up Jalan Kempas Lama is a significantly larger yard filled with every variety of plastic scrap—from PET bottles to computer cases—televisions, piles of rusty ferrous, and some stray electric motors. It belongs to M&M Recycling (Johor Bahru, Malaysia). The marketing manager, K.M. Chan, is happy to show an unannounced visitor around the premises, pointing out the various types of plastics and describing his sources, which range from ANI to local municipalities. “We buy plastic in Malaysia and mostly ship it to China,” he says. “The same with our low-grade metal.” Outside of a shed on the near side of the yard, an old man sits among tools and a small pile of electric motors, with which he busies himself breaking them apart. Above him loom stacks of scrap televisions procured locally—M&M has a Malaysian Department of Environment license to handle electronic scrap—and inside the shed are PCs, barrels full of circuitboards, speaker cones, more televisions, aluminum window frames, and other random, small bits of nonferrous metal. “We take apart some of it here, and some of it we send to India,” Chan says. “The Indian buyer shows up every once in a while, and we sell it all to him.” On average, he says, he generates 5 to 10 mt of nonferrous a month; more often than not, it leaves the country. “But if the price is right, we’ll sell it to somebody around here,” he adds. He sells the ferrous locally.
Nobody knows just how many scrapyards and scrap collectors operate in Malaysia—there are no national associations covering the entire industry—but all agree that the business is divided between Malaysia’s two dominant immigrant communities—Indians and Chinese. In the world of scrap, this is nothing new, of course. Scrap recycling has long been an occupation available to entrepreneurs with minimal capital, and immigrants have dominated the scrap industry in many countries, including the United States. The difference here, however, is that unlike the early 20th century immigrants who thrived in the U.S. scrap industry or even the Korean immigrants with scrapyards in Japan, Malaysia’s immigrants enjoy the advantage of tight family, cultural, and linguistic ties to mother countries in the throes of rapid economic growth. A century ago, the last thing an Italian immigrant scrapyard owner would (or could) consider doing was send metal to family in faraway Italy (in the post-World War II United States, the situation was different). But the Indian immigrants who constitute a significant proportion of Malaysia’s scrap industry not only consider it, they have the benefit of plentiful, cheap shipping to India as well as family ties to major scrap processors and consumers across India. Likewise, Malaysia’s Chinese immigrants are some of Asia’s most cosmopolitan travelers, maintaining family and business ties not only in China, but in other countries, too. This is one of many factors that have allowed Malaysia to emerge as a scrap “bridge” to Asian countries with which developed-world exporters are less comfortable or able to navigate.
Back in Rawang, GMS Holding’s Baskaran tells me that he’s the founder and first president of the Malaysian Indian Metal Trader and Recyclers Association (Kuala Lumpur, Malaysia), a group of roughly 450 small scrap companies, peddlers, and traders who—unlike GMS—don’t necessarily export, but rather collect and sell scrap up the chain to big companies like GMS that do. Though Baskaran is hesitant to discuss the matter, the group has played an important role in defending the industry from what many consider discriminatory laws and regulations against small scrap operations, the vast majority of which, in Kuala Lumpur, are Indian-owned.
These days, however, Baskaran, a three-decade veteran of the industry, seems most concerned with the expanding fortunes of his business across Southeast Asia, beyond India and Malaysia. He founded GMS in 1993 in the town of Batu Caves, now a suburb of Kuala Lumpur. The company grew quickly and in 1996 moved down the highway to Rawang, where it now operates on 5 acres in an industrial park with sourcing yards in Batu Caves and two other locations. “We thought there was a very huge market potential in Malaysia and neighboring countries,” Baskaran says, looking back upon the company’s origins. “GMS would like to take part in that, focus on the region’s needs apart from the two giants [China and India]. We want to import and deliver the supply locally.”
GMS processes 20,000 to 22,000 mt of nonferrous metal annually, evenly split between aluminum and copper. Most of the aluminum comes from domestic sources; the copper comes from imports and local purchases from the company’s well-established network of suppliers. Downstairs, in the company’s well-organized warehouse, migrant workers are running cable through a stripper, and others are sorting through recently arrived bags of wire, searching for contaminants. “We import some cables from South Africa,” Baskaran tells me, “but I can feel the Chinese competition coming for it, because the premiums have been going up.” Imports are new to GMS, but like other large Malaysian operators, the company sees no alternative means of growth. Baskaran and other company officers say GMS is cautiously exploring the opportunity to import from Sharjah, the most industrialized emirate in the United Arab Emirates. The key concerns in trade with Sharjah—and most other markets outside of Southeast Asia—are shipping time and currency fluctuations, with the latter being especially tricky when importing from the United States. When it comes to purchasing scrap, Malaysia’s Indians are as proudly cautious as their famously conservative scrap cousins in India, and they see no need to rush to find new sources when they can rely upon their well-established network of collectors and industrial accounts. But growth throughout Southeast Asia has created scrap shortages that are forcing them to look abroad despite their preferences.
We enter an adjoining warehouse where workers are feeding clean copper wire—purchased locally—into a granulation line that generates barrels full of ultra-clean, quality-controlled material the company ships directly to customers in Japan, Baskaran says proudly. It’s a demanding market with near-obsessive quality standards for any import, but especially for scrap metal. “We give them the quality they need, with immediate delivery,” he says. B. Ganesan, GMS’ vice president for its international division, tells me that on average, the company exports 60 percent of its nonferrous material. Malaysia’s booming construction industry, supplied in large part by nine aluminum smelters, consumes most of the company’s aluminum, whereas its copper travels all over Asia. I notice a couple of stray motors on a pallet outside of the warehouse, and Baskaran nods at them. “Most of our low-grade material goes to India and China.” With only “one or two [copper] rod and foil mills to supply,” the domestic copper market is small, anyway. Brass goes to India, Ganesan tells me (the “Brass City” of Jamnagar is a prime destination), and local consumers. Lead, which the company imports from Brazil, they broker locally.
We walk from the nonferrous yard down a slope, through a fence, and into the company’s ferrous scrapyard. On the near side, a hydraulic crane outfitted with a magnet lifts a pile of locally sourced, clean ferrous production scrap into an open container; on the far side, another crane loads cans from a shiny, apparently pure, pile of tin can scrap into another container. GMS sources 90 percent of its ferrous from Malaysia and imports the remaining 10 percent from other countries around the region, including Singapore and Thailand. Malaysian mills much prefer domestically sourced scrap rather than imports, Baskaran says, though some Malaysian mills disagree with this assessment. “In the U.S., you talk about HMS being 80-20,” he says, referring to the proportion of dense steel scrap (such as rebar) to light scrap (such as steel sheet), he says. “In Malaysia, we talk about HMS, but it’s ready for melting. It’s been pre-segregated.” Exporters need not worry, though: Baskaran says the steel mills have tighter standards for domestic than imported material.
All’s not well, however, for Malaysia’s ferrous scrap processors. Malaysia has a 10-percent export duty on scrap steel, and the newly formed Malaysian Steel Association (Petaling Jaya)—a consortium representing 85 percent of the country’s steel-consuming industry—has asked the government to increase the duty to 30 percent to protect the domestic supply. Before 2008, Malaysia had a total ban on the export of ferrous scrap, forcing domestic prices down and leaving processors at the mercy of the mills. Lifting the ban was little help, in large part because it was lifted to help processors unload inventory at the bottom of the market. Now matters are only slightly better for ferrous processors. For example, a company cannot export ferrous without an export permit, and several Malaysian industry sources point out that all the export permits seem to go to ethnic Malays, forcing even the biggest ferrous exporters to use them as agents. Nonetheless, even with these impediments, GMS’ leaders are optimistic and clear about the company’s future. “Growth is connected to finding new markets,” Ganesan tells me. GMS still manages to export its tin-plated steel and structural bundles to India, and under the right circumstances that practice will expand.
The Outlook for Aluminum
It’s not just the processors looking abroad for scrap supplies. Scrap consumers are doing so as well. The highways in Pasir Gudang, Johor, are jammed with trucks carrying boxes of the goods produced in the industrial parks and factories that drive this highly industrialized part of Malaysia. It’s a good place to set up shop if you want a steady supply of production scrap and have the means to buy it. Ye Chiu Metal (Pasir Gudang, Malaysia), Malaysia’s largest secondary aluminum smelter by volume, has operated in Malaysia since 1984 and in Pasir Gudang since 1993, just as the area began taking off. As the company has grown, its focus has become more and more globalized.
“We are still a small player compared to China,” says Huan Kok Sy, Ye Chiu’s soft-spoken and modest general manager. Indeed, Ye Chiu’s Chinese smelter, in the Shanghai suburb of Taicang, produces 20,000 mt of product a month, with another 5,000 mt in capacity set to come online later this year. The Malaysian branch, in contrast, produces a quite respectable, but comparatively small, 7,000 mt a month. Yet unlike Ye Chiu’s Chinese operation, which relies entirely on imported metal, the one in Pasir Gudang gets 75 percent of its scrap from a network of roughly 30 Malaysian suppliers and the remainder from imports from Southeast Asian countries and Ye Chiu’s U.S. trading office.
“We’re careful with whom we deal,” Huan explains to me as we climb a set of stairs onto the large raised platform upon which the company processes its scrap. “It keeps the quality up.” The quality of what Ye Chiu buys domestically is extraordinarily high, and necessarily so: It’s sourced from the high-tech manufacturers such as the computer and automotive companies that have driven Pasir Gudang’s—and Malaysia’s—economy for the last decade. We stroll past clean piles of aluminum wire that stretch 15 feet across and perhaps 10 feet deep. “It’s not unusual for us to receive tenders for 2,000 to 3,000 mt of wire,” he tells me. “If you were here last week, that pile would be three or four times as big.”
At Ye Chiu, as at most Malaysian scrapyards, the workers aren’t Malaysians, but rather migrants from elsewhere in Southeast Asia and more distant parts, including Nepal. “It’s difficult to hire local people who want to work in this industry,” Huan notes. “It’s dirty and noisy, and people prefer to work in better environments.” Ye Chiu pays its labor force a bit more than the market average, Huan tells me, and significantly more than it used to pay, in large part because it wants to retain the workers. These days a laborer costs approximately MR1,800 (US$608) a month, up from MR1,200 (US$400) five years ago. Huan says he doesn’t worry about the cost, though. “The problem is finding the people at all.”
In the processing zone, workers are outfitted with safety equipment—including gloves, masks, and hard hats—and are largely concerned with organizing the company’s already clean inventory for the smelting operation. Intense processing of the kind that you’d find in China, say, is largely absent except for four teams of four workers. Each team clusters around a conveyor of mixed aluminum (Taint/Tabor), pulling out copper wire and other scattered contaminants. More intensive scrap processing—along with the low-grade material—moved to cheaper locations 10 years ago, Huan tells me.
From the scrap processing area we board a van and ride a few minutes to the company’s smelting facility—one of only nine in Malaysia—where, side by side, 25-ton and 40-ton furnaces produce ADC-12 ingots certified for export to Japan. At least, that’s where they went during the early years of the plant’s history. These days, the company sells 70 percent of the ingots locally, often to Japanese-owned manufacturing facilities, and it exports the rest to Thailand, Indonesia, and India. (The Taicang facility now supplies the company’s Japanese customers.) “Probably 40 percent [of our customers] are automobile industry consumers, and the remainder are everything else,” Huan explains. “Automobiles are the key industry for this material in Southeast Asia right now.”
Ye Chiu is running at full capacity, unable to grow much more on its current site, and it could certainly rest on its high-quality laurels. But growth is in the DNA of this company, so it’s in the advanced stages of planning a second plant, which will increase its scrap requirements significantly. “The region is growing, and so we should grow,” Huan tells me. And he knows that the scrap the company will need can’t come from Malaysia. “Even now it becomes difficult to buy scrap in Malaysia because we are the biggest buyer, and we end up bidding up against ourselves,” he says. “It’s preferable to import.” Perhaps in time, as Southeast Asia’s economic growth leads to more automobiles and consumer goods being purchased and recycled, the material will come from the regional recycling chain. Until then, Ye Chiu, like growth-hungry recyclers across Asia, will compete for the scrap in developed countries. “We will need more supply,” Huan concludes with a good-natured shrug. In one sense it shouldn’t be difficult: Malaysia’s ports and customs are relatively clean, with little of the corruption seen in China and many other Southeast Asian nations. The biggest challenge importers and exporters might face is just finding each other.
A Contentious Steel Picture
The hunt for overseas scrap suppliers is familiar to Malaysia’s steel mills. The country’s almost entirely scrap-based steelmaking industry imports 70 percent of its scrap, says Lim Hong Thye, managing director of Ann Joo Steel (Petaling Jaya, Malaysia), Malaysia’s fourth-largest steelmaker by production volume. But there’s a problem: “Malaysia is the only country in Southeast Asia that has excess steelmaking capacity,” he notes, pointedly, during an interview at Ann Joo’s headquarters in a suburb of Kuala Lumpur. Lim and other industry participants don’t blame the shortfall on regional demand, which is strong and growing—the industry exports roughly 35 percent of its 5 million mt of production—but rather on their inability to procure sufficient quantities of domestic steel scrap. Many Malaysian scrapyards seek stronger markets for their ferrous abroad, the mills say, but also Malaysian ferrous scrap generation doesn’t keep up with demand. “Our industrial development isn’t what it should be,” Lim sighs, echoing the words of some of his downstream suppliers.
On first impression, at least, Ann Joo doesn’t lack for scrap. A few days before my meeting with Lim, I drove across the bridge from Penang Island to the northwestern coast of peninsular Malaysia. As the car went around a traffic circle, it passed, in short order, a major Intel fabrication facility, a Sony facility, and—if you watch for it—giant piles of ferrous scrap belonging to Ann Joo. The stockpiles have been there since the 1960s. Back then, the company was named Malayawata Steel, and it was the first steel mill not only in Malaysia, Lim says, but in all of Southeast Asia. In 2000 the Ann Joo Group acquired a stake in Malayawata (its first step toward acquiring the company, which it completed in 2006), and it has since embarked on a program to modernize and expand the facility. When the company completes an upgrade later this year, it might be the largest single-site steel production facility in Southeast Asia, rivaled only by a Tata Steel facility outside of Bangkok, and it will need those scrap piles and more.
Ann Joo’s 100-mt EAF produced 740,000 mt of long products in 2010—up from 380,000 mt a year when Ann Joo took over the company, Lim tells me. The upgrade will add a mini blast furnace for hot-metal charging. “Our aim is to produce 1.1 million mt of construction steel,” Lim says. “But that number will be lower if we decide to produce higher grades.” That new production volume largely will be exported. Ann Joo currently exports 37 percent of its production, with 90 percent of its exports going to the Middle East. Even so, Lim views Southeast Asia—more specifically, Vietnam, Indonesia, and the Philippines—as his biggest opportunity. “Our goal is to be a global player,” he tells me. “That’s who exporters are going to be dealing with in the future.”
Tension between mills and scrap processors is almost inevitable in a country where 70 percent of the ferrous scrap is imported. In fact, nine mills formed the Malaysian Steel Association last year, in part, to better represent the interests of the consuming mills against the downstream and midstream scrap processors who—together with the mills—had all belonged to the 40-year-old Malaysian Iron and Steel Industry Federation. “Exports of scrap put more pressure on us,” Lim says with a smile. “How can we have that when we have a scrap shortage?”
Though Ann Joo and the other mills seek to protect their access to the local steel scrap market, Lim has his share of complaints about the domestic supply. “The problem is that the [scrap] industry is fragmented with small players and not much in the way of proper processing. The local scrap industry simply doesn’t follow the international rules,” he says. His EAF requires feedstock that’s no more than 3 feet long, for example, but he receives 5-foot-long material from local dealers. “We’ve had to install a shear to cut local and imported material. And we’re really pushing the local dealers.”
Lacking a supply of domestic shredded ferrous (like many developing countries, Malaysia doesn’t yet have an automobile shredder), Ann Joo is interested in obtaining that kind of material from its overseas suppliers. The best quality, Lim tells me, is from Australian scrap. U.S. scrap is improving, he says—he has three U.S. suppliers—but he and his staff have found that it suffers from high copper content. It’s “not free copper in the scrap”—the copper is alloyed in the steel, the result, he says, of it being recycled too many times. Australia, on the other hand, sells him “first-generation scrap” from the country’s plentiful blast furnaces. Though he doesn’t relish international competition for his scrap supply, he’ll take that over the vicious competition for Malaysia’s lower-quality material. “We prefer imports,” he says. After all, it’s available in larger, more consistent volumes than what a fragmented, mostly small-scale domestic processing industry can supply.
A Sign of Things to Come?
It’s a truism of the scrap industry that macroeconomic trends turn up in the metal warehouse and the ferrous yard first. A steep decline in the global scrap market preceded the most recent global economic crisis; the growth of China over the last 20 years was foretold by the seismic shift of developed world metal toward ports in Guangdong, Zhejiang, Tianjin, and other places that previously were unknown to most processors. So what should the scrap industry make of the rush of Malaysian scrap processing and consuming companies to develop overseas suppliers of material they hope to sell into a growing Southeast Asian market? Is Southeast Asia “the century’s best market potential,” in the words of GMS’ C. Baskaran? If so, then for the next several years, Malaysia might be the gateway, or the bridge, by which developed-world exporters access some of the region’s trickiest but most tantalizing markets. Indonesia is particularly enticing for its large population and semi-developed condition.
Even companies that have thrived on domestic supply and demand are looking abroad. The yard of GSL Materials Recycling is at the far edge of the Li-Foong Industrial Park in Balakong, 30 minutes from downtown Kuala Lumpur. Managing Director G.S. Lau founded the business in 1993, just as Malaysia was in the midst of the fast-growth phase that would end with the Asian financial crisis in 1998. Back then, as now, he collected leftover, often reusable, equipment from some of Kuala Lumpur’s most famous building projects. He later expanded into production scrap, much of which he picks up across Kuala Lumpur with his fleet of 20 trucks. For the most part, he tells me, his business has depended upon Malaysia as the source and consumer of his material, though he has trading relationships that extend from Iran to the United States. With Malaysia’s slowing development, however, the rest of Southeast Asia’s growth is, for him, too much of an opportunity to continue doing business the old way. “We are thinking of importing to expand the business,” he tells me. “To grow, we need material, and Malaysia’s industries aren’t mature enough to supply it.”
A quick walk through GSL’s sprawling, 8-acre scrapyard might leave a different impression, however. A pile of clean bundles of production scrap, procured in large part from one of Malaysia’s biggest manufacturers, rises to the height of the foothills behind the scrapyard. At the top, Lau shows me his “treasure”: pallet after pallet and ton after ton of defective but clean cast aluminum parts he has procured from a major manufacturer. Up here, looking across the full scale of GSL’s operations, which comprise both ferrous and nonferrous divisions, I have no trouble believing Alex S.H. Chang, GSL’s director of strategy, when he tells me the company is one of the top five ferrous processors in Malaysia, though the company won’t reveal its scrap volumes.
As we gaze upon the GSL scrap, Lau tells me that Malaysian construction companies often leave behind everything—from excavators to scaffolding—at completed sites, and he just has to clean it all up and find new users for it, be they other construction companies or even missionaries. What can’t be reused is recycled: From the hill we can see workers shearing old scaffolding. It’s a good business, especially in an economy projected to grow roughly 5 percent in 2011, in large part due to government stimulus and foreign direct investment. Lau, like many of his counterparts, worries that it’s a poor basis for growth, and that as wasteful as the construction industry can be, it’s not wasteful enough to grow GSL.
As we descend the hill, accompanied by Lau’s elderly father, who appeared suddenly among the “treasure,” we pass one of the company’s six excavators digging into a pile of steaming steel turnings and piles of aluminum sheets on pallets, ready for shipping. The manufacturing scrap, including the automobile scrap that now constitutes more than 50 percent of Lau’s business, came later to GSL, after Malaysia’s economy began to recover and international investment in the manufacturing sector began to flow in the early 2000s. “Once you open up globally,” he tells me, “you have a more secure business. So that’s what we will do.” This time, however, it’s international scrap, and not capital, that will be the means to grow Malaysia’s recyclers.
Adam Minter is a journalist based in Shanghai, where he writes about business and culture for U.S. and international publications. He also maintains a blog at www.shanghaiscrap.com.
The scrap processors and consumers in this Southeast Asian nation hope to use their ties to China, India, and the rest of the region to become the bridge between developed-world scrap supply and developing-world demand.