Anyone doing business in Asia will sooner or later come
across an unfamiliar cultural situation-for example, how to
best eat giant braised goose webs.
For Stephen Greer, who left Pittsburgh with a one-way ticket
to Hong Kong in the early 1990s to try his hand as an
entrepreneur, that was just one of the learning experiences
along the way to setting up what would become a $250-million
scrap company, Hartwell Pacific Ltd.
Greer, who tells the story of his rough ride to success in
his book Starting from Scrap, notes that it was no
secret in 1993 that Asia was the "workshop of the world." But
the scrap metal business, which he settled on after attempts to
trade anything from chicken feet to toothbrush holders, was at
the time a shadow of the multibillion global market it has now
"I felt fortunate to be in at the beginning of this market,"
Greer told AMM. With China emerging as a major world
player and the other Asian "tiger" economies posting strong
growth rates, Greer soon grasped the opportunities and set up
scrap trading operations in Southeast Asia and China.
More by accident than design, Greer focused on trading
stainless scrap. "There was only one problem," he wrote after
securing his first contract for the prompt shipment of two
containers of stainless steel scrap to Britain "We knew next to
nothing about stainless steel."
But he had a major customer, a large German recycler that in
the book he calls Nickelmet (though industry players will have
little problem guessing its real identity). The company for a
while became his employer before an expensive failure to break
into the Taiwanese market led him to go it alone.
After struggling to service a large contract with South
Korea's Posco Ltd., Hartwell Pacific decided to make the shift
from being a brokerage company and instead become a metals
recycler with its own yards. It was a critical move. Greer
notes that while it limited his young company's ability to grow
volume, "we became less interested in volume growth than in
servicing the market, and made more money that way."
Greer's strategy-to find "inefficient" markets that generate
stainless scrap but have no big stainless steel producers as a
major competitor-led him to focus on Hong Kong, the
Philippines, Malaysia and Thailand. Attempts to replicate the
strategy in Mexico and the Southeast United States were less
successful, however. Greer describes his Latin American
strategy as a "disaster," as the company quickly over-expanded
and was burned by corruption in Mexico.
Hartwell Pacific kept growing, though not without problems
dishonest local employees, fraud that cost the company upward
of $1 million, plus other issues familiar to anyone doing
business in emerging markets, such as having a shipment of
stainless from China that turned out to be largely lead ingots.
Not that Greer believes those issues are confined to Asia, or
to the scrap market. Fraud is a challenge in any market based
on a high level of inventories, he said.
Greer also has learned from his mistakes the discovery of
the lead ingots made him realize the need for quality control
and helped him build a company with "equity value," something
not every scrap trader manages to achieve.
Greer hasn't revealed the dollar value of Hartwell Pacific,
which he agreed to sell to Australia's Smorgon Steel Group Ltd.
in 2005, but it was clearly enough to set him-along with his
business partner and later wife, Mei-up for life.
But the fun of Greer's book isn't so much in the eventual
success story as its rare insight into the Asian scrap market
over the past 15 years, as well as the tips it provides for how
to handle such situations as surviving the cutthroat Bangkok
business world (pretend to launder cash for the Russian mafia)
or have a trouble-free trip through Kuwaiti customs (leave the
AK-47 behind). Scrap, as Greer notes, is a more interesting
business than most would imagine.
And for anyone wondering about how to eat giant braised
goose webs, which Greer encountered during a banquet in
Shenzhen, China, to celebrate the opening of his Chinese
venture tackle them ice-cream-cone style, while wearing a
plastic glove. In comparison, the scrap market seems like a
piece of cake.