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 become.
"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.