International Trading Supplement--Growing Gateway

In a 1998 profile in Recycling Today, the Tung Tai Group was referred to as a "Gateway to Asia" for its ability to ship material to regions in China.

Eight years later, the Tung Tai gateway remains wide open and, in fact, offers additional markets for scrap metal and plastic exported from North America to China’s still-booming manufacturing sector.

The company has benefited from its early position as an importer of scrap materials to China and continues to focus on gaining market share and establishing a reputation for quality in the scrap importing and shipping industries in China.

FRONTIER MENTALITY

Tung Tai was in a position to take advantage of China’s metals industry boom because it was an already established shipper of scrap on the sea lanes from the United States to Taiwan.

The company’s roots trace back to the early 1970s, shortly after Joseph Chen moved from Taiwan to the United States in 1969. In 1972, Joseph began brokering nonferrous metals from the United States to Taiwan.

Just 11 years later, in 1983, Tung Tai Group, which is based in San Jose, Calif., opened its first processing location in China.

The scrap processing facility was one of the first of its kind in China, but in this case the company with its foot in the door stubbed its toe. Unfortunately, Chinese regulators who were not certain what to make of the operation shut it down, citing a lack of licensing requirements.

Joseph and Tung Tai persisted in learning the Chinese market and the regulatory climate, and by the late 1980s the company could operate with more confidence. "By 1989, Chinese officials had become more familiar with the scrap business," says John Chen, Joseph’s son and current executive vice president of the company.

When doing business in China, knowing the right people can also be critical, according to Joseph. "Relationships are very important here. In China, you have to know a lot of people," he remarks.

Joseph remains president of Tung Tai, which now has a total of 11 processing facilities and trading offices in the United States, Taiwan and China.

ECHOING THE BOOM

Joseph’s foresight in entering the Chinese market early on in its economic liberalization has allowed Tung Tai Group to establish operations in the major metals-producing regions of China throughout the course of the nation’s economic expansion.

The list of Chinese cities in which Tung Tai has operations reads like a roster of metals production centers in that nation: Nanhai, Shenzhen, Shanghai, Tianjin and Zhuhai among them.

A visitor to Tung Tai’s Nanhai operation (located in the nearby city of San Shui) can see a wide variety of nonferrous scrap grades, along with growing amounts of ferrous and plastic scrap that are being processed and stored on a parcel of land adjacent to the nonferrous facility.

On one day during a June visit, John estimated that about 10,000 tons of inventory was on the ground at the facility, which he called typical at the San Shui facility.

Some 3,000 tons of that total was copper-bearing red metal scrap, most of it stored under roof at the San Shui facility, which is one of the highest-volume yards run by Tung Tai. The importance of the plant is borne out by the fact that Joseph’s brother Ho Chen serves as plant manager. Another of Joseph’s brothers, Ping, oversees the facility in Shenzhen.

The red metal at the yard includes some wire and cable and a few motors, but most is sorted copper and brass scrap grades being prepared for nearby brass mills and copper smelters.

At each location and throughout its history, Tung Tai has shown a willingness to serve the markets as they have evolved in China. At one time, this may have meant mining electronic scrap for circuit boards and wiring.

But now, with Chinese metals producers willing and able to pay for premium scrap, Tung Tai is focusing on gathering the aluminum, copper and brass grades that are in demand.

With facilities located at or near ports throughout China, Tung Tai is able to direct its shipments to match the demands of consumers. Thus, more red metal scrap heads for the northern ports, while the southern port locations take in greater amounts of aluminum to feed China’s many melting plants in that region. "Our intent is always to import scrap to match the nearby consumers," says Joseph.

The era of high pricing has encouraged Tung Tai to move beyond nonferrous metals and also import plastic scrap and ferrous scrap. On the plastics side, getting to know that market also allows the company to prepare and market its wire and cable coatings and other forms of plastic that some of its nonferrous customers generate.

And while Tung Tai’s facilities are designed to handle scrap that is shipped via intermodal container, high ferrous prices have allowed some forms of ferrous scrap to make the trans-Pacific journey via container.

FEELING AT HOME

In a nation that has become a global leader in the production of aluminum, copper, brass and steel, Tung Tai holds a relatively small market share of the supplier segment needed to feed such huge industries.

But the company’s multiple locations and long-lasting ties to North America have helped it become one of the few scrap firms with operations throughout the People’s Republic of China. "There are not a lot of national players in scrap metals at the moment," Joseph remarks.

The well-established model for the last two decades has been to bring North American scrap to China, matching one of the world’s largest scrap generators with its fastest growing consumer.

But Joseph, John and the other key people at Tung Tai have been mindful of how scrap flows can and will change over time. In one move to ensure that it can continue to tap into adequate supplies, the company has hired Joffre Valles as purchasing manager for Latin America. Valles, a native of Venezuela, works from a trading office in New York to establish ties with scrap generators and dealers in Latin America.

Another opportunity for Tung Tai will be establishing itself as a buyer, processor and broker of scrap generated within China. Now, there is what John calls "a big separation between import and domestic yards."

Currently, import yards can better serve the needs of consuming mills and smelters that need scrap of a defined chemistry that is ready to melt. Additionally, only a minimal number of China’s relatively young pool of vehicles and appliances are being scrapped. Most older cars and appliances make their way into China’s less wealthy interior, where they remain in operation.

But with both manufacturing scrap available and a stream of cars and appliances certain to form, "eventually, people are going to start collecting [more] domestically," says John.

Joseph and John estimate that only about 10 percent of the scrap Tung Tai handles is generated from within China. "But that will grow—that’s certainly our plan," says Joseph. "If you set up a good system, there will be great opportunities for scrap collection in China," says Joseph.

For Tung Tai, this has meant employing some 2,000 people throughout the nation. And as in any other part of the world, the company has made a concerted effort to promote from within and reward its best workers.

It is a formula that has helped Tung Tai Group build a strong bridge reaching across the Pacific Ocean.