ONE man's trash is another man's treasure; and Frank Chen, founder and managing director of BR Metals Pte Ltd, has turned recycling spent catalytic converters into a US$130 million business.
BR Metals recovers platinum group metals - specifically palladium, platinum and rhodium - from catalytic converter scrap that it acquires from suppliers such as car scrapyards. These are highly valuable metals: rhodium, for instance, is currently about 14 times the price of gold.
The recovered metal is processed and refined, and then sold to buyers such as precious metal trading houses.
The business was started in China in 2009 by Mr Chen, a Singaporean and former business consultant at one of the Big Four accounting firms.
During his travels to China for work, he observed a lack of price transparency in China's metal recycling industry and saw it as an opportunity to enter the market.
"Those in the West already had a pretty sophisticated and transparent way of conducting business in our industry, but those in the East did not. So naturally, there was a gap to close," Mr Chen said.
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He added that he also had an advantage as a Singaporean in China back then, as Singaporeans were perceived to be able to bridge Eastern and Western thinking, as well as converse in English and Mandarin.
VALUE-ADDED SERVICES
BR Metals set out investing in sophisticated sampling and laboratory analysis equipment - some costing a few hundred thousand US dollars each - and methods in order to establish the accuracy of its ability to sample and test for precious metal content in the scrap. This not only allowed the company to lead in price transparency, differentiating it from other players, but also to reap better margins.
The company currently has four patents for different components of its sampling line, which were developed to increase efficiency and reduce material wastage.
Said Mr Chen: "Our ability to quickly and accurately analyse the precious metal content in our scrap materials enables us to hedge our precious metals and manage the price risk, by mitigating the risk of overpaying for the materials. We are also able to pay our suppliers more quickly."
The company also offers value-added services, such as metal hedging and logistics, to its suppliers.
On hedging, for instance, Mr Chen said: "Commodities have super cycles - prices can rise very high and then drop very low. If companies don't practise active hedging, they could make a lot of money in the upturn and lose it all in the downturn. So, we actively share this idea with our suppliers and encourage them to hedge in advance."
This has helped BR Metals retain nearly all of its suppliers over the years. Its technological edge, meanwhile, has helped it edge out some competitors in China and Asia.
In recent years, the company has also invested in automation to raise productivity. In 2018, the engineering team in Singapore came up with a solution to automate a process in the sampling line. Doing so reduced each production cycle's time by 72.07 per cent, electricity use by 48.26 per cent, and costs by 38.15 per cent.
Between 2016 and 2020, BR Metals' revenue rose from US$4.8 million to US$130 million.
The company recovers about 80,000 troy ounces of metal today. It has a processing facility in Singapore as well as a new one in Shaoguan, China, to handle increasing volumes of scrap.
The company's headquarters are in Singapore - it set up an office here in 2014 to take advantage of Singapore's newfound status as a regional precious metal trading hub. It also has offices in Guangzhou and Cambodia, and employs about 60 people in total.
ONWARDS AND UPWARDS
Mr Chen has a few plans for the company going forward: "The downtime during the Covid-19 pandemic gave us time to reflect and redesign our machines and processes. It also gave us a lot of time to look at other business ventures that we could diversify into."
One of the plans is to continue research into improving its methods of analysis, to maintain its edge over competitors. For instance, BR Metals is working with the Singapore Institute of Technology to develop a quicker and more cost-effective method for precious metal analysis that still maintains accuracy.
Another plan is to diversify into recycling electronic waste, or e-waste. This is to reduce the business' concentration on catalytic converters, especially as Singapore plans to phase out petrol and diesel vehicles by 2040.
For a start, BR Metals will focus on automotive-related e-waste, such as cash card readers and engine control units. "We can leverage our existing supplier network to purchase e-scraps at competitive prices. Our existing risk management and operational systems can also be replicated and deployed in e-waste recycling," Mr Chen noted.
"This will put us in good stead for future expansion into processing other types of e-scrap including those from the semiconductor industry," he added.
Finally, the company may revive plans to expand into Vietnam if the Covid-19 situation improves and air travel resumes, Mr Chen shared. The aim is to reduce the business' reliance on the Chinese market, which still contributes the most to its overall revenue.
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