“The market fluctuations and changes in regulations as well as import and export policies in different countries have greatly affected the flow of scrap around the world”
Anshul Gupta, Chief Executive Officer, PGI Group, sits down with Swaliha Shanavas to discuss the changing dynamics of recycling, the opportunities as well as the challenges facing the industry, his role in this sector and plans for the coming year, particularly in the light of changing scenarios in the region and around the world.
Tell us briefly about your background and experience in the recycling industry. What triggered your interest in the sector?
I entered the industry right after I completed my certified public accountant course. I joined the family business and received training from my grandfather, an industrialist and steel maker. I also handled the finance operations at one of his public listed companies and developed his export business alongside as they used to manufacture large quantities of alloy steel. I also developed export markets including Sri Lanka, Kenya, Tanzania and the Middle East. After a couple of years, he suggested I travel to the UAE and explore the options. I agreed and since then there has been no looking back.
I travelled a lot as we were selling large quantities of alloy steel in the Gulf region, Africa and South East Asia, and we expanded into some 35 countries. Whenever I travelled, I made it a point to explore scrap opportunities in those countries and gradually developed the recycling side of the business. We started with a small yard operation end 2000, entered the stainless steel segment in 2004 which has grown over the years, and in 2007, started with all the non-ferrous material.
How has your journey been so far?
The journey has been excellent so far. In the scrap business you need to have animal instinct, you should learn to survive and evolve. You learn a lot in the business, and I enjoy this dynamic environment. We need to consider political, economic and many other aspects in this business. So, one has to be well informed and keep track of all the developments worldwide including new government policies, ongoing and upcoming projects, etc. So, it keeps you active and your brain is very vibrant.
In your capacity as CEO, PGI Group, what is your normal day at work like?
My day starts at six with a morning workout and then I check my emails, messages and take care of important phone calls before leaving for work. I’m at the office by 9.30 a.m. and, of course, it’s mostly a busy day at work including meetings and other day-to-day activities. I finish work by 5.30 p.m. and spend some quality time with my family.
What do you love most about your job?
The best thing about my job so far has been my team, they work very hard for the company. My father and wife work with me as well. They are two big pillars and play a very important role in the growth of the business along with other team members. So, I love working with all of them. Apart from that, there is such a dynamic environment around, which always keeps you going.
What is the biggest challenge at present?
The biggest challenge is that the market is volatile and there are a lot of fluctuations. If you want to survive and grow you need to be alert at all times, never lose control over the business, always be aware of your surroundings and what’s happening in different parts of the world. And that’s how you can succeed in the recycling and trading business.
What are the developmental issues facing the metals recycling sector in the Middle East at present?
Actually, most of the companies in the metal recycling business in the region have been doing well over the past few years. A major challenge would be the environment around us due to some geopolitical factors. The other sectors are not performing as well as we had hoped, so it indirectly affects the generation and collection of scrap in the region. Of course, we also have to sell the material to smelters and so on. So, if the development and growth in real estate is not as expected, their demand is also weaker, which indirectly affects us in terms of supply and demand. This is a challenge and you need to evolve and can never expect to achieve the same kind of growth every year.
Any other changes you might have observed in the region’s metals sector over the years?
The biggest change we see is that the governments are becoming more proactive now. The norms and even the licencing procedures for scrap processing are changing. For instance, you need additional licences for handling hazardous waste, etc. Various emirates are taking necessary steps to streamline the processes. Everyone is getting serious about plastic and hazardous waste and trying to find ways to reduce the amount of waste being generated, and also deal with different types of waste in the right manner to reduce the impact on the planet.
With China and many other countries banning scrap imports and imposing restrictions on various types of scrap, what is the current state of the business?
Most of the countries are now following a policy similar to that of China. No one wants the waste from other countries ending up in their nation, which is fair. As per the norms, you should be sustainable enough to handle the resources properly, because it is not ‘waste’ but a resource that can be reused or recycled. This is an opportunity with a challenge and most of the governments are beginning to see the benefits. Various countries that have steel or aluminium plants have even banned the export of certain types of metal scrap and prefer that their resource be recycled, and the value-added products be exported or used in their country. This scenario is starting to be seen in many countries and in this we see an opportunity.
Do you think this region would be willing to adopt this model? How do you think these developments would impact the trading segment?
Yes, sooner or later this is bound to happen as most of the countries are getting stricter and closer to the same harmonised understanding that waste should be handled in a proper manner and not just exported. So, most countries are on the same page in this regard and it is just that some of them are taking steps faster than others. But I see everyone heading in the same direction. In this region, there are examples of companies trying to utilise the resources thereby reducing waste going to landfills. I think this could be reflected in government policies in the near future.
These developments will surely have an impact on trading as it would involve different aspects. We would need to find ways to create added value to succeed in the trading business. For instance, when China started strictly implementing its green fence policy starting 2017, many companies started producing and exporting commodities processed from scrap, rather than shipping scrap to China. This actually presents an opportunity to those who are fast enough to produce commodities from scrap and export to ensure value addition plus margin.
So, it helps both ways – China, by giving them a better quality resource; and here there’s an opportunity to create jobs. Trading does not create job opportunities, but processing and commodity production helps create more jobs, thus contributing to the economy.
We’re in the last quarter 2019. How has the Metal Recycling sector worldwide, and particularly the Middle East, fared during this year?
I think this year has been great in terms of vibrancy, a year full of challenges. Each government is coming up with new plans, policies, and the market is changing a lot due to the ongoing trade war between two world powers. All these factors have affected our industry a lot and created disruption, and disruption always creates opportunity. So, whoever is first to cash in on this opportunity will do well in the business. It’s always good to observe the changes and try to adapt to the situation instead of complaining.
What key market trends have been influencing the situation and how is the industry responding to the environmental approach and strict quality requirements of key markets like China, Malaysia, etc?
The market fluctuations and changes in regulations, import-export policies, waste management policies in various countries have completely affected the flow of scrap all over the world. The scrap which used to head to China is now being routed to various Asian economies or rather being processed in Europe and USA. Most countries have begun to understand that China will not be opening up the grilled fence anymore. Some players have invested huge amounts in processing in their own countries. Most people are moving in that direction, and with this change the machine producers are quite happy as their order books have been full in recent times. Thus, this is a good opportunity to handle the waste produced, create job opportunities in your country and possibly use your own raw material. Companies with good capital expenditure capacity can invest money and process the material in their own nation to create a value addition and then export it. Many of the resources can also be reused within the country rather than being exported.
What has been PGI’s experience over the past couple of years and are there any changes in your business model? What are your key objectives for the next two years?
Our business is more or less consistent, we are trying to do more of processing now. PGI is also planning to start plastics recycling, mainly as part of our CSR obligation. And this idea came from my daughters who are being educated on these aspects in school. The good thing is that students learn and pass on the knowledge to parents as well. We are setting up a small plastics recycling plant as a pilot project, and if it is viable, we will expand the same.
PGI plans to start operations in Saudi Arabia too. We had a good research and development trip this year and will start with an office and trading activity in Saudi. If all goes well, we will need to have a facility there. So far we are happy with our two facilities in Sharjah. We have two facilities in Thailand that are doing well, and we expanded our operations there by adding a plant in January 2019.
What is the outlook for the coming year?
2020 seems to be a positive year. We see a lot of people coming in, I’m sure the trade would be moving upward in the UAE. So, how do we encash the opportunity? We need to think further and also work together with all stakeholders to make the best out of the situation.
What do you like to do in your spare time?
I enjoy cycling, it has been my passion for the past two years. Of course, everyone loves to travel, and I do travel a lot as we get to learn about different places, cultures and try different types of food. My thir d biggest passion is cooking, and I try to cook a meal for the whole family at least once a week. That’s my unwinding time with the family.