Steel recycling firm Shin-Ei Holdings is a company that epitomizes Japan’s modern economic miracle in the face of mineral resource scarcity. As an island that is scarce in mineral resources, Japan’s economic success has long been considered somewhat of an industrial miracle, with the country having had to develop technologies that process and utilize imported materials in an efficient and innovative manner. Shin-Ei Holdings is one such company that has pioneered such industrial processes. We speak with president, Toyohisa Kaneko, to get his valuable insight into the steel industry and the importance of recycling this vital commodity.
I would like to start off by asking you about Japan because Japan is somewhat of an industrial miracle. As an island nation that is poor in mineral resources, Japan has had to develop technologies to utilize resources that it imports in an efficient manner. As a company involved in metal recycling, can you tell us what technologies the Japanese recycling industry has developed and what can that industry teach the world?
As you mentioned, Japan has faced the challenge of scarcity of resources for a long time and our biggest mission was to effectively utilize the resources available to us. Of all the materials and resources, Japan has focused on steel the most. There is the saying that “steel is a nation”. That is why the value of steel has increased. Steel is a very high- performing recycling material, so our focus has been on how to recycle steel in our daily life. It is difficult to recycle steel that is mixed with other metals such as aluminium and copper. It is important to think about a way to separate the steel from the non-steel. That was the key to doing proper recycling. Based on that focus, we have advanced our recycling technology.
Can you describe the monozukuri process of your business? What, for you, is the essence of monozukuri?
As I mentioned earlier, Japan has limited resources and land for the nation, so we thought seriously of ways to improve the use of our limited resources available to us. I think that is the origin of our monozukuri spirit. Recycling is an important part of monozukuri. In order to better the technology, we had to really listen to the needs of the customers and try to satisfy those needs to their level of satisfaction. One of the things that we should try to think about is how to remove the impurities from the recycling materials. Sticking to the satisfaction of the customers is the base of monozukuri. Take, for example, the blade. As you process it more, the blade will be strengthened. That kind of deep dive into the better solution is the base for monozukuri.
In the case of your company, where are you sourcing most of your materials which you currently are recycling and where are you looking to increase the recyclability? Are there alternative sources that you could possibly receive steel from scrap steel to recycle steel?
In terms of the current source of the materials for recycling, the biggest source is the automotive industry, but this is probably unique to this region. But if we think about Japan as a whole, I think the biggest source for recycling is society or our daily lives that includes building or construction materials. It also includes the social infrastructure such as the railway for trains and the steel used for the highways. These are the current biggest sources of those scraps and the volume of scraps from those lifelines will continue to grow. However, if we look at countries like Japan or the United States, which are mature countries, it seems that the volume of scraps will not grow because these countries are facing a population decline. The amount of scrap per person in their lifetime is already limited so the volume of scrap for the future will decrease over time. The market that we need to focus on ten years from now is going to be the advancing countries.
If you look at your company, you have been founded in 1939 and recently consolidated into a group of five companies: Shin-ei Kinzoku which processes metal scrap; Shin-ei Material which focuses more on difficult stuff such as steel cables or copper; Shin-ei Eco which focuses on disposing of waste materials associated with processing metals; your Transportation Division; and your most recent purchase, Kowa, which specializes in aluminium or nonferrous metals. Given these four breakdowns, with transport not included, which is the main focus of your business? And tell us please more about the synergies you were able to create between these four distinct yet similar lines of business that you operate in.
As you have said, we were founded in 1939 as the Shin-ei Kinzoku and this company treated scrap steel. We have diversified since then. However, Shin-ei Kinzoku remains to be the axis of all these group companies, and it is going to remain the key company going forward. However, we are now focusing more on Shin-ei Eco Life that is dealing more with the disposal of industrial waste. As I mentioned, steel is an excellent high-performance kind of metal when it comes to recycling but among the other industrial wastes, we believe that there are other metals or materials that can be recycled. So, our mission is to reduce the reclaimed land without being recycled. We will try to find materials that can be recycled other than steel. Going forward, Shin-ei Eco Life is going to be the other axis for the group companies.
We know that your company can do a wide variety of different materials, and the construction industry such as the automotive, aerospace, and farming industries require such materials. But if we look at the automotive and aerospace industries, we see there is a change in demand for different nonferrous and lighter materials such as magnesium, aluminium, titanium, even resinous composites like CFRP. They are being demanded to reduce the weight of cars or aeroplanes. Can you tell us how you are adapting to this? What technologies have you developed to recycle these lighter, nonferrous alloys or plastic resins?
We need to find out a way to recycle materials that will replace steel going forward so our challenge is to be a part of the recycling process for those changing materials. As you mentioned, we acquired Kowa to strengthen the recycling technology for aluminium and there is a prospect that car bodies will be replaced with aluminium from steel. In looking ahead, we have acquired Kowa to deal with these challenges. We are still exploring ways to adapt to the changing materials.
Not all scrap materials are equally valuable. We know that materials such as aluminium, brass, and copper which do not contain an R&R are much more sought after in the international market. Can you tell us more about how in your midterm strategy, you are adapting to focus on these more valuable and high-demand materials moving forward
Speaking about steel, steel is mixed with so many different other metals such as copper, nickel, chrome to make it stronger or harder. There are so many different types of steel products. We are still researching the changing purpose of use for steel or changing steel-made products. In that regard, there is a lot of recycling potential for steel materials. In the automotive industry, there is a rapid movement towards EV under the Carbon Neutral Strategy, so we are paying attention to batteries or coppers. So, the materials such as aluminium, coppers, or nickel will be on our radar going forward for recycling. We are still deep diving into the new materials to find out a good way to recycle them.
You have gone international since 2011 when you opened in Korea and after that in 2015 in Thailand. In the Asia Pacific, there is a huge increase in demand for ribbed metal, and with it will be the increase in demand for recycled material as rapid industrialization takes place in countries such as India, Indonesia, even Vietnam. Can you tell us, what are the benefits of having these two locations in Thailand and Korea and how are you using these two locations to grow your business internationally?
We entered the Korean market first. At that time, we thought that what happened in the United States would happen in Japan and that Korea would follow suit. Since the United States became an exporting country, and then Japan followed, we thought that South Korea would also turn into an exporting country at some point in the future. So, during this time of transition, we feel we will have business opportunities in South Korea. We thought that there would be benefits in terms of proximity between Japan and South Korea. That is why we built a plant in South Korea. In the future, we are considering purchasing a lot of scraps from South Korea and using that for recycling. We have an advantage in terms of quality control because we have transferred the know-how for quality control in South Korea. We can grow that business in that local market then we would like to expand that to other regions such as Southeast Asia or the Middle East.
Speaking about Thailand, we have mentioned earlier that the consumption of steel in this region will grow moving forward. We believe that there is a lot of steel that is currently being used in their daily lives. Ten to thirty years from now, those will become scraps for recycling. Since this country has a lot of consumption of steel and a lot of potential scraps, we have chosen this country as the centre for the scrap industry for the Southeast Asian market. That was an investment for future growth.
Moving forward internationally, what would be your go-to strategy? How will you look to further develop your business as you grow internationally? Will you be doing joint ventures? Will it be a merging and acquisition? Will you open another factory or even another sales office? What will be the go-to method for the expansion?
At this moment, there is no specific plan or strategy for international expansion. But through Our Oversea Business Department’s (Chief Officer, Mr. Ozawa ) negotiation, we are now trying to deal with the recycling challenge for India. There are a lot of cars that are abandoned on the streets everywhere. It is a national problem dealing in recycling these abandoned cars. So, we got an offer from India for the recycling technology partnership. That is our mission going forward and we must think about how to solve this problem together.
I have one last question for you. This question is a bit more personal. To get to know your professional ambitions as the president of the company and most importantly as the third generation of a family business, imagine we come back in two to three years time and interview you all over again, what would you like to tell us? What are your dreams for the company? And eventually, what legacy would you like to leave for the next generation?
Two to three years from now, I would like to grow Shin-ei Eco Life that deals with industrial waste. We call our group company a comprehensive recycling company and we would like to be able to recycle all kinds of industrial waste. We need to advance our technology for metal recycling. We still have a lot of room for improvement in the treatment of the industrial by-product so we will continue to grow the recycling technology going forward. As for my legacy that I want to leave for the next generation, there are so many people who have followed my grandfather in this company and really grew this company. So, my mission is to make this company stronger and more needed by society. I think it is important to always have a fighting spirit to achieve that. We also need to pursue more international expansion and further expansion or growth for technology. And I hope that every one of our employees has such a fighting spirit so that we can work together to grow this company going forward.
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