Century Metal Recycling: Quality & Reliability is key for innovation in energy and resource efficiency
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This Indian company shows that Circular Economy businesses should focus on the quality of the products and services.
Century Metal Recycling (CMR) is the largest recycler in the aluminum recycling industry in India. The company manufacturers aluminum alloys from imported scrap. Century Metal’s customers are in the automotive manufacturing sector. They supply to the automobile manufacturers such as Maruti Suzuki India Limited, Honda Cars India Limited and Honda Motorcycle. They also supply to the Tier 1 suppliers to the automobile companies like Rockman Industries Private Limited, Sunbeam Auto Private Limited and Minda Industries Limited. The company has seven manufacturing facilities concentrated in the auto cluster of North India. It also entered into two Joint Ventures. With Toyota Tsusho Corporation it has set up a plant in South India. With Nikkei MC Aluminum it has set up a plant in the state of Haryana in North India. The company supplies aluminum alloys in both solid ingot form as well as in liquid metal form.
In June 2018, the company filed a Red Herring prospectus with the Securities and Exchange Board of India (SEBI) for an Initial Public Offering (IPO) of shares. As a part of the exercise, it commissioned a CRISIL Research Report “Assessment of Indian Aluminum Recycling Industry”. CRISIL estimates that the Indian aluminum recycling industry is capacity is fragmented. CMR with an annual installed capacity of 218,000 MT (as on March 2018) is the largest player in the country. It accounts for about approximately 16% of the estimated domestic capacity. In the supply of the liquid aluminum, the company controlled for 70% market share.
Recycling aluminum scrap is an important component in building a Circular Economy. The Circular Economy emphasizes reducing waste and keeping products and materials in use. This is opposed to the current industrial economy’s “take-make-dispose” approach. Aluminum is the most crucial lightweight construction material and has an important role to play in the Circular Economy. Aluminum is a very energy intensive material. The gross energy requirement for aluminum is 200 MJ/kg. The corresponding number for steel is about ten times less. Recycling aluminum requires only 5% of the energy required to produce primary aluminum from bauxite. The supply of liquid metal leads to additional environmental benefits. Century Metal supplies the liquid metal directly to the customer’s production line. It, thus, reduces the energy required to re-melt the solid ingots. It also leads to material efficiency. During the re-melting, the aluminum reacts with oxygen to form an oxide. This “oxide loss” can be as much as 5% of the aluminum. In June 2015, the company registered a project under the Clean Development Mechanism (CDM) for its plant at Bhiwadi. The Bhiwadi plant was set up to supply liquid metal to Sunbeam Auto. The project’s annual emission reductions was estimated to be 8,713 tCO2e. The assumption was that the annual production would be 16,500 tons per year.
CMR started its liquid metal business in 2006. Its first customer was Rockman Industries. CMR set up a plant next to a new plant Rockman was setting up at Haridwar. It followed up with another liquid metal plant for Sunbeam Auto in Gurgaon in 2009. The company was not able to receive carbon credits for its existing plants. It could only apply for a brand-new plant. The opportunity came up when Sunbeam started a new plant at Bhiwadi, Rajasthan. CMR was contracted for supplying liquid aluminum alloy. This was in 2011. Mohan Agarwal, the founder of the company, told me that the CDM project certification was an endorsement of the environmental benefits. It was just that the company did not get any commercial benefits despite the heavy investment in the documentation.
The liquid metal plants are of two types. The initial ones were the “side by side” plants. CMR set up its plant just next to its customer’s plant. It supplied the customer with the liquid metal in the same type of laddle used by the customer. The liquid metal is then poured directly into the customer’s manufacturing line. Essentially CMR’s operations are an extension of its customer’s premises. Mohan Agarwal learnt about liquid metal technology in Europe. There, the liquid metal is carried in large ladles (about 3 tonne liquid metal in 7 tonne ladles). The customer must have infrastructure to store and distribute the liquid metal. Agarwal figured out the best way to add value would be to eliminate all the extra investment. The opportunity came when Rockman, its existing customer, decided to set up a new plant. Agarwal asked them whether it would be possible to mirror their operations in Century’s end. The added benefit was the customer would not have to bear the inventory carrying cost. It borrowed from the “just-in-time” manufacturing method developed in Japan.
The other type of liquid metal plant was also adopted from Japan. In Japan they use smaller ladles (about 1.5 tonnes) in which about 0.8 tonnes of liquid metal can be stored. The use of smaller laddles allows “on the road” plants. Here liquid metal is supplied to about 5 or 6 customers in a maximum radius of about 25 kilometres. The liquid metal has to be consumed by the customer within an hour of dispatch. Safety is a critical issue. The ladle has to be secured so that even if it topples, the liquid metal will not leak.
The recycling of waste is an important component of the Circular Economy. The challenge as the Economist special report on waste pointed out is to build companies that do this at scale. The one challenge is that the supply of primary commodity often fluctuates wildly. It is therefore difficult to invest in large recycling capacities. CMR is the largest aluminum recycler in the country. It has about 70% market share in the liquid metal market. In 2018, the company and its Joint Ventures Partners were setting up three plants. The lesson to be learnt is the focus on quality.
The logistics of supplying liquid metal are mind-boggling. A “side by side” plant makes as many as one hundred deliveries a day to a single customer. An “on the road” plant can make about one hundred and twenty deliveries to several customers in a single day. The deliveries are made directly to the customer’s machines. One of its customers has 96 machines and CMR’s ladles feed them directly. The company takes complete ownership of the quality of the metal. There is no way the customer can check it as it goes into the production line. Indeed, because the supply of metal is outsourced the customer’s expectation of quality has gone up. CMR can meet these expectations because it considers itself a metal supplier. Parameters such as temperature, gas content, metal composition and metal cleanliness are rigorously monitored in a way that customers who melt ingots for their production often cannot.
It is not just about the quality of the product. It is the predictability of the service. Missing a delivery would mean a loss of production on the part of the customer. Customer production schedules are notoriously difficult to predict. It is often that a few of the customer machines are down on a day while on another day all machines are exhibiting high demand of the metal. For a company like CMR which uses imported scrap, the poor quality of Indian infrastructure adds to the uncertainties. Shipments of its raw material can be delayed. Customer deliveries can be disrupted The company has to plan its plant locations, its own stocking of raw material and its own scheduling meticulously.
The lessons from CMR reflect the recommendations made by Subir Chowdhury, the quality guru in his heartwarming book The Ice Cream Maker: An Inspiring Tale About Making Quality The Key Ingredient in Everything You Do. Subir Chowdhury makes the point that it is not just important to innovate in bringing new products to the market. It is equally important to sweat the quality details to maintain a position of leadership. Quality starts with the leader listening intently. When CMR set up its first liquid metal plant with Rockman the founders of both companies worked together. They thought through the details and planned for contingency situations. They were both excited at the prospect of doing something new in India. Agarwal’s customers were his inspiration and motivation. The next step is to enrich the customer experience. CMR decided that it needs to increase the quality of the metal that the customer would get from melting the ingots themselves. Instead it asked customers “what is the quality you dream of?”. It then worked at meeting those standards. The next step is to Optimize. It means recognizing the price of failure. In the case of CMR it meant that its customers would lose either because of loss of production or rejects. This was not acceptable and CMR decided to think through all its processes to ensure that this does not happen.
The series of blogs is based on my experiences in working on the KfW SIDBI Innovation Finance Programme between 2013 to 2015. It was one of the most satisfying periods of my professional life. I worked with a wonderful team of Dr. Jürgen Bischoff, Mikael Henzler, Harsh Kaul, Rakesh Rewari, Rukmini Parthasarathy, Maike Lerch, Ravi Tyagi, Laxmi Narayana, Cosima Strahr and Chinmay Dholakia. These series of blogs are my way of appreciating them and all the inspiring people I met. Century Metal Recycling took a loan from SIDBI. I thank Mr Rishi Dwivedi for introducing me to the company officials.
