January/February 2011
With scrap markets rolling again, China is focusing with gusto on developing its “Circular,” or sustainable, economy, which includes a bigger and more technologically advanced recycling industry.
By Adam Minter
For a decade, China’s many recycling conferences have served as a barometer of the health of the world’s biggest scrap import market. In down years, the convention halls were sparse; in up years, meetings spilled into all-night negotiating sessions that forced hotel cafes and bars into fourth shifts. The 10th annual International Secondary Metals Forum, held Nov. 7-9 in Ningbo, China, continued that tradition. Buoyed by a bull market in many nonferrous metals, this premier Chinese scrap conference—organized by the Beijing-based China Nonferrous Metals Industry Association’s metal recycling branch (CMRA)—bested its old attendance record by attracting roughly 1,800 delegates, 300 of whom came from nearly two dozen other countries. For the few attendees who broke away from the 24-hour trading sessions to sit in on the conference speeches, the event provided a candid view of the state of China’s nonferrous scrap industry currently and projections of its next five years. In light of some notable announcements at the event from Chinese government officials, attendees might look back on the 10th forum as a pivotal point in the regulation of China’s scrap industry.
Change was definitely in the air, especially in the record-breaking exhibition area, in which 50 exhibitors showcased their machinery and technology. The expo hinted at the growing industrialization of China’s recycling industry. Though the vast labor force that has defined the Chinese scrap business will continue to play a role, the industry is slowly but surely adopting developed-world processing techniques. One sign of that shift was that for the first time, the 2010 CMRA forum included a Metals Industry Technology and Equipment Summit at which senior scrap industry advisers to the Chinese government outlined future technology upgrades in that sector.
In large part, the mechanical and technological changes to China’s scrapyards are a response to China’s next five-year plan, the national economic planning document that provides a road map for the country’s development. The 12th plan, due in 2011 and covering years 2011-2015, will include a section that raises the secondary materials business to the level of a strategic industry on par with steel, oil, defense, and other enterprises considered essential to Chinese national security and social stability. This transformation of the industry’s stature was reflected in the confident and determined faces of conference organizers, government officials, academics, and industry leaders who envision a robust future for the world’s most important nonferrous scrap import market.
The Current State of Affairs
For years, CMRA President Wang Gongmin has given the most important speech at the conference, and this year was no different. Wang traditionally gives what amounts to two speeches: The first, printed in the conference proceedings, offers government statistics and regulatory information, but that printed text only serves as the foundation of the broader discussion of crucial issues he delivers in person at the forum. This year, he repeated that pattern, providing noteworthy information in both addresses.
In his published speech, Wang revealed that, from January through September 2010, China’s output of secondary nonferrous metals was 5.55 million mt, up 17 percent compared with the same period in 2009. Secondary copper accounted for 1.75 million mt, 17 percent higher year on year; secondary aluminum reached 2.82 million mt, up 22 percent; and secondary lead totaled 980,000 mt, up 6 percent. For all of 2010, China’s secondary nonferrous metal output could reach 7.2 million mt, he said.
Turning to the scrap trade, Wang reported that China’s nonferrous scrap imports grew 11.6 percent, to 5.37 million mt, in the first three quarters of 2010 compared with the same period in 2009. Its copper-bearing scrap imports were 3.22 million mt, up 7.7 percent year on year, while its aluminum scrap imports hit 2.15 million mt, up 18 percent. Wang offered no figures on lead scrap imports because they are not allowed under Chinese law. He attributed the higher scrap prices in 2010 to increasingly steep competition from India and Southeast Asia.
In his printed remarks, Wang applauded the Chinese scrap industry’s ongoing consolidation, pointing out that the country now has more than 20 resource recycling parks that process both imported and domestic recyclables. Six additional parks are under construction or planned, he noted, adding that China intends to establish parks in remote, politically sensitive Xinjiang and Tibet provinces as economic development moves into its western frontier. “These [parks] serve as the material supply base for [the] secondary nonferrous metal industry,” he said.
Wang lauded the development of several large-capacity secondary nonferrous processing facilities across the country. “Total investment is hard to figure, but it’s big,” he said. The enterprises include significant lead recycling operations, including a lead-acid battery recycling facility under construction that will have the capacity to process 300,000 mt of batteries a year, Wang said. In his view, the growth of China’s automotive industry is forcing its lead recycling operations to make immediate technological upgrades, and much of that technology must be imported—for now.
The most startling moment in Wang’s spoken address came when he transitioned from comments on industry consolidation into a lengthy soliloquy on new regulations. Pausing, he glared at the mostly Chinese crowd. “Please wake up,” he said. “I’m going to raise my voice, OK? We will concentrate the industry. If you don’t have environmental and energy-saving equipment, you will be eliminated. We will eliminate enterprises. If you don’t fit into the requirements, you will be eliminated.”
As if heeding Wang’s words, some of the delegates in the hall—many of whom were sleepy after the buffet lunch—did appear to wake up. Certainly, the few international attendees in the audience snapped to attention. Despite the seriousness of his threat, Wang only spoke generally about the type of environmental or energy-saving technology he or other top-level officials would like to see. To an extent, this is by design: Wang is one of the drafters of the secondary materials section of the 12th five-year plan, and five-year plans contain specific production goals but only general statements on the means to achieve them. According to Wang’s written speech, China’s secondary nonferrous metal production will reach 11.1 million mt by 2015, with secondary copper production at 3.8 million mt, secondary aluminum production at 5.8 million mt, and secondary lead output at 1.5 million mt.
In a more general sense, Wang made it clear that China’s secondary nonferrous metal industry will play an important role in advancing the nation’s “circular,” or sustainable, economy by investing in environmental and energy-saving technologies that will make it harder for players to enter the industry. At the same time, however, he was clear that he expects these changes, rather than further limiting the kinds of materials China can process and import, instead will result in China expanding the recyclable-material imports it allows. To some extent, this process already is underway. Early in his written speech Wang stated that the National Development and Reform Commission (Beijing), China’s economic planning agency, issued a circular in spring 2010 calling for an “urban mining” demonstration base, for which it had selected two sites, in Taizhou and Tianjin. Urban mining, as China uses the term, is the process of extracting materials from scrap appliances and electronics. In this same vein, Wang stated in his written remarks what was perhaps the biggest news of the conference: “We will add to the variety and expand the scale of imported scrap metals,” he wrote. “On the one hand, scrap home appliances, circuitboards, [and] scrapped cars are all valuable renewable resources. On the other hand, recycling technology has matured, and the processing shall not result in secondary pollution. But those products are all on the list of prohibited import goods. It is suggested that relevant departments should make policies to approve the import of such products.”
When asked later about this statement, Wang said he introduced it “just to discuss.” In keeping with previous CMRA conferences, during which Chinese officials floated policy proposals before the government enacted them, there’s plenty of precedent to suggest that Wang’s statement was a calculated hint of policy to come.
Shang Fushan, vice president of the China Nonferrous Metals Industry Association, touched on a few of Wang’s points in his own speech. Specifically, he said he does not find the “five-year plan volume estimates so accurate, but we think we can accept these numbers.” In his opinion, the most pressing issue for China’s secondary nonferrous metal industry is the ongoing structural deficit in copper supplies, and any volume targets will have to account for that uncomfortable fact. On the topic of aluminum, he said China’s breakneck construction of high-speed rail infrastructure and its automotive industry largely are driving demand for the light metal. Even with those important consumers, the country’s secondary aluminum industry continues to face overcapacity, “and we must control it.”
Unlike previous CMRA forums, the 2010 event featured only one commodity-specific presentation, an analysis of the aluminum market by Xiong Hui, a senior analyst with Beijing Antaike Information Development Co. (Beijing). According to her data, China’s domes tic supply of aluminum scrap reached 2.32 million mt in 2009, with obsolete scrap accounting for roughly half of that total. Xiong did not supply a figure for the volume of China’s UBC recycling, but she did claim that its UBC recycling rate “approaches 98 percent, ranking first worldwide.” Nonetheless, China imports nearly half of the scrap aluminum it consumes, she acknowledged, with Germany supplying the lion’s share—19 percent—and Spain and the United States tying for second at 16 percent each. In the coming five years, however, China will decrease its imports, Xiong said, in large part because the volume of aluminum introduced in commerce over the past 10 years will begin to enter the recycling stream at a fairly rapid pace, particularly as automobiles are recycled. That doesn’t mean China’s appetite for aluminum will slow, only that it might have greater domestic supplies available.
Raising the Bar, Closing the Door
Though China might soon open its doors to new types of imported scrap, it continues to make it more difficult for new domestic processors, importers, and overseas exporters to enter the business. Indeed, several speakers revealed that government officials are not entirely in agreement on the use of scrap metal imports as a means of stoking the nonferrous industry. Zhou Bingyan, an associate researcher with the China Research Academy of Environmental Sciences (Beijing) and author of the first list of “waste” materials prohibited from shipment to China, opened his speech on “hazardous waste” detection by proclaiming that most scrap imports into China are hazardous. “I have written to the Ministry of Environmental Protection,” he stated, “telling [it] to slow the growth of recycling parks. The only way to meet new volume demands [from parks] is via imports, and that prospect is terrifying.”
Though Zhou’s view is on the fringe, it can’t be discounted due to his prominent position. That said, no other speaker at the CMRA conference gave any indication that China plans to curtail its scrap imports. Rather, they detailed specific licensing measures for domestic processors and exporters alike.
Sui Xiuli delivered the 2010 forum speech on behalf of the General Administration of Quality Supervision, Inspection, and Quarantine, which attracted attention due to the Dec. 31, 2010, deadline for most international scrap shippers to file renewals of their licenses to export to China. In the weeks prior to the CMRA event, international traders experienced difficulties using AQSIQ’s new online filing system (which will be mandatory starting in 2011) and fulfilling certain notarization requirements, among other problems. Sui opened by noting that, since the 1990s, scrap exports to China have increased—“as has smuggling.” With the mood set, she noted that AQSIQ had registered 3,129 overseas suppliers since the start of its licensing program (not all of whom are still registered), and it expects to register more in the coming years. She then shifted to describing the requirements for new and renewing applicants, including the need to provide office floor plans for their locations. From there, she offered a lengthy recitation of the various reasons that license applications—both new and renewals—are denied, including applicants’ failure to provide paperwork in Chinese, a lack of radiation detection equipment at the applicant’s facility, lack of signatures on the applications, submission of hand-written applications, and a “floor plan submitted without dimensions and units of measurement.”
Li Xinmin, an inspector with the Department of Pollution Prevention and Control at the Ministry of Environmental Protection (Beijing), focused on Chinese scrap importers, noting a range of problems including a tendency for licensed, certified importers to re-sell material illegally to non-certified importers. The point of the certification process, Li noted, is to ensure the use of safe, environmentally sound processing techniques in China. Shifting material to non-certified importers circumvents that control. “We still have lots of illegal enterprises without certification,” he said. “Some very well-known enterprises still have very backward methods. They burn material at night. In Jiangsu [province], we saw a lot of smoke. The local people told us they are burning at night.”
As a result of these and other violations, the MEP plans to improve its import regulations in the coming year and “enhance enforcement,” Li said. Much of this enforcement will parallel the ongoing implementation of China’s new e-scrap regulations. According to Li, China will make a special effort to require importers to maintain records, including the types and volumes of materials imported, for five years. Importers also will have to file annual “environmental management reports,” though Li did not provide any details on what such reports would contain.
Like other Chinese government agencies, the MEP also will encourage the ongoing development of recycling parks. Currently, Li claimed, there are 1,700 certified nonferrous metal recycling enterprises in China, but only 100 to 200 of them—some of China’s largest by volume—are in recycling parks. “We will encourage [scrap processors] to move if they haven’t already,” he said. In closing, Li noted that “more regulations are coming. We need to determine whether China can handle certain low-grade materials with low metal content.” Though he did not mention any specific materials, there’s no question that circuitboards and other e-scrap are among the last categories of low-grade, low-metal-content recyclables not approved for import into China.
The Technological Path Ahead
The upcoming 12th five-year plan will focus on further refining and developing China’s “circular” economy, though the government will flesh out most of the specifics later. Some of the generalities occasionally contain statements that can move industries and markets, however. Shang Fushan, for instance, announced that China would—under its new five-year plan—begin to accumulate significant stockpiles of nonferrous metals to protect its consumers against adverse markets. Specifically, he said, China will build stockpiles of secondary copper, secondary aluminum, and secondary lead equivalent to 40 percent, 30 percent, and 30 percent of its annual consumption of each metal, respectively.
Like Wang Gongmin and other government speakers, Shang emphasized that industry consolidation is inevitable and desirable, and he provided a portrait of what he expects the industry to look like in 2015. In his view, the top 10 corporations will account for 90 percent of the country’s copper output, 90 percent of aluminum, 70 percent of lead, and 70 percent of zinc.
The goal to consolidate the industry is inextricably tied up in the five-year plan’s emphasis on upgrading industry technology and equipment. Both Shang and Wang spent considerable time talking about research grants and pilot programs designed to upgrade the industry so it can compete globally. Other speakers offered similar remarks at past CMRA events, but this year’s forum featured a full morning seminar on the kinds of equipment and processes needed, being developed, and being deployed throughout the industry. Of the speakers at this event, none was more important than Wang Jiwei, CMRA’s secretary general.
In large part, Wang Jiwei used his address to introduce the China Technology Innovation Strategic Alliance for Resource Recycling Industry (CIAR) (Beijing), which he also serves as secretary general. CIAR is an alliance of CMRA, several other associations with an interest in nonferrous metal recycling (such as China’s Used Mobile Phone Network), and top-level Chinese government agencies, including the Ministry of Science and Technology, the Ministry of Environmental Protection, the National Development and Reform Commission, and the Ministry of Commerce. Together, the groups will focus on development in three areas, Wang noted: upgrading technology, refining scrap copper, and energy efficiency. At the same time, the Ministry of Science and Technology plans to begin research on the recycling of home appliances, tires, and production “waste.” “Our [manual] dismantling, done in China, is better, higher quality, and cheaper than anywhere [else],” Wang said. “Now the question is how to supplement it with technology.”
To a certain extent, the answer to that question was in the exhibition hall, where equipment manufacturers displayed a range of scrap processing machinery mainly used in the developed world, including shredders, eddy-current separators, and other sorting equipment—especially systems for handling the complicated material streams from shredded electronics. The ReMA convention and other trade shows in industrialized countries still exhibit a wider and deeper pool of technological solutions for the scrap industry, but if China implements the goals outlined in its next five-year plan, the technology gap will be much smaller by the time CMRA holds its 15th forum in 2015.
Adam Minter is a journalist based in Shanghai, where he writes about business and culture for U.S. and international publications. He also maintains a blog at www.shanghaiscrap.com.
With scrap markets rolling again, China is focusing with gusto on developing its “Circular,” or sustainable, economy, which includes a bigger and more technologically advanced recycling industry.