March/April 2014
China is putting substantial effort—and money—into developing a world-class electronics recycling industry. Time will tell whether this ambitious experiment will be able to leave low-tech, polluting processing techniques to the history books.
By Adam Minter
China’s electronics recycling industry is shaping up to be massive, heavily state-subsidized, and primarily operating far from the coastal regions long associated with China’s recycling trade. It’s being built with the help of the Chinese government, which is determined to become a global leader in high-tech recycling. The future of these gargantuan, integrated recycling operations is hardly certain, but so long as the Chinese government is willing to subsidize the recycling of certain electronic devices and appliances, it’s a future that’s here, right now.
Gaining Government Support
That future unfolded below me in August 2013, as I stood on a catwalk over a television disassembly line at the sprawling plant of Shenzhen GEM High-Tech Co., one of China’s largest private electronics and appliance recyclers. The 1,800-employee plant—one of three the company operates, with a fourth in the advanced planning stages—occupies 214 acres in Jingmen, an industrial town in China’s rapidly developing Hubei province. Below the catwalk, a constant stream of workers in hard hats, dust masks, safety glasses, and steel-toe boots, a few dozen at a time, pushed cages filled with old TVs into the space. They unloaded the units onto conveyors that delivered them to workers with power screwdrivers for disassembly. In less than a minute, a worker would separate a cathode-ray tube from its plastic case and electronics, then place everything on a second conveyor for further disassembly, including the separation of panel and funnel glass.
I was visiting as a guest of GEM, my invitation timed so I could accompany a group of researchers from the State Development & Investment Corp. (Beijing), a multibillion-dollar Chinese government investment and holding company that primarily develops projects in energy and raw materials. Those researchers, who represented the Department of Strategic Investment, were looking for an investment opportunity.
The endless parade of old TVs arriving in the warehouse was evidence of the investment their employer—the Chinese government—has made in GEM and other electronics recyclers through official subsidies. In 2012, to encourage the recycling of electronic products in safe, modern facilities and to help the companies that process them compete against smaller, less safe, informal recyclers, the Chinese government launched a producer-responsibility program that collects fees from electronics manufacturers and gives the funds to GEM and other licensed recyclers. Each of the disassembled TVs below me came with a subsidy of RMB85 ($14.05), with the government providing similar subsidies for computers, air conditioners, washing machines, and refrigerators.
The recycling industry—and GEM—is more than a passing fancy for the Chinese government, I learned. A bright yellow sign on the catwalk displayed two photos of Xi Jinping, secretary general of the Chinese Communist Party and president of China, visiting the GEM Jingmen plant on July 22, 2013. The sign quotes Xi—in Chinese and translated English—declaring that the recycling industry is a “sunrise industry” and that “GEM is by far the best enterprise I have ever seen in the circular economy.” Those are strong words, especially in China, where such compliments and official visits by top leaders are all but endorsements. But as China’s environment continues to deteriorate, Xi has staked much of his credibility and legitimacy on cleaning it up, including new initiatives to reduce air and water pollution.
As an environmental issue, electronic scrap isn’t nearly as pressing—or as visible—as air pollution, but it could become more so if China can’t quickly develop an efficient, environmentally sound e-scrap management system. According to the United Nations’ Solving the e-Waste Problem initiative (Bonn, Germany), in 2012, developing nations—including China, India, Brazil, and Russia—discarded more end-of-life electronics by weight (25.4 million mt) than the world’s developed nations (23.5 million mt). That year, China generated 7.2 million mt of e-scrap, compared with the United States’ roughly 9.36 million mt, according to StEP data. The global volume of e-scrap is set to grow 33 percent by 2017, with most of the growth coming from the developing world, StEP says. China, as the world’s largest consumer of electronic devices, will be at the front of that pack.
The Recycling Park Approach
The problems with improper disposal and recycling of e-scrap—especially by the informal recyclers who have long dominated China’s e-recycling industry—include soil, water, and air pollution and their related impacts on human health. Several towns in China have long been associated with the trade—including the infamous Guiyu—but perhaps the worst was Neijiang, in Sichuan province in western China. According to a 2011 report in the state-owned Sichuan Daily newspaper, Neijiang was southwest China’s largest “waste materials” market. At its peak in 2007, it employed 7,000 people and handled 1.5 million mt of scrap annually from 20 provinces. That volume came at a high human and environmental price, as the Sichuan Daily described in 2011:
“… the negative impact of the vast operations … left a deep impression—waste water used in the cleaning of plastics was discharged indiscriminately; national highway 321 was lined for almost ten kilometers with piles of junk.”
That was the least of it. In 2002, the paper reported, a fire broke out in the processing zones that “burned for three days and three nights, and required almost the entire firefighting force of Neijiang to extinguish.”
In late July 2013, I went to Neijiang and rode down highway 321, past rolling hills covered by farms and modest brick houses. There were no fires or junk-lined roads—and no scrapyards, either. The area seemed to be an industry-free zone, without a hint of smoke and smog. The car turned off the highway, and I rode past rows of workshops where I could see some bales of plastic scrap, but it all seemed orderly—at least from the car.
The change in Neijiang, I learned, was due to the development of the China Southwest Renewable Resources Industrial Park, a government-funded demonstration project to bring modern, technologically advanced, and environmentally sound recycling operations to Southwest China. Officially, the park is one of seven National Circular Economy Urban Mining Demonstration Bases. China Recycling Development Corp. (Beijing), a 25-year-old, state-owned entity, owns and operates five of the bases, including the one in Neijiang.
CRDC is China’s largest recycling company—and most likely one of the world’s largest—with more than 50 branches and 30,000 recycling stations. It has been at the forefront of China’s move to better, more advanced electronics recycling for nearly a decade. In 2007, it established the Huaqing Circular Economy Park in Qingyuan—one of China’s most intense copper processing zones—as a place where scrap cable could be recycled intensively and mechanically without burning the insulation off the material—a once common, polluting practice of small-scale recyclers. Over several months, the company and local authorities moved 1,300 of the area’s small-scale recyclers into a centralized area and required them to start using safer, cleaner recycling methods.
Around the same time, CRDC, the federal government, and local authorities established the Shandong Linyi Resource Recycling Base in Linyi, which is now China’s largest appliance and electronics recycler as well as the designated recycler of electronics for the Chinese government. When I visited that facility in early 2008 (see “An Evolving Approach to Electronics” in the May/June 2008 issue of Scrap), the operations fit inside a single warehouse and volume didn’t seem to be a concern. That has changed.
According to CRDC’s website, as of September 2013 (the most recent date for which information was available) CRDC had recycled more than 5 million appliances (including CRTs, computers, refrigerators, washing machines, and air conditioners) in the first nine months of the year. It’s all but impossible to increase processing volume like that by relying on manual labor and “primitive” recycling methods such as burning circuitboards—especially in today’s China, where labor shortages are driving up wages and squeezing factories across the country. Large-scale recycling requires innovation, mechanization, and lots of investment.
Thus, in 2009, the city of Neijiang and CRDC invested RMB3.4 billion ($560 million in current dollars) in the development and construction of the China Southwest Renewable Resources Industrial Park on 131 acres, setting aside an additional 5,000 acres for future expansion. At the same time, the mess on highway 321 was slated for cleanup, and the 140 biggest families responsible for that mess received notice that they were moving into the industrial park. If all goes as planned, the park will be directly and indirectly responsible for creating 20,000 jobs by 2015 and generating RMB10 billion ($1.6 billion) in annual revenue.
Opportunity in the West
When I entered the industrial park, I saw rows of towering new warehouses, and—in principle, at least—the cleanup of Neijiang began to seem plausible. At the main office building, Zhao Yan, the park’s general manager, greeted me. China’s scrap industry, he explained, is following manufacturing westward, from the mostly developed East Coast into regions where labor is cheap and development is still necessary. For electronics recyclers, large consumer electronics manufacturers that generate large volumes of e-scrap—such as Foxconn Technology Group (Taipei, Taiwan), which makes the Apple iPad and iPhone—are leading the shift westward. For now, at least, manufacturers like them are among the park’s largest scrap suppliers.
“The main products we’re concerned with here are e-scrap and the plastics inside of it,” Zhao said, but the park also runs a polyethylene terephthalate bottle recycling line that depends on collected material from the local area. Later this year, the park will start recycling lubricating oils and begin “deep mining,” as Zhao and others euphemistically call refining, including processing circuitboards and other precious metal- and copper-bearing materials.
“I’d also like to add battery recycling,” Zhao said, “but we’re very close to residences, so the permits would be difficult.” Instead, this year the company will add a recycling line for mobile phones. In fact, the week before my visit, Zhao noted, he was in Guiyu, examining that city’s massive informal mobile phone recycling operations, and he wasn’t impressed. “We will take the business from them,” he said.
We left the office and walked across the road to one of several warehouses on the site. En route, Zhao told me the park would recycle 2 million appliances in 2013, making it a “top-three recycler of appliances in China.” CRDC as a whole would recycle 9 million appliances in 2013. Most of these appliances come from businesses and manufacturers, he explained. Collections from private individuals and households are still difficult, he acknowledged, but the company is building e-scrap collection franchises that it hopes individual recyclers will join. Those franchises, combined with CRDC’s nationwide in-house logistics system, should help the group increase its scrap volume.
We stepped through an open loading dock door just as a forklift zipped past carrying a metal pallet stacked with old black-and-white TVs. They represent the front line of Chinese e-scrap recycling: old TVs purchased during China’s first wave of consumerism in the early 1990s that have cycled through repair shops, reuse, and now recycling.
Across a wide aisle, the dismantling operation was humming. Teams of women in safety gear lifted old TVs onto tables, where they used power screwdrivers to open the cases, remove the CRTs, and separate the electronic components, including the circuitboards. They stacked the CRTs on movable racks and sent them to another workstation, where tens of workers separated the panel from the funnel glass using a hot-wire cutter and then vacuumed out the phosphorescent dust inside the cavity. According to Zhao, the plant dismantles 8,000 CRTs a day, and it would process more if it could obtain them. The labor costs, though, are significant: The company pays most employees RMB4,000 ($661) a month, while “experienced” employees can make RMB5,000 ($826), Zhao said. Without subsidization, it’s hard to imagine that such an operation would be viable.
So what happens to the circuitboards and CRT glass? Zhao pointed across another aisle at cages of circuitboards that, he said, were waiting for the park’s refinery to open. “We have many more,” he said. We walked to an adjacent, locked warehouse; inside, 10-foot-high piles of circuitboards stretched for hundreds of feet, the entire length of the space. In addition to the lock on the door, cement walls and a fence protect the material from thieves.
As for the CRT glass, back in the first warehouse I could see it was crushed and loaded into sacks, but then what? “Currently we send it to a glass-to-glass recycler,” Zhao said, “but we will have our own facility [in 2014]. We send the metal to our own companies.”
We entered an office that had a window offering a view of a warehouse where hundreds of SuperSacks filled with shredded plastic from TV cases awaited transport to plastics recycling facilities within the recycling park. Monitors dominated one wall of the room, showing detailed live images from the CRT recycling operations. The feeds, in addition to providing security and ensuring efficient operations, are beamed to the Ministry of Environmental Protection in Beijing, Zhao said. “They do this because they audit our operations due to the subsidy. They want to know that we aren’t misusing the subsidy and that what we receive is actually recycled. They even audit our electricity usage to make sure it is what it should be. They know what it should be.”
Around the corner and down a wide street, Zhao leads me past the company’s PET bottle recycling line. Workers unload giant sacks of bottles that ride a conveyor up to a sorting area where workers pull trash from the material stream. The bottles get mechanically sorted by color, ending up as large bales of green and clear PET bottles at the far end of the line. The bottles, unlike the company’s electronics, come from small recyclers in the area who collect from homes and business. The plastic is recycled on site in a joint venture between the park and SK Group (Seoul), known as PlasKing.
What Zhao wanted me to see was across from the PET line, in yet another massive warehouse. There, the plastics shredded in the CRT dismantling warehouse—mostly acrylonitrile butadiene styrene—are washed, mixed, and extruded into new ABS. The factory, also a PlasKing project, does some limited manufacturing, including plastic pipe that Zhao said would be used in the construction of a high-speed rail line into Tibet. It sells most of the plastics to manufacturers, however.
In theory, small-scale recyclers could do that same work—and for a much lower capital investment and lower labor costs. According to a company official quoted in Sichuan Daily, however, small-scale recyclers can’t produce the same quality of plastic scrap as PlasKing and its recycling technology. Currently, on the open market, PlasKing can earn as much as RMB10,000 ($1,652) a mt for its shredded plastics, whereas small-scale recyclers in Neijiang previously could earn RMB3,000 to 4,000 ($459 to $651) for their lower-quality flakes.
I glanced at one of the extruders and the water used to cool the strands of ABS emerging from it, wondering what the company does with the water. It turns out that the operation has an on-site wastewater treatment plant that reportedly can process 2,000 to 4,000 mt of effluent daily. That’s likely more capacity than the operations need at this point, but with the volume of e-scrap increasing across China, there’s little question that the China Southwest Renewable Resources Industrial Park eventually will need that capacity.
A Subsidized Future?
Pollution-control equipment is a hallmark of China’s new e-scrap recycling operations, and it’s often placed in a visible location to prove that the operators are serious about preventing pollution. At GEM High-Tech in Jingmen, the water treatment plant encompasses at least two city blocks of pipes, tubes, and tanks. The facility is at the heart of a sprawling campus that has precious metal and copper refineries, e-scrap disassembly lines, plastics extruders, and a battery recycling line—the company’s primary profit center. GEM won’t show visitors the battery recycling line due to its proprietary nature, but the company provides an observation area from which visitors can see piles of lithium-ion, alkaline, nickel-cadmium, and other batteries awaiting their turn in the system. According to the company, the system can produce 5,000 tons of ultra-fine cobalt and nickel powders annually (as of 2011), which is 60 percent of the domestic Chinese cobalt powder market and 40 percent of the domestic nickel powder market. Company promotional materials claim that its efforts and collection programs raised China’s battery recycling rate (not including lead-acid battery recycling) from 1 percent in 2006 to 10 percent in 2011.
Still, China’s most pressing reason to recycle batteries from consumer products—to manage the hazardous elements they contain—will be mitigated in the coming years due to the phase-out of mercury-bearing batteries and the government’s assurance that it is now safe to deposit used alkaline batteries in the trash. As a result, e-scrap—especially government-supported electronics processing—will be the company’s future. That is part of the reason why researchers from the State Development & Investment Corp. are visiting: That entity is making large investments in technology (some funded by government grants), including plastic sortation and—in Jiangxi province—a CRT glass-to-glass recycling line. Meanwhile, in Jingmen, the company is planning to refine CRT glass to capture the lead, though it has no specific starting date for that project. Until then, the Jingmen facility will continue sending its CRT glass to a glass-to-glass recycler in Tianjin.
As it is in Neijiang, the Chinese government is keeping careful watch on what happens to the scrap at GEM. For example, the company’s recycling line for washing machines (which receive a government subsidy of RMB35 [$5.78] per unit) doesn’t start with dismantling, but with a two-step process in which each machine passes through an X-ray machine to reveal if it contains an electric motor. Then an operator at a computer identifies the model, snaps an image of the machine, embeds the image in a file, and prints a barcoded sticker that’s placed on the machine to track it through the dismantling line. That line has two important stops—motor extraction and shredding—after which the various streams are sorted using a range of technologies and equipment largely purchased from foreign manufacturers. GEM also has developed its own innovations. The company proudly enumerates the hundreds of patents it has received at home and abroad, pointing out that it developed 90 percent of its refining technology in house.
Inside the company’s copper refinery, workers drive forklifts carrying pallets of electrolytic copper sheets. According to company officials, the Jingmen plant produces 15,000 mt of copper annually and has the capacity—and intention—to reach 30,000 mt. It won’t be easy to achieve that capacity. GEM and its counterparts are finding it difficult to source adequate scrap for their operations. Like its state-owned counterpart in Neijiang, GEM has benefited from access to government and corporate scrap, but long-term growth will require sourcing material from homes and businesses. In theory, government subsidies for recycling appliances should help large companies compete with independent operators that have very low fixed costs. GEM, for one, is working on a program in which it can hire the scrap peddlers on the street, in effect using the subsidies to buy out the competition.
Success will depend on many factors, with the most important being the government’s long-term commitment to paying subsidies for the safe, clean recycling of appliances. If the subsidies end, then it’s likely that the recent buildout of large-scale electronics recyclers in western China will stall. After all, the modest success of mammoth recycling enterprises such as GEM and the China Southwest Renewable Resources Industrial Park is due, in part, to laws and regulations prohibiting unsafe, polluting practices by small-scale recyclers. Those laws and regulations had been on the books for years. What’s changed is cash flowing into the system, subsidizing the development of some of the largest—in acreage, at least—recycling companies in the world.
Perhaps, in time, these monumental companies will realize innovations and efficiencies that allow them to succeed without subsidies. For now, their success is the state’s success—and that’s progress both for China and for a global recycling industry whose future and image depend on progressive improvement in recycling operations in the developing world.
Adam Minter is a journalist based in Shanghai, where he writes about business and culture for a range of publications, and author of Junkyard Planet, published in 2013 by Bloomsbury Press.
China is putting substantial effort—and money—into developing a world-class electronics recycling industry. Time will tell whether this ambitious experiment will be able to leave low-tech, polluting processing techniques to the history books.