January/February 2012
China’s elevation of its secondary nonferrous metal sector to “strategic industry” status shows the importance the country now places in recycling’s economic and environmental impact. This fall’s CMRA forum highlighted some of the ramifications of this new attention.
By Adam Minter
On the first night of the 11th annual International Secondary Metals Forum, held Nov. 7-9 in Guang-zhou, China, guests enjoyed a buffet dinner in an outdoor courtyard of the Dongfang Hotel, the event’s venue. On stage at one end of the lush space appeared Wang Jiwei, secretary general of the Beijing-based China Nonferrous Metals Industry Association’s Metal Recycling Branch (CMRA), which organized the conference. As laser projections of CMRA’s logo moved slowly across the courtyard walls and the 1,200 delegates, Wang glanced at the sky and joked, “It was supposed to rain tonight, but due to our industry’s positive contribution to society, God has ensured that it won’t.”
The Chinese recycling industry does seem blessed, not only with good weather at the CMRA forum, but also with unprecedented growth since 2008. In the past year, China maintained its role as the world’s leading nonferrous scrap importer, and its recycling sector enjoyed a promotion to strategic importance in the Chinese government’s key economic planning documents. This year’s forum reflected the industry’s enhanced status, featuring the first appearance by the chairman of the China Nonferrous Metals Industry Association (CNIA) (Beijing), a government-run agency with authority over the country’s vast nonferrous industry.
In China, power and affluence typically go together, and affluence definitely was in the air at this year’s CMRA event. The exhibition hall was the largest in the conference’s history, with dozens of exhibitors, many of whom invested in house-sized booths. There, and in the hotel lobby and bar, the forum lived up to its reputation as an international networking hotspot. Though markets were volatile prior to and during the forum, and despite rumors of broken contracts—blamed on importers and exporters alike—scrap buyers and sellers met day and night to work out their next deals. Overall, the forum was an amalgam of the old and the new, continuing its tradition as an essential meet-and-greet event while pointing to the future directions and character of China’s nonferrous metals industry.
The Impact of “Strategic” Recognition
Every CMRA has its VIPs, but the 2011 event had its biggest yet: Chen Quanxun, chairman of CNIA, which plays a lead role in formulating and implementing national policy on primary and secondary nonferrous metals, providing a crucial interface between policymakers and the state-owned metal sector (and, to a lesser extent, the private one). With secondary nonferrous metal companies newly enshrined as “strategic industries” in the 12th five-year plan, China’s economic planning document for the next half-decade, his presence was as much an affirmation as a necessity.
Thus, on the forum’s first morning, Chen met with senior leaders of CMRA such as Vice Secretary-General Ma Hongchang; ReMA President Robin Wiener; Scott Horne, ISRI’s general counsel and vice president of government relations; and Francis Veys, director general of the Bureau of International Recycling (Brussels), in a formal reception area off the main convention hall. Combined, ISRI, BIR, and CMRA represent the bulk of the world’s secondary nonferrous metal processors, consumers, importers, and exporters.
“China has become stronger these last few years” Chen said of its nonferrous metals industry during the meeting. “In 2010, 20 percent of China’s nonferrous metals production, or 7.5 million mt, came from secondary metals. In 2015, we will produce 12 million mt of secondary nonferrous metals.” CNIA is focusing on two recycling-related issues: urban mining and the disposition of end-of-life vehicles and appliances. On the latter topic, he noted that the organization would like to obtain new technology for its recycling industry members and to form overseas partnerships to learn about and possibly purchase such technology. “We are facing great pressures for resources—severe conditions,” he said, “so the secondary nonferrous resources are much more important now.”
Chen said CNIA is promoting the development of a resource recycling park in impoverished Guangxi province in southern China. He listed “cheap labor, cheap land, and good weather” among Guangxi’s appealing factors. It also helps, he said, that “the former head of China Aluminum Corp. [the state-owned aluminum conglomerate] is the party secretary for Guangxi, and he promotes the enterprises.” It was a revealing statement: Such connections are often key to the success of businesses and even entire industries in China. Notably, China’s nonferrous scrap importers, wary of the higher duties and intense inspections they’re now facing in neighboring Guangdong province, have turned to Guangxi’s ports as their new favorites.
From there, the dignitaries moved to the convention hall to mark the official opening of the forum. Ceremony dominated the first half hour: CMRA signed a memorandum of cooperation with ReMA and a separate one with BIR. In their respective agreements, the organizations pledged to work to encourage the development of the secondary nonferrous metals industry through such means as exchanging information, delegations, and convention/exhibition services as well as to facilitate contacts among governmental authorities. These agreements are landmarks in the relationships of these organizations and an affirmation of what their leaders have accomplished in nearly a decade of meetings.
Wiener, in her comments preceding the signing, recognized the work of CMRA’s Ma Hongchang. “We are here, in large part, because of [him],” she said. It was no exaggeration. Ma is a giant in the global recycling industry: He was China’s top representative to the Basel Convention, he personally wrote many of China’s earliest regulations on importing waste and recyclables, and he almost single-handedly opened the country’s shipbreaking industries. Characteristically, though, Ma was offstage, preferring that others get the spotlight.
Getting Down to Business
After the opening ceremony, Wang Jiwei convened the morning session, which reviewed the policies and statistics of China’s secondary nonferrous industry. Li Jing of the National Development and Reform Commission’s Department of Resource Conservation and Environmental Protection (Beijing) reviewed a list of policy initiatives, including a promise to reduce the recycling industry’s carbon dioxide generation and further develop precious metals recycling. Li devoted the most attention, however, to China’s year-old electronics takeback program, a government-subsidized effort that has driven the recovery of 60 million individual appliances, computers, and monitors since its inception, according to Li Jinhua of Tsinghua University (Beijing). “We want to implement extended producer responsibility” for this material stream, Li Jing said, “and we are working toward that.”
In the meantime, the government is further codifying its approved methods of electronics recycling and disposition. Despite the large volume of items flowing into the government’s takeback program, the standards for actually recycling these products remain vague, leaving many companies unwilling to commit to investments in processing equipment and methods, she said. China has “made some technical progress,” meaning some companies can handle 100,000 units of e-scrap or appliances annually, said Xu Jun of the Department of Social Development in the Ministry of Science and Technology (Beijing). The stumbling block is the recycling of plastics, and the government is spending significant sums on research to address the issue, he said. “Our goal is to make a breakthrough in e-waste dismantling that allows us to utilize 90 percent of an appliance.”
Xu also took a moment to discuss China’s reuse and remanufacturing industry, a controversial topic—and one rarely, if ever, discussed at past CMRA events—because the industry competes with China’s politically powerful manufacturing sector. “Our goal is to increase the rate of remanufacturing for electronics products to 80 percent,” he said. So far, the greatest success in reuse and remanufacturing has come in the vehicle tire sector, he said.
On the regulatory front, Chinese importers and exporters of nonferrous metals to China experienced a period of significant regulatory confusion in the second half of 2011. In August, a new director of Guangdong Customs imposed and began enforcing higher duties and a new regulation requiring companies that import scrap materials to also process them. This latter regulation is designed to restrict processing to licensed companies that have passed environmental reviews with the provincial environmental authorities (a prerequisite to obtaining a license) rather than allow materials to flow to the thousands of unlicensed, environmentally unsound entities in Guangdong’s processing zones. The combined impact of these changes is difficult to determine at this early stage, but there’s no question the changes have been disruptive and have called into question the future of Guangdong’s status as the traditional heart of China’s low-grade nonferrous scrap trade.
Continuing the focus on China’s environmental status, Li Xinmin of the Department of Pollution Prevention and Control in the Ministry of Environmental Protection (Beijing) bluntly stated that “the environmental situation is still very severe.” He cited government reports that deem all seven of China’s major river systems to be in “poor” condition and its urban air quality to be in a “severe” state, largely due to increased automobile ownership. He also reported that in 2010, China generated “2.5 billion tons of solid wastes, of which 400 million to 500 million tons could be considered hazardous wastes.” Without sufficient facilities to treat those wastes, China faces numerous challenges, including “protests in some regions.” Even though Li was addressing a scrap recycling audience, he wasn’t shy about placing blame, albeit carefully: “Lately there have been some incidents of hazardous waste dumping of concern to the secondary nonferrous industry.”
He became less polite when addressing Hong Kong and its role in facilitating the transshipment of materials from Europe into China, stating that “all waste that goes to Hong Kong goes to China in the end.” Li said he and his colleagues are studying the situation carefully, with the goal of solving this problem. He inspected shipping containers bound for China on a recent visit to the port of Rotterdam in the Netherlands, for example. Many conformed to Chinese law, but many others did not. “We opened containers and compared them to the invoices,” he said. “The invoices said waste plastics, but inside was garbage, including cigarette butts, bottles, cans. They are exported as recyclable waste but are actually garbage.” (Until recently, China prohibited the import of whole PET bottles, and it continues to ban the import of aluminum used beverage cans, both materials commonly considered recyclables in international commerce. What Li considers garbage, a recycler might consider a tradable commodity.) In any event, Li is not oblivious to the economics of the trade: “We are not open to some materials, but they have a market in China. That tells us they are smuggled.” This smuggling is possible, he said, due to the widespread “buying and selling of licenses for import of materials to China.” The licenses are sold to unregulated businesses that import materials and use “backward” technologies to discharge pollution and illegally discard wastes, he said.
In Li’s view, the solution to this problem lies with Guangdong Customs. Representing that division at the CMRA forum, Yu Lisheng focused his remarks on the Aug. 1 regulatory changes that have shaken up the Guangdong-centered scrap recycling industry. He agreed with Li that “smuggling is often conducted by those who buy licenses illegally,” but he noted—in perhaps a first at a CMRA forum—that criminal activity isn’t restricted to scrap importers, exporters, and processors. “Smuggling is also related to corruption” in Guangdong Customs, he said, “so we need to strengthen anti-corruption among staff.” Guangdong Customs needs an ethical staff to enforce the August regulations, especially those designed to prevent illegal trade in licenses and cargoes, which are not new problems, Yu said. “In the past, we didn’t punish the illegal use of licenses because we didn’t have a clear policy on the matter. Now we do. The relevant authorities have acquired a legal basis to punish violators.” One penalty is the immediate suspension of import licenses that companies have used to import materials for unlicensed companies to process. Such suspensions could have significant repercussions. According to Yu, 1,000 companies in Guangzhou—Guangdong’s largest city—are importing material, but “only 100 to 200 are licensed to process.”
There are several reasons behind Guangdong’s customs crackdown, including the desire of provincial and national authorities to capture missing tax revenue. The most-cited reason, however, is the need to improve the industry’s environmental standards. Yu distilled the matter to a simple calculus that reconfirmed the still-underdeveloped nature of most of China’s small-scale scrap processors: The amount that some companies import and the amount they process don’t match. “That’s very bad because it means that pollution is increasing,” he said. The focus on scrap import volume and what happens to the material isn’t just a matter of smuggling. According to Yu, customs is investigating Guangdong’s “environmental carrying capacity,” a measure of precisely how much imported “waste” the province can handle safely before causing environmental damage. He didn’t explain how regulators might use such a number.
Statistically Speaking
A hallmark of previous CMRA conferences was a “state of the industry” address by a senior CMRA leader that offered statistics on China’s secondary nonferrous metal industry. This year’s CMRA event not only lacked such an address, it also did not provide the wealth of statistical information usually found in presentations by other government officials. Still, speakers offered enough data for attendees to sketch a numerical picture of the industry.
CMRA’s Wang Jiwei offered the most up-to-date statistics, noting that China’s secondary nonferrous metal production totaled 5.86 million mt in the nine-month period from January to September 2011. He projected that China’s production would reach 8 million mt for the full year, which would be a 3-percent increase over 2010’s 7.75 million mt (slightly more than the 7.5 million mt that CNIA’s Chen Quanxun reported at the forum’s opening morning). Of the January to September total, secondary copper production was 1.93 million mt, slightly more than that produced in the same period in 2010; secondary aluminum production was 3 million mt, even with 2010; and secondary lead production was 930,000 mt, down nearly 4 percent compared with 2010, Wang reported.
China’s imports of nonferrous scrap reached 5.33 million mt in the first nine months of the year, roughly equal to 2010 imports in that time frame, though the value of the 2011 imports was up almost 27 percent, to $15.3 billion, Wang said. Copper and copper-bearing material comprised 3.43 million mt of China’s imported nonferrous scrap volume, a 7-percent gain in volume from the same period in 2010 and a 36-percent increase in value, to about $12 billion. The volume of China’s aluminum scrap imports declined 11.5 percent, to 1.9 million mt, in the January-to-September period, but their value was roughly 2 percent higher, to $3.27 billion, he said.
Yao Suping of China Ruilin Engineering Technology Co. (Jiangxi) provided a detailed portrait of China’s secondary copper industry, focusing on the need to upgrade its technology. She said, for example, “more than 80” production lines in China are using “waste mixed copper as raw material” to produce copper bars and brass rods of “low quality.” She did not say what volume this outdated production mode produced, but she did note that the Chinese government is supporting the “reconstruction and expansion” of several secondary copper production lines with capacity of 200,000 mt a year in major industrial production zones. At the same time, she said, “there are more than five secondary copper smelting projects with the capacity of 200,000 mt which are now under construction and proposed for construction, and there are a number of projects with the capacity of 100,000 mt,” adding that “these new factories are making an effort to achieve the modernization goal.”
In 2010, only state-owned Jiangxi Copper Corp. (Guixi City) used more than 200,000 mt of scrap copper annually, reported Zhou Wuzhuang of CNIA in an undelivered speech that was included in the conference proceedings. Two other companies, Ningbo Jintian Copper (Group) Co. (Ningbo) and Shandong Jinsheng Nonferrous Group Co. (Linyi), had the capacity to use more than 100,000 mt. He noted that Shandong Jinsheng, Guangxi Nonferrous Metals Group Co. (Laibin City), and Western Mining Investment Co. (Tianjin) “could increase their capacities to 500,000 mt a year of recycling copper.”
Mostly unspoken, but surely on the minds of many, is that scrap demand and supply from within China increasingly is driving the growth of its secondary nonferrous metal industry. The scale of this shift is still small, but it is accelerating, as any visitor to a Chinese scrapyard can attest. At the CMRA forum’s expo, exhibitors promoted equipment such as automobile shredders to recyclers of domestic scrap. Next year, when Chinese scrap processors have installed more of those machines, the issues of efficiently operating that equipment and sourcing material for it could be on the forum’s agenda.
Adam Minter is a journalist based in Shanghai, where he writes about business and culture for U.S. and international publications and maintains a blog, www.shanghaiscrap.com.
Associations Sign New Memoranda of Cooperation
A highlight of the 2011 CMRA forum was the signing of two memoranda of cooperation—one between CMRA and ISRI; the other between CMRA and BIR. Signing the agreements for their respective organizations were Francis Veys of BIR, Wang Jiwei of CMRA, and Robin Wiener of ISRI. In the ReMA agreement, the two groups pledge to increase cooperation and exchange to encourage the growth of the secondary nonferrous metals industry in the United States and China. The agreement lists four areas of cooperation:
- CMRA and ReMA will work toward a greater exchange of information on market developments as well as government policies and regulations. The two groups will offer mutual links to each other’s websites, for one, and provide information on their respective annual conventions.
- ISRI and CMRA will encourage and assist their respective members to attend each other’s annual conventions. CMRA will give ReMA members a “preferential price” to attend its convention, for instance, while ReMA will help CMRA delegations attend the ReMA convention and make information on CMRA’s convention available to ReMA members.
- ISRI and CMRA will offer each other a panel session or “topic meetings” at their respective conventions, and each will enjoy a discounted price on a booth at those events.
- CMRA will establish connections for ReMA with relevant Chinese government departments, and both will offer assistance on trade promotion and dispute resolution among their members.
China’s elevation of its secondary nonferrous metal sector to “strategic industry” status shows the importance the country now places in recycling’s economic and environmental impact. This fall’s CMRA forum highlighted some of the ramifications of this new attention.