January/February 2013
Weak nonferrous metal markets and a scheduling conflict with the Chinese government didn’t prevent speakers at CMRA’s 2012 forum from offering valuable information about China’s past, present, and future recycling trends.
By Adam Minter
For the past decade, the International Metal Recycling Forum—an annual event of the China Nonferrous Metals Industry Association’s Metal Recycling Branch (Beijing)—has been the most important and informative nonferrous metal event in Asia. The conference has maintained that status comfortably through up and down markets, regulatory changes, and international trade disputes. The most recent gathering, however, faced the unprecedented challenge of having a scheduling conflict with a major meeting of the Communist Party of China.
At the same time the forum convened at Beijing’s China World Hotel Nov. 8, the National People’s Congress opened two miles away in the Great Hall of the People for the most important Chinese political event of the decade: the Communist Party’s week-long transition of its top posts to a new generation of leaders. CMRA never would have intentionally scheduled its conference at the same time as this massive government event. The association picked the date for its forum more than a year ago, while the Chinese government scheduled its congress in the last week of September 2012. Despite that unfortunate timing, CMRA was lucky: In the weeks leading up to the National People’s Congress, the government forced many conferences and other events throughout Beijing to cancel as a security precaution. The CMRA Forum was one of the few non-Congress events allowed to proceed in Beijing, according to several participants with connections to the Chinese authorities, thanks to the prominence of the secondary nonferrous industry in China’s economic blueprints, the high regard in which China’s economic planning agencies hold CMRA, and the high-level connections between CMRA and top government officials.
The National People’s Congress still had a profound impact on the forum. Ordinarily, the conference features top-level government speakers from agencies that oversee the Chinese nonferrous metal trade. This year, they had to abandon their CMRA commitments to fulfill Congress-related responsibilities, which reduced the number of government attendees and all but eliminated speeches on regulatory issues.
The loss of government-related attendees was one reason why attendance at the 2012 forum fell to 800 delegates from 1,200 in 2011. There also were fewer registrants from China’s private sector, in part due to the National People’s Congress and in part due to the stagnant conditions that have plagued China’s nonferrous markets for the past 18 months. The event’s international attendance was strong, however, with 250 delegates from more than 30 countries.
One important development for the forum’s long-term health was the evolution of its traditional exhibition area into a full-scale trade show that covered almost 81,000 square feet and featured more than 65 exhibitors in several expo halls. The 2012 forum marked two additional milestones: It commemorated CMRA’s 10th anniversary and its critical role in guiding China’s secondary nonferrous industry, and it honored Ma Hongchang, CMRA’s vice secretary general and a co-founder of the organization, on his retirement. Without CMRA—and especially without Ma’s contribution to its development and outreach—relations between China’s nonferrous industry and the world’s recyclers would not have reached the advanced stage they now enjoy. (See “China’s Recycling Advocate Retires,” above, for more on Ma and his career.)
A Decade of Growth
As in past years, speakers from CMRA and its parent organization, the China Nonferrous Metals Industry Association, offered a trove of data on China’s nonferrous recycling industry. Wang Jiwei, CMRA’s secretary general and vice president, presented the majority of the forum’s key data in two separate presentations—one during the general assembly of CMRA members and the other at a session titled the Industrial Development Summit. He outlined the stunning growth of China’s secondary nonferrous industry in CMRA’s 10-year history. From 2002 to 2011, the nation’s output of secondary nonferrous metals grew from 2.7 million mt to 10.1 million mt—an average annual growth rate of 15.1 percent, Wang said. This growth exceeded the 14.5-percent annual growth rate of China’s nonferrous metal industry in general, which saw its production volumes (including secondary output) rise from 10.1 million mt to 34.4 million mt in the same period, he noted.
Growth rates for each of the major metal categories were equally impressive, Wang reported. Secondary copper output increased from 880,000 mt to 2.6 million mt, an annual average growth rate of 13 percent; secondary aluminum output grew from 1.3 million mt to 4.4 million mt, for average growth of 15 percent a year; secondary lead production rose from 190,000 mt to almost 1.4 million mt, up 26 percent a year, on average; and secondary zinc output increased from 340,000 mt to 1.7 million mt, an average annual growth of 19 percent. Total production of these four metals was 57.4 million mt in the 2002 to 2011 period: about 17 million mt of copper, 25.6 million mt of aluminum, 6.4 million mt of lead, and 8.5 million mt of zinc.
Notably, despite the significant growth of secondary nonferrous production, scrap’s share of overall nonferrous metal production in China has not grown as dramatically. For example, scrap constituted 40 percent of all copper inputs in both 2002 and 2011, while scrap’s share of aluminum inputs dropped from 30 to 24 percent in that period, a trend Wang blamed on the growth of China’s electrolytic aluminum industry. Lead scrap, in contrast, increased its prevalence in China’s lead production from 12.8 to 29 percent, largely thanks to greater availability of lead-acid batteries as feedstock. Similarly, scrap’s share of zinc inputs grew from 15 percent to 24 percent.
Those statistics aside, there’s little reason to doubt the strength or direction of China’s secondary nonferrous metals sector. “Both the scale of the industry, and the total output, ranked the first in the world,” Wang said, noting that China’s 1,000 largest secondary nonferrous metal enterprises produced more than 10 million mt in 2011, worth roughly $64 billion—that’s 40 percent of the annual production of China’s entire secondary materials sector, which includes everything from plastics to steel, paper to edible oils.
Wang made it clear that the growth of the secondary nonferrous metal industry has had environmental as well as commercial benefits for China. From 2002 to 2011, the industry saved the nation 110 million mt of coal and about 11.2 billion cubic yards of water compared with producing the same volume of metal from primary resources. In addition, China’s production of secondary aluminum, copper, lead, and zinc in that period saved it from having to mine approximately 9 billion mt of virgin ore. Wang gave China’s secondary aluminum sector special praise, pointing out that it had saved Chinese industry 350 billion kilowatt hours of electricity and prevented the generation of 522 million mt of carbon dioxide and 8.24 billion mt of solid waste.
The Growing Domestic Market
As a developing country, China can’t match the per capita scrap generation rates of developed regions and countries such as Europe, Japan, and the United States. That said, the growth in some consumer product markets—most notably appliances and automobiles—is giving China scrap resources it lacked 10 years ago. Already, China’s consumer-product boom is yielding scrap volumes that would be epic in smaller countries. Between 2002 and 2011, China collected more than 33 million mt of domestic nonferrous scrap and recycled it into 27.5 million mt of new metal products, Wang said. By metal category, China expanded its collection of copper scrap 313 percent in that period, from 290,000 mt to 1.2 million mt a year, while its annual domestic collections of the other three major nonferrous metals also soared: aluminum scrap, up 244 percent, from 640,000 mt to 2.2 million mt; lead scrap, up 694 percent, from 170,000 mt to 1.4 million mt; and zinc scrap, up 253 percent, from 490,000 mt to 1.7 million mt.
Chinese legislation mandating the collection of electronic scrap and spent appliances has had a profound effect on the country’s domestic collection rates, including the development of municipal programs to better harvest material that Chinese scrap peddlers collect. The nationwide renewable resource recycling system—which encompasses many systems that local governments build and maintain—has established 33,075 renewable resource recycling stations where peddlers and homeowners can drop off and/or sell their recyclables, 181 recycling sorting centers, and 36 regional distribution markets where scrap consumers can buy domestically generated recyclables for processing. China also has established 28 “urban mining” demonstration projects in 20 provinces to implement pilot collection and processing methods for appliances and e-scrap. In addition, China now has 14 recycling parks that specialize in processing imported scrap, with plans for more, Wang and other speakers said.
Those recycling parks will remain essential pieces of China’s recycling infrastructure because imported resources are important stopgaps for the development of China’s secondary nonferrous industry, Wang said. In the past decade, China became the world’s undisputed king of nonferrous scrap imports, purchasing 62.7 million mt from 80 countries and regions, he said. Those imports included 44.2 million mt of copper-bearing scrap, which was 76.6 percent of China’s total copper scrap supply. Similarly, the country imported 18.2 million mt of aluminum scrap in the past decade, which was 59 percent of its aluminum scrap supply. According to Wang, China’s hefty imports of nonferrous scrap were all part of a grand design: “The goal to expand the nonferrous metals industry in China by quickly taking advantage of the international nonferrous scrap resources has been achieved.”
Nevertheless, the Chinese nonferrous industry’s dependence on scrap imports has become a matter of significant concern in China. Several times during the conference, speakers—including Wang—indicated that reducing that dependence on foreign supplies is both a short-term and a long-term goal of Chinese policymakers and businesses.
Life Beyond Overcapacity
One of CMRA’s top goals in the past decade was to eliminate small, polluting operators from the Chinese recycling industry and develop large-scale businesses with the capital to innovate technologically and meet environmental dictates. During the 12th Five-Year Plan, the Chinese government’s five-year blueprint for the country’s economy, “industrial concentration was significantly improved for the purpose of laying a solid foundation for sustainable development,” Wang said. As proof of the plan’s success, Wang noted that China has more large-scale secondary nonferrous businesses than any other country, including 10 companies with the capacity to produce 300,000 mt of recycled aluminum annually, 10 operations capable of producing 200,000 mt of recycled copper a year, 10 firms that can produce more than 100,000 mt of recycled lead annually, and five enterprises capable of producing more than 50,000 mt of recycled zinc each year.
China built much of its new secondary nonferrous metal capacity after the 2008 global financial crisis, often with the help of government subsidies. Despite the positives of the sector’s growth, it has created overcapacity that underlies the current difficulties in China’s nonferrous industry, said Chen Quanxun, president of the China Nonferrous Metals Industry Association. China’s total nonferrous output in January to September 2012 increased 2 percent, to 7.2 million mt, over the same period in 2011, he said, but its growth rate slowed by 10 percent. Worse, for the 8,027 nonferrous metal businesses—both secondary and primary—that CMRA tracks, the January-to-August profits were 27 percent lower in 2012 than they were in 2011, a drop of approximately $13.6 billion. Worst of all, the sector’s employment growth was a sluggish (for China) 1.6 percent in the same period.
China’s secondary nonferrous sector, meanwhile, produced 5.4 million mt from January to October 2012, a 3.8-percent increase over the same time frame in 2011, according to data CMRA provided after the forum. Copper production in that period was unchanged from the previous year at 1.7 million mt. Aluminum production hit 2.8 million mt, up 4 percent; and lead output totaled 900,000 mt, a 7-percent increase. Chen blamed “overcompetition” for slowing growth in the nonferrous sector and driving down profit margins. “These difficulties are not due to an economic downturn but due to the structure of the industry, and especially overcapacity,” he said.
Reversing the above trends starts with technology to improve the quality and competitiveness of Chinese products while reducing “the need for human resources,” Chen said. Such efforts should help the industry reduce its energy consumption and costs, he added. Above all, he stressed the need for the sector to further optimize its “industrial structure and concentration and concentrate large-scale companies and groups.” In that way, he suggested, excess capacity of smaller companies can be eliminated and larger enterprises can compete more effectively.
Looking ahead for China’s nonferrous recycling sector, Wang Jiwei emphasized that barriers to enter the business will rise. Currently, he explained, CMRA and relevant government departments are formulating entry requirements for the lead recycling industry, with the copper and zinc sectors soon to follow. Wang did not describe the entry requirements in detail, but past speeches suggest they’ll likely be a combination of capital, technological, and environmental thresholds. “I think this will have a big impact on this industry,” he said, adding that “some companies will face difficulties.” Though Wang did not spell out the nature of those difficulties, he hinted that the tax code will be one enforcement tool. “Qualified, good enterprises will have a positive tax environment,” he said. “Noncompliant enterprises will have difficulties.”
The Next Decade
The absence of high-level Chinese government officials meant that most of the other presentations at the CMRA Forum focused on international markets and technology, with the latter topic receiving greater attention this year. In addition to introducing its full-sized trade show, the 2012 forum gave companies the opportunity to present technology and techniques for reducing human-resource costs and increasing material yields from scrap. Such presentations would have been unthinkable 10 years ago, when CMRA was founded. Cheap labor was the buzzword and the foundation of China’s surging metal industry and metal demand. A decade later, it’s clear that the cheap-labor era was temporary while China’s demand for nonferrous metals is long term. After all, no developing country can develop adequately without raw materials. In that way, at least, nothing has changed in the past decade, and it’s unlikely much will change by CMRA’s 20th anniversary. China will continue to develop, and that development will require nonferrous scrap, both domestic and imported.
Adam Minter is a journalist based in Shanghai, where he writes about business and culture for a range of publications. Bloomsbury Press is publishing his book about the scrap industry in fall 2013.
China’s Recycling Advocate Retires
The retirement of Ma Hongchang, CMRA’s vice secretary general and a co-founder of the group, ranked among the most important announcements of the 2012 International Metal Recycling Forum in Beijing. Despite his soft-spoken and publicity-shy nature, Ma served as an essential bridge between U.S. and European scrap recycling associations and Chinese government agencies throughout his CMRA career. Without his role in calmly facilitating dialogue, the past decade of trade between international scrap exporters and China’s importers would have been more difficult.
Born near Wuxi, in China’s Jiangsu province, Ma studied to be a nuclear physicist and spent 25 years working for the Institute of Atomic Energy in Beijing. There, he twice won China’s prestigious State Scientific and Technology Progress Prize. In late 1989, he left nuclear physics behind and joined the State Environmental Protection Administration, where he ran the Solid Waste Division. In that capacity, he played a critical role in developing China’s early solid waste laws and regulations and served as its chief representative for Basel Convention negotiations. In this period, he also played a key role in establishing China’s “green” shipbreaking industry, earning recognition as the father of Chinese shipbreaking.
In 2001, Ma co-founded CMRA, and he has played a leadership role in the organization ever since. At the 2012 CMRA Forum, Francis Veys, director general of the Bureau of International Recycling (Brussels), gave Ma a certificate honoring his role in the global recycling trade. Veys praised Ma for his expertise and invaluable contacts in important Chinese government agencies, thanking him for being “of great assistance to BIR and its entire membership”—a sentiment that many in the global scrap industry share.