Clearing the fence

Features - Regional Spotlight

After experiencing Operation Green Fence in 2013, scrap traders enter 2014 hoping the year does not entail any new surprises from China.

January 13, 2014

Several recycling industry conferences held in Asia in the final two months of 2013 provided venues for scrap traders from around the world to comment on how the industry has changed since China’s Operation Green Fence, a multi-agency effort by the Chinese government to more closely manage the activities of containerized scrap imports, was introduced in February 2013.

It is questionable to conclude that buyers and sellers of scrap materials have reached a consensus about Green Fence’s lasting impact, other than the fact that some of the changes appear to be permanent.

Reactions include disappointment in the increased bureaucracy and costs associated with the Green Fence inspection regimen, but there also is satisfaction by some recyclers that quality expectations in China are being brought up to standards found in other parts of the world—and in such a way that shippers of poor quality materials are ultimately facing the greatest threat to their business models.

Hard hit but recovering

Perhaps no recycling sector has been harder hit by Operation Green Fence than the plastic scrap sector. Plastics recyclers who gathered for the Re-Plas 2013 Autumn event in November in Hangzhou, China, took part in an event that one of its hosts described as the first such convention in the “post-Green Fence era.”

The effects of Operation Green Fence and reactions to it from plastics recyclers dominated much of the programming at the RePlas 2013 Autumn event. Lu Xisen of the Tianjin Price Information Service said the slowdown at ports caused by the implementation of Operation Green Fence was one reason why China’s plastic scrap imports dropped from 790,000 tons in January 2013 to 480,000 tons in February.

There was some bounce-back to 610,000 tons in March, Lu noted, but the restricted flow of plastic scrap into Chinese ports caused both overseas exporters and Chinese manufacturers to look for alternatives.

Lu said some of these exporters have begun shipping plastic scrap to Malaysia or Vietnam, where it is processed into flakes or pellets that can then be shipped into China with less scrutiny.

Although recyclers in other parts of the world have complained about a lack of clear communication from Chinese authorities about Green Fence, China Scrap Plastics Association (CSPA) President Dr. Du Huanzheng told RePlas attendees he was pleased with the lines of communication that have been established between the government and plastics recyclers.

“Just before Green Fence, AQSIQ (Administration of Quality Supervision, Inspection and Quarantine) had contacted our association and identified which are the illegal procedures,” said Du.

Subsequently, he said, government agencies “have been extensively hearing from us [and] working with us on implementation. We are very happy to see such communication.”

Du added that AQSIQ had conducted seven workshops on Green Fence since August in cooperation with CSPA that attracted 60 recycling companies. “Our government highly requests our reports from the field,” he added.

CSPA Executive President Dr. Steve Wong, who is also president of Hong Kong-based Fukutomi Co. Ltd., said the association will work on lengthening that line of communication to other parts of the world. “We want to establish a long-term idea and communication chain with foreign and international counterparts,” he commented.

Looking westward

Throughout China’s imported scrap boom of the past 15 years, the hotbeds of scrap buying, processing and melting have been concentrated in the nation’s major Pacific (east) coast cities and ports. A concentrated effort by China’s government and banks to rapidly industrialize and urbanize the nation’s interior is beginning to change that.

Speaking to delegates at the 2013 Annual Convention of the CMRA (China Nonferrous Metals Industry Association Recycling Metal Branch), held in November in Chongqing, Chen Demin, a professor at Chongqing University in China, provided an overview of the western region’s development as a growing manufacturing, scrap generating and scrap consuming center.

“The pace of growth is fast,” said Chen, with the nonferrous metals industry experiencing “active change” in cities like Chongqing as “industry rapidly moves east to west in China.”

Growth has been particularly fast since 2008, he added, with the Chongqing region now having 10 secondary nonferrous metals producers each with output of 300,000 tonnes per year or more.

Chen said European scrap exporters are exploring the improved access to the southwestern China market via the newer freight rail line that runs from Antwerp, Belgium, to Chongqing. There are challenges, noted Chen, but he added that secondary smelter production “in the long run is environmentally friendly” compared to primary production processes. There also is investment growth in southwestern China’s resource parks designed to host nonferrous scrap processors.

Li Shuyuan of China’s Ministry of Environmental Protection said Green Fence remains necessary to prevent “secondary pollution” and to “counter foreign waste smuggling.”

Li stated that companies caught using an AQSIQ license to import mixed wastes or using one that does not belong to them not only face cancellation of their licenses but they also “will face criminal charges.”

China’s government has been paying particular attention to irregularities in plastic scrap imports, she said, because plastic scrap has chemical regulatory tie-ins with environmental and human health implications.

Surendra Borad, chairman of the secondary plastics trading organisation Gemini Corp., headquartered in Antwerp, Belgium, who also chairs the Plastics Division of the Bureau of International Recycling (BIR), Brussels, offered his viewpoint as a plastic scrap exporter.

“Recycled plastic traders may perceive Green Fence as a hindrance in the immediate future, but it will serve the interests of the trading community in the long run,” he commented. “Green Fence is in the best interest of the users of reprocessed plastics and for the environment,” added Borad, stating that it also will “benefit the Chinese recycling industry in the long run.”

Path of least resistance

As pointed out by Borad, positive aspects of Green Fence are emerging. As the shipment of some plastic scrap to Vietnam or Malaysia demonstrated, however, business owners will also look for alternatives if one nation puts up unwelcome barriers.

That was one of the main points brought out by Robert Stein of U.S.-based scrap metals company Alter Trading Co. in a presentation he made at the 2013 China International Scrap Conference.

That event was hosted by the China Entry-Exit Inspection and Quarantine Association Reused and Recycling Branch (CIQAR) in Ningbo, China, in early November 2013.

Stein, who also is the chair of the Bureau of International Recycling (BIR) Nonferrous Division, asked Chinese government officials to consider the consequences to its own nation’s business owners of burdensome trade barriers and hurdles.

“The costs of continuing to meet AQSIQ (China’s Administration of Quality Supervision, Inspection and Quarantine) licensing requirements are high both in terms of money and business time,” said Stein. “And yet despite achieving this AQSIQ approval, exporters have remained prey to all-too-familiar whispers and warnings of changes to the rules relating to how we get our valuable scrap into China. Some of these changes actually happen; others do not. But all of them take up valuable business time as we assess the potential impact on our operations. Perhaps worst of all, some of the changes happen at very short notice.”

If 2014 brings with it additional regulations or new twists to the Green Fence, Chinese scrap buyers may suffer a competitive disadvantage, said Stein. “I hope you can see why importing countries other than China might seem an eminently more attractive option for the reputable exporters with whom, I’m sure, you would prefer to do business,” he told the assembled delegates.

“The stark truth is that for my company and many others globally, the compliance issue costs of supplying scrap to China are the highest that I know of in the entire world,” Stein remarked. “Scrap metal, like any other commodity, eventually finds its way to the most efficient market of value, which simply put means that we regularly compare costs of getting our product to various markets as part of the decision as to where it will ultimately be shipped. All impediments that stand in the way of easy material flow cost us money, and are obviously a part of the calculation. In today’s world of increasing costs, the compliance issues that we face in our shipments to China all too often dictate that our scrap metal either stays in the domestic market or is exported to countries other than China.”

Stein said the issue is not one of national sovereignty, but rather of business climate. “We, as a scrap metal company, have absolutely no misgivings with China wanting to make sure that ecologically unsound material does not find its ways to your shores. But the costs for us to undergo inspections by CCIC (China Certification and Inspection Group); maintaining an AQSIQ license; extra and special handling and packaging, are all inflationary to your consuming sector.”

Recyclers are able to take steps to clear all those hurdles, said Stein, but doing so comes at a cost to Chinese businesses. “As a responsible recycler, we, along with many other quality shippers around the world, will do whatever it is that you want us to do, but please understand that the more difficult you make it, the higher the costs are to the entities who ultimately must pay the price for the extra costs that are incurred—in this case it’s the Chinese consumer. We cannot tolerate changes of policy that are put forward with little or no notice, and the most recent case of this, last spring, resulted in thousands of tons of scrap being diverted to other markets at sometimes lower prices,” he commented.

“It is a universal truth that bears repetition: commodities, including scrap and other recyclables, find their way to points of consumption via the path of least resistance,” stated Stein. “For the seller, every obstacle is an additional cost; and if there is no mechanism for recouping that additional cost, the buyer would not be behaving in the best interests of his own business and of his employees if he did not at least pursue more cost-friendly alternatives.”

The next steps

Speakers at the 2013 Annual Convention of the CMRA (China Nonferrous Metals Industry Association Recycling Metal Branch), held in November in Chongqing, China, noted that Green Fence procedures caused expensive delays for importers and exporters, but many commented that in the long run the changes will be beneficial to recyclers who play by the rules.

Operation Green Fence indisputably “affected the customs clearance of importers” stated Wang Jiwei, vice president and secretary general of the CMRA.

The increased scrutiny of imported scrap came at the same time as increased taxes and increased energy costs for nonferrous scrap recyclers and secondary metals producers, noted Wang, making 2013 a difficult year for the sector in China.

Delays caused by Green Fence were frustrating for metals recyclers, according to Wang, because “there are basically no smuggling cases for scrap metal,” and sub-standard shipments of mixed waste do not try to enter the country labeled as scrap metal.

“Copper and aluminium are not smuggled into China, however we were affected [by the port slowdowns] and our customs declaration process has been slowed down,” he stated.

Alexandre Delacoux, director general of the Brussels-based BIR, acknowledged that Green Fence caused difficulties, but also played up the positive aspects of the initiative.

“I think Green Fence shows that China can apply [these standards] because you can pursue quality,” he commented. “I’m very glad about that.”

As 2014 gets underway, recyclers are likely pleased that the surprise element of Green Fence is behind them and are just as likely keen to avoid any new surprises.


The author is editor of Recycling Today Global Edition and can be contacted at