2016 CMRA: Causes for concern

Debt levels around the world have the potential to slow down the world’s economies in 2017, scrap trader David Chiao warned attendees at the 2016 CMRA (China Nonferrous Metals Industry Association Recycling Metal Branch) Annual Convention in early November.

Chiao is a United States-based scrap trader with Uni-All Group and is currently serving as the president of the Non-Ferrous Division of the Brussels-based Bureau of International Recycling (BIR). His presentation provided an overview of current economic conditions, including potential potholes on the road to future metals production growth.

He said one of his foremost concerns involves levels of “debt heading up around the world,” including government, corporate and personal debt level amounts.

With China’s growth slowing, Chiao said the list of regions where scrap exporters may find future demand include India, the ASEAN (Association of Southeast Asian Nations) region and Latin America. He said all three regions also share “common issues,” including their overall scrap demand is not as strong as China’s; their economies are affected by the slowdown in China’s economy and they have their own problems with rising debt levels.

When all three types of debt (government, corporate and personal) are considered, Chiao said Japan remains the most burdened, with debt measuring at 300% of its annual gross domestic product (GDP), followed by China at 250%, the U.S. and Germany in the 170% range and India at 120%.

Chiao said many economists have written that China is at a critical tipping point to “either increase GDP or decrease debt to not cross this 250% red line.”

In a panel discussion at the CMRA event, Xu Zhun of Lanxi Zili Copper Co. Ltd. remarked that no matter what level of GDP China’s economy is able to achieve, the nature of the scrap buying and selling relationship between China and the rest of the world is changing.

With the investment in recycling resource parks in China and in additional processing technologies, China is set to become “both a buyer and seller” of scrap on the global market, said Xu.

Xu said he and colleagues from Lanxi Zili Copper have been visiting metals production and recycling sites around the world “as we look to cooperate with enterprises” and “have a chance to learn from them.”

The end-of-life vehicle (ELV) dismantling and recycling market in China will grow in particular, said Xu. “There are some 40 enterprises in this business [currently], and it’s a good market,” he commented. “It will generate a lot of scrap material. End-of-life vehicles and appliances will begin experiencing a peak flow [in China] in about five to eight years.”

The 2016 CMRA Annual Convention was 7-9 November at the Dongfang Hotel in Guangzhou, China.