ISRI CONVENTION 2015: China’s scrap industry evolving rapidly

China has taken the reins as the largest metals producing nation in the world and is unlikely to relinquish that title anytime soon. However, there are aspects of the nation’s economy and trade policies that are causing uncertainties for scrap recyclers who export materials to the nation.

 

China’s economy was the focus of a session at the 2015 Institute of Scrap Recycling Industries Inc. (ISRI) Annual Convention [], held in April in Vancouver, Canada. Presenters at the session portrayed an economy in transition, one that remains a manufacturing powerhouse but that also is exporting some of its manufacturing work to nearby nations.

 

Freelance journalist Adam Minter, who formerly lived in Shanghai but now resides in Kuala Lumpur, Malaysia, said labor costs are rising in China and some manufacturing work is being shifted to the nearby ASEAN (Association of Southeast Asian Nations) region.

 

Minter said the ten ASEAN nations (Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar and Vietnam) have a “pretty impressive GDP and potential” and that when combined they will comprise “the fifth largest GDP in the world by 2018.”

 

Several ASEAN nations border China, which has helped make them beneficiaries of the recent rise in Chinese labor costs, according to Minter. Rising labor costs are keeping imported copper scrap demand suppressed in China, said Minter, because a common business model relied on intensive hand sorting and numerous laborers.

 

With both market forces and government minimum wage requirements lifting wages in China, many of these operators are finding “cheaper labor just to the south” in Vietnam, Laos and Cambodia, said Minter. 

 

Chinese finished goods manufacturers have begun to deploy robots in large numbers, said Minter, and some recyclers are likewise investing in automation rather than relocating operations to Vietnam or another nation.

 

Presenter David Chiao of scrap trading firm Uni-All Group Ltd., Atlanta, listed labor costs as one of several factors affecting the inflow of red metal scrap into China. The average scrap sorter in China who was earning CN¥1,200 (US$193) per month in 2010 is now earning CN¥2,500 (US$403) per month and, because of a minimum wage law in China, will soon be making CN¥4,000 (US$645) per month.

 

The higher wages are one factor causing some nonferrous recyclers to pull back from their importing and sorting activities, said Chiao, as are environmental controls steering importers to bring in more intensively pre-sorted materials.

 

Purity standards for mixed metals grades such as zorba are being rigidly enforced in ports such as Ningbo, China, said Chiao, potentially causing overseas scrap traders to reconsider doing business with Chinese buyers.

 

A third disincentive for exporters is theft from sealed containers, which used to be centered in southern China but is now “spreading all over,” said Chiao. He said recyclers are particularly dismayed by an attitude of “we’ve never heard anything about that” from police departments, which he interprets as an unwillingness by police to take on organized crime rings that are likely behind the thefts.

 

Despite the difficulties, China’s demand for copper and the scrap that feeds its copper and brass production facilities is unlikely to go away, said Minter. He pointed to government investments in the “new Silk Road” and by China’s emerging Asian Infrastructure Investment Bank as likely sources of future demand for copper and copper products.

 

The 2015 ISRI Convention & Exposition was at the Vancouver Convention Centre April 21-25.