Future shock: the center of the recyclable commodities universe appears to have shifted to China

Recycling Today, April, 2004 by Brian Taylor

In 2002, China imported 3.3 million metric tons of scrap paper from the U.S. Mills there have shown a preference for mixed paper, which is now imported from the U.S. at twice the rate of OCC, spurring mixed paper to become a higher-volume grade than it was a decade ago.

Unless there is a sudden jolt to the Chinese economy, papermaking capacity there is expected to grow rather than slow down any time soon.

AND THE REST. The shift in manufacturing to China has also made it a larger destination for plastic scrap and the mixed-commodity obsolete electronics stream.

As noted in a recent feature, on plastic scrap ("Unbending Plastics, Recycling Today, March 2003, pg. S6), surging demand from China has affected pricing in the U.S. Some forms of plastic container scrap sold well above historic averages early this year as export brokers competed vigorously for post-consumer bales.

Chinese demand might be steady and strong enough in cause plastic prices to trend higher. The possibility may be attractive to North American recyclers, but consumers who count on low-cost feedstock have been dismayed by the sudden doubling of their material costs.

Electronic scrap may be considered a commodity driven largely by re-use, component harvesting, landfill bans and public relations gestures here in North America, but metals and plastics producers in China hungry for material have been much more willing to mine obsolete electronics for recoverable metals and plastics.

The unsafe and unsound practices of some Chinese electronics recyclers was exposed in 2002 by the Basel Action Network and followed up by closer customs inspections in China.

It appears, though, that the legitimate efforts of more scrupulous operators could keep Chinese demand for electronics in place for some time to come.

STUDENT DRIVER. If China is in the driver's seat, are recyclers in for a different kind of ride? Or, more skeptical market watchers may wonder whether China's driving privileges are temporary, with North America taking over at the steering wheel not too far down the road.

Determining the answers to these questions involves making judgments about China's central government leadership and the firmness of China's footing as a full-fledged, WTO-card-carrying member of the global economy.

China has become the world's industrial park, churning out goods for export in staggering amounts, with economic growth (calculated, admittedly, by the central government) rising at annual rates of as much as 9 percent.

But skeptics still point to potential problems that could derail China's race to bring a middle-class lifestyle to more of its citizens. Possible trouble spots include a banking system described by some as having marginal oversight and high loan default rates; higher world energy prices that could put the brakes on rapid industrial growth; and internal turmoil created by a society drawn toward economic freedom but not enjoying civil freedoms.

Other skeptical voices wonder if metals growth in particular will fall off after the construction boom surrounding the 2008 Olympics in Beijing.