Asia: Market of the Future

Although many Asian countries have strong economies, with a annual growth rates as high as 6 percent or 7 percent as they build their infrastructures, exports of recyclable commodities from the United States to these countries is not currently booming, although there is some trade activity. In part, this is due to high prices and strong domestic demand in the U.S.

The slowest country is China, which has been beefing up its environmental regulations as well as keeping imports in check in order to control inflation. Exports of many materials from the U.S. to Korea continue strong, and Japan, while still consuming some scrap, generates more of its own scrap and imports considerably less from the U.S. than in the past.

Significant importers of copper scrap have traditionally been India, China and Korea, according to Michael Friedman, president of Friedman Metals Brokerage Co., York, Pa. "It seems like everyone is getting ready," he says. "But the problem is that right now copper is not cooperating. The market conditions in the U.S. make it very difficult – prices are very good in the U.S."

Because nonferrous prices in the U.S. are high, there is little attraction to overseas buyers. In addition, domestic steel mills are using up much of the ferrous scrap generated in the U.S., so less iron and steel scrap is currently being exported to Asia and the Pacific Rim.

But there is great potential for the future, says Friedman, as many countries have great demand for both industrial materials and consumer goods. He says there is an emerging well-educated middle class in China that will be tapped into the world market.

"When I was there last October, Hong Kong and China were just booming," he says. "Building was going on like crazy, people were buying things, there were a lot of cars on the streets, and people were dressed nicely. Back in the country it’s like in the 1920s, but in the big cities everyone’s carrying cellular phones and you see microwave dishes on the rooftops, and we saw a lot more motorscooters and motorcycles imported from Japan, and more stores selling washing machines. So a great deal more consumer goods are flooding the market and people are buying."

Although China does not have the same level of industrialization as Western countries, it is nevertheless developing rapidly – with a growth rate of 6 percent to 7 percent annually – and generating increasing quantities of waste.

As far back as 1984, the country began drafting a law regulating waste, according to Professor Zhang Kunmin, first deputy environment minister of China. The law, which is close to being passed, includes provisions on waste monitoring, preventative regulations for industrial and urban waste, and regulations for hazardous waste. The country is also interested in adopting something similar to Germany’s "polluter pays" principle, says Kunmin.

The recent increased focus on regulating waste and recyclables has led to a slowdown in materials imported into China. Between the last quarter of 1995 and March of this year, the Chinese were very concerned about hazardous waste imports into the country, says Benjamin Shaw, president of Tungsman & Co. Inc., Skokie, Ill. But the situation is easing, he says. "Conditions are now okay for trading, but they are more strict than before."

Although the Chinese have been passing more laws regulating trade in recyclables, Shaw says they have little teeth. "China has a lot of laws, but the problem is that because of the Communist system the infrastructure is bad, so the laws can’t be enforced."

Nevertheless, materials such as machine scrap are not moving to China as much as they used to because of recent concerns on the part of the Chinese government about importing hazardous materials, says Gene Johnson, district sales manager for the China Ocean Shipping Co., a steamship company based in Baltimore. These sorts of limits could inadvertently encourage the development of a black market, if companies in China are still interested in receiving materials the government has banned, he speculates.

China is a large importer of U.S. metals, but only on its own terms, says Johnson. "Culturally, China is a disciplined society, so no matter how badly they need something, if they don’t get the price they want they will stop buying, or buy from someplace else," he says. "They may produce less or stop producing – whatever they have to do. It’s a big problem. Freight rates from Europe have dropped considerably, so they may buy more from there."

Copper has been down for the last few months, says Johnson. "China shut off their buying all of a sudden, because the price went up."

China frequently ties up cash to slow economic growth and slow inflation, adds Shaw. This is followed by a frenzy of buying activity. "Usually the pattern is for them to hold up trade for a few months, and then engage in boom trading," he says.

The Chinese market is never consistent, agrees Grace Chan, senior trader at Pacific Metals Ltd, Vancouver, British Columbia, Canada. Pacific Metals traditionally has exported low-grade materials to be cleaned and sorted in China, says Chan. More recently, the Chinese have improved their ability to process higher-grade materials, as well. "Five years ago, it was strictly low grade material to China," she says. "They are growing, just like Japan or Korea – going through industrialization."

But despite the market’s inconsistencies, China is a key country in which to ship materials, and will be into the year 2000, according to Steven Shecht, president of Earth Metals Recycling Inc., Plano, Texas, as there is the volume of business that will allow for future growth and expansion. "I’m very bullish on China in any industry – computers, machine parts, etc.," says Shecht. "This is the country to trade with, just as Japan was 10 or 20 years ago. It’s extremely frustrating, though, because there’s no middle ground – it’s feast or famine. But the feast times are fun."

There’s a high rate of recycling in Hong Kong for nonferrous, ferrous, paper and plastics, according to a recent government study. Much of the material is exported to China, as materials are often sent through Hong Kong on their way to China. Also, with cheaper labor costs and more land availability, a number of Hong Kong-based businesses have processing facilities in China, according to Ian Cooper, a United Kingdom recycling expert.

As in other developing countries, there are individual scavengers who ensure that containers such as aluminum cans are collected and recycled. The country’s lack of landfill space will encourage the development of waste reduction and recycling, predicts Cooper. An area with potential is recycling construction and demolition debris.

There is uncertainty about what will happen to business in general, and recycling in particular once the Chinese take over the Hong Kong government in June of 1997. But some U.S. scrap exporters are not concerned.

"The currency is not backed by the Hong Kong government, it’s backed by banks," says Friedman. "Those who are there are going to stay."

Japan is one of the world’s most densely populated countries, with approximately 124 million people on a small land mass. To make matters worse, about two-thirds of the existing land area is covered with mountains, woods, or is volcanic and so is not suitable for human habitation. For this reason, handling waste efficiently is key.

The country relies heavily on incineration for disposing of waste. Japan has about 1,950 household waste incinerators, two-thirds of all such facilities throughout the world. About 73 percent of the country’s waste is currently incinerated. Also, recycling of household materials is now more common.

As disposal costs are rising in Japan, the government has passed laws encouraging recycling and enabling localities to pass landfill levies. So far, the levies have led to some increase in illegal dumping. Following the example of many European countries, Japan may pass laws requiring separate collection and recycling of packaging materials. Some observers say an increase in the country’s environmental consciousness could provide an opportunity for Western countries to sell modern pollution control equipment into Japan.

The Japanese market has been slow for a long time, says Chan. The economy, artificially inflated for many years, has been in a recession for a few years. As a result, the country is producing less and demanding less scrap.

The country is buying very little scrap from the U.S., and more from Southeast Asia, agrees Shecht. "They are also generating their own scrap, which they didn’t do 10 years ago," he says. "They are much less dependent on the U.S. for scrap."

A number of Asian countries have joint ventures between industry and national governments for recycling packaging materials such as expanded polystyrene, according to Betsy de Campos, director of environmental affairs for the Alliance of Foam Packaging Recyclers, Washington.

"In Korea, they’ve been very progressively implementing a joint industry-government program to really push the education on curbside so they can get high participation levels," says de Campos. "And the funding and so forth mainly comes from industry, it appears, at least with the plastics group – I don’t know how it’s working with the other materials."

A great deal of plastic is generated in Asian countries, she says, as the material is viewed very favorably.

Because there are higher volumes of polystyrene available within smaller distances in Asia than in the U.S., says de Campos, Asian collectors can more cost-effectively ship the material to central facilities where the material is melted down and then transported to end markets.

Some of the polystyrene generated in Asian countries is used domestically, and much of it is shipped to China, says de Campos. Overall, she sees potential in Asian polystyrene recycling.

The author is editor of Recycling Today.