Testament to China having surpassed its peak stages of infrastructure building and rapid urban migration was its decline in steel consumption and output in 2015. The nation’s steel industry—already widely regarded to have been in an overcapacity situation in 2014—finally scaled back output in 2015 as China’s pace of construction receded from the pace of the previous 15 years.
Some sectors within China’s nonferrous industry face similar circumstances, with copper in particular connected to the building boom of the previous two decades.
Presentations and group discussions at the 2015 convention of the China Nonferrous Metals Industry Association (CNIA) and its Recycling Metal Branch (CMRA), held in early November in Ningbo, China, provided insight in particular on the state of China’s secondary copper, aluminium and lead industries as they cope with fundamental economic changes.
Topics at the event ranged from the health of the leading nonferrous sectors to the ongoing role of imported scrap materials to the response of government agencies in China to support and police the secondary nonferrous metals industry.
Representatives of the CNIA and CMRA warned that the “new normal” economy of China likely means an end to rapidly growing metals production capacity. Ren Xudong, executive vice president of the CNIA, portrayed a mixture of good and bad conditions for nonferrous metals producers.
Many base metal sectors, he said, have an excess capacity issue and “prices are in a downturn both at home and abroad.”
Figures for secondary metals production in China for the first nine months in 2015 show aluminium output up 5.5 % and lead up by 15%, but secondary copper production has dropped by 7.1%, according to Ren.
The figures likely reflect the health of the Chinese automotive industry, which consumes aluminium as well as lead in the form of lead-acid batteries, versus its building industry, where less copper and brass have been needed.
The secondary nonferrous sector, Ren said, is “important to help establish the green, low-carbon system” China is seeking, but companies will have to seek out their own opportunities. “We need to be confident and take measures to look for new areas of growth in this industry,” Ren stated.
Wang Jiwei, vice president and secretary general of the CMRA, said the “new normal” of slower economic growth in China made 2015 a difficult year for producers, with “capacity rates of some enterprises [being] less than 50%.”
During China’s 12th Five Year Plan era from 2011 to 2015, major investments in nonferrous production created facilities that could produce up to 680,400 tonnes annually of copper or lead individually.
The five-year time frame also will have witnessed China having brought in some 29.9 million tonnes of imported nonferrous scrap, according to Wang.
The 13th Five Year Plan era may not feature such rampant growth, said Wang, but initiatives such as “Made in China 2025” and “One Belt, One Road” should bring policy support and technological advances to the sector, according to Wang. “I hope Chinese enterprises can join forces with foreign colleagues to develop the sector,” he stated.
BARRIERS TO SUCCESS
Chinese nonferrous metals producers have been scaling back their purchases of imported scrap. While the phenomenon likely is tied in part to the slowdown in the copper sector, it also may be partially because of trade policies in China, said some members of a panel discussion at the convention in Ningbo.
Increased inspection regimens and fees imposed by a coalition of China’s customs and environmental agencies have been necessary to stem the shipment of substandard materials, according to panelists, but many policies and procedures are unnecessarily burdensome or even off-target, according to several participants.
Robin Cai of Hong Kong-based Alter Metal Recycling Ltd., a subsidiary of United States-based Alter Trading Co., said Chinese regulators are considering allowing wider (nonlicensed) importation of higher, cleaner grades of scrap, such as No. 1 and No. 2 copper.
The grades have not been problematic and are valued by metals producers, Cai said, adding, if misclassified shipments arrive, the buyers will be as eager to reject them as any government inspector would.
She urged regulators to allow Chinese metals producers to have wider access to these materials, saying it would improve the competitiveness of Chinese companies in that sector.
The current inspection regimen to ship these nontroublemaking materials can add $1,000 of cost per container, Cai said. “This is creating a higher cost for Chinese metals producers. These are high-demand quality products. If they do not come to China, they will flow to other countries.”
Robert Stein of Alter Trading expressed the same view. “It is not as if there are mountains of scrap looking for homes,” he said. For scrap exporters, “Rising costs in China have made this less of an attractive market for [many] materials,” Stein added.
Javier Ingles Fenoli of Spain-based Hermanos Ingles S.A. was more sympathetic to the existing China Certification & Inspection Group (CCIC) system, saying CCIC “plays a positive role” in dictating “who can do business in this field. CCIC plays a core role in protecting our environment.”
Cheng Jianhong of Yuyao, China-based copper producer Ningbo Shimao Copper Industry Co. Ltd. offered her perspective that current scrap inspection fees and processing requirements have caused her company to shift its focus away from using scrap as feedstock, instead using cathode.
“We have used copper scrap for many years, but we have closed down that part of the business,” she stated. “China has lost its cost advantage as a scrap consumer,” Cheng added.
As a copper producer, Cheng said she is obligated to compare the value of scrap from different countries with the value of using copper cathode.
Panelists agreed that regulators in China, as in all nations, will continue to change the country’s regulatory climate in response to environmental and economic factors.
Salam Al Sharif of United Arab Emirates-based Sharif Metals International supported China’s mission to regulate as it sees fit but also encouraged it to favor “regulations that boost business and are not suppressors.”
WHAT SHADE OF GREEN?
For Chinese regulations to be more favorable towards scrap imports, several of the nation’s government agencies may need to be convinced that imported scrap plays a positive role not just in the economy but also in the environment.
Two representatives from government agencies who spoke at the convention in Ningbo said the Chinese government will provide support to the recycling industry during the next five years, while a third warned recyclers to be mindful of causing pollution or risk less positive government interaction.
Speaking at the opening session of the convention, Gao Yuahu of China’s Ministry of Industry and Information Technology (MIIT) said the “new normal” in China points to slower economic growth, but recyclers have an advantage.
“We want to transform the green sector as the new strength of our economy,” stated Gao regarding several policies in the works in Beijing. These policies will “coordinate, prioritize and develop the low-carbon circular economy,” he added.
The movement may spell trouble for older smelter and refinery operators, even if they do recycle metal. “The recycled metal industry has become an important priority [but] we have developed specific plans to phase out the backwards capacity,” Gao said, referring to polluters and energy-intensive operators. “We still face problems with companies with small-scale and deficient technology.”
Ma Rong of China’s National Development and Reform Commission (NRDC) also tied the nonferrous recycling industry to the circular economy effort and noted that President Xi Jinping has stated that “waste should be turned into resources.”
She encouraged industry leaders to think of recycling not only in terms of production or output. “Recycling is not only a primary industry, it also is an important service industry,” Ma said. “We have to develop our notion of service.”
Ma also encouraged recyclers to protect their financial positions using hedging and other tools and to upgrade their technology. “Nonferrous separation and extraction is no easy job,” she acknowledged and said agencies such as the NRDC can “cultivate key enterprises” as they take technological forward steps.
Presenter Ling Jiang of the China’s Ministry of Environmental Protection (MEP) concentrated more on enforcement, saying that China’s inspection and enforcement actions have resulted in gradual improvements and the weeding out of bad players.
Green Fence in particular, Ling said, was effective “to attack the import of foreign garbage [and] taking action against plastic waste” shipments.
Despite improvements, “We cannot ignore the problems,” Ling warned. “The development of this industry is tied to self-discipline. We should grasp the dividends and avoid the hazards. I hope all of you can be self-disciplined [and] avoid the illegal smuggling,” he said.