Mon, Jan 12, 2009 - Page 9 News List

Scrap trade takes hit in downturn

China’s official media has reported that four-fifths of the country’s recycling units have closed and that millions of people will eventually be left without employment



The scrap trader was immovable, despite Wu Wenxiu’s pleas. She would pay 1 yuan — roughly US$0.15 — for a kilogram of plastic. Around the corner in Shi Yuhai’s yard, the offer was no better. Wu shrugged his shoulders and began to heave bags from his tricycle on to the scales.

“One kuai [yuan] here, one kuai there — everywhere’s the same these days. This industry has broken down,” he grumbled.

Wu is one of 160,000 collectors in Beijing who make a living from the detritus of urban life. Recycling has become a global industry and China is the largest importer of the world’s waste materials. Then came the slump.

“It’s a canary in the coalmine: it’s the front and back end of industry,” said Adam Minter, who runs the Shanghai Scrap blog and specializes in the metal trade.

“Until about eight weeks ago, for example, the entire [US] west coast paper market was sent to China and most of it was sent south. It was processed and made into packaging for products that [were] then shipped back to the US ... But when US consumer demand dropped off, that broke the cycle,” he said.

Across the scrap trade, prices have halved or worse in a matter of months. Each link in the chain is disintegrating, from factories to scrapyards to collectors such as Wu, 56, a former farmer who now plans to return to Hubei Province.

Official media reported that four-fifths of China’s recycling units had closed and that millions will eventually be left without employment.

Dongxiaokou, on the outskirts of Beijing, is a village composed of scrap: Blocks of crushed metal are stacked in a tower, heaps of plastic bottles glint in the sunshine and piles of newspapers and rags fill yards. But the merchants all have the same story — they have lost tens of thousands of dollars in a few months, wiping out years of hard work.

Shi puffed on a cigarette as he counted out notes for Wu.

“I’ve been in this business for 15 years and it’s been bad before, but never this severe. Everyone’s lost a huge amount of money and some can’t sell their stock,” he said. “Usually we sell to factories and they recycle them into plastic chips. But the price of chips has dropped so it’s had a knock-on effect on us.”

This area deals in domestic waste rather than imports, but Shi said every part of the industry had been affected.

Beijing dealers have taken a particularly hard hit. They stockpiled large quantities of recyclables because prices were soaring, but as the market began to soften, the Olympic security clampdown prevented trucks from entering the capital. The merchants could only watch as the value of their holdings plummeted.

“In a good year we can earn about 50,000 yuan (US$7,300) but this year we lost 200,000,” said Gong Rongchuan, 45, whose yard lies across the rutted alley from Shi’s.

“We came here more than 10 years ago and at the beginning we collected ourselves. Then we managed to start the business,” Gong said. “We were too poor to get loans but we managed to borrow 100,000-200,000 [yuan] from friends and relatives and we work from morning to night every day. But we haven’t paid them all back because of our losses.”

Minter says the predicament is typical.

“People would borrow money from relatives and buy a container of scrap and then throw all that money back in and reinvest it. Great if it goes up — but the moment it starts slipping, especially if it’s slipping 20 percent-30 percent, you’re finished,” he said.

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