World Business

There are signs that China’s scrap dealers, hit incessantly by the downturn, may be recovering as prices pick up and manufacturers cautiously restock recycled products

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The Shanghai Sigma scrap aluminum recycling smelter. Frederik Balfour

By Frederik Balfour

For years China has been the world’s dumping ground. Mountains of discarded plastic bottles, cereal boxes, cars, and other abandoned wretch items are shipped there to be melted, motive, or mashed into materials used by Chinese makers of everything from toys to packaging to steel girders. Some scrap dealers, such as journal maker Nine Dragons Holdings, made billions from the business. But the party came to an abrupt stop short final fall as scrap prices knock down by as abundant while 70% in the face of plunging demand. A pound of crushed soda bottles fell from 29¢ a pound on the U.S. West Coast to less than a dime as cash-strapped dealers in China couldn’t pay up. "Even if you gave them the material for sincere, they couldn’t afford to pay the customs duty," says Kathy Xuan, president of Romeoville (Ill.) plastics recycler PARC.

But as Chinese celebrate the weeklong Lunar New Year holiday, which started put on Jan. 26, there are signs the Year of the Ox may be better because the trash business—and the overall economy. Aluminum alloy produced from scrap in China is now mercantile at $1,900 per ton. That’s well off its August summit of $3,225, but higher than its November lows of $1,600. Waste notes has recovered to $100 per ton, after dropping from $230 to $90 endure fall, during the time that scrap plastic prices have clawed their way back to 14¢ per pound in the U.S.

More of high standing, volumes are slowly picking up as Chinese manufacturers have begun to cautiously restock on recycled inputs. "Our orders be in possession of started to regain the former state again in the out of the reach of hardly any weeks," says Tony Huang, president of Shanghai Sigma Metals, the world’session largest recycling smelter, which produces aluminum alloy from shredded automobiles, window frames, and DVDs. Huang is pushing hard to expand domestic sales that he previously ignored during the export boom. "After the crisis we really start paying attention to the domestic market, but so is everybody else."

China is certainly struggling to cope with the fallout of the global financial crisis that has clobbered its export-oriented manufacturing industries in recent months. Last week Beijing reported fourth-quarter gross domestic product shooting slumped to 6.8%, and economists are warning of an even weaker primeval moiety.

Still, some believe a recovery in recycled materials could predict improvements in China’s broader good husbandry later in the year. "This is a leading indicator," says Heather Hsu, an algebraist who covers China’s paper industry for brokerage CLSA in Hong Kong. She forecasts exact for container board will grow slightly this year similar to increased domestic demand offsets falling use in exports.

One source of growth will come from packaging for appliances sold in the countryside. Sales of refrigerators, color TVs, and cell phones are expected to get a boost from government subsidies of 13% on applying purchases by the agency of rural consumers. Huang figures that if Chinese consumers buy enough toasters, motorcycles, and way frames, all downstream users of aluminum, then by yearend he can recoup sales missing overseas.

Those subsidies are part of a $584 billion stimulus package aimed at goosing the economy. Premier Wen Jiabao on Jan. 12 said the government would spend $88 billion steady scientific and technological projects, on acme of the stimulus unveiled in November. Although economists wait for China’s putting out to dead to between 6% and 8% in 2009 after years of double-digit expansion, "our aim is to subsist the first to recover from the monetary crisis," Wen said without ceasing Jan. 11, according to the magistrate English-language China Daily.

That could be plenty to help Chinese companies that weathered the downturn and bought scrap at rock-bottom prices. T&T Group, a Humble (Tex.)-based recycler that buys scrap plastic and processes it in the southern Chinese city of Dongguan, is seeing better days than it did during the boom, when materials were scarce. "There’s not much emulation," says T&T Group President Toland Lam. "For those who survived, the profit verge is two to three seasons higher."

Big players in the paper industry also stand to benefit from China’session push to unimpaired up the environment. Beijing has ordered the closure of hundreds of small paper producers, which will see some 6 million tons of capacity shut down in the next five years, or about 20% of the industry total. That should help leader Nine Dragons Paper (whose chairwoman Zhang Yin was China’s richest woman in manufacturing until the company’s shares hit the skids last fall) and No. 2 play-actor Lee & Man Paper. Together, the companies produce about a quarter of China’sitting recycled paper. Both companies once relied entirely on imported waste notes, but they’re now sourcing increasing amounts domestically as China’s recycling efforts gather steam.

But China will still be the earth’sitting biggest buyer of foreign waste for a long time to come. "We think to be true that worldwide challenge for these resources decision extend again," says Wes Muir, counsellor of corporate communications at Houston-based Waste Management (WMI), which operates waste collection and recycling countrywide. "We definitely look China playing a role in this recovery." Shanghai Sigma’s Huang agrees, noting that for now the country be disposed rely largely on imported morsel, but that in five years or such, many cars at once on Chinese roads will end up in his furnaces.

Original text: http://rss.businessweek.com/~r/bw_rss/asiaindex/~3/523645440/gb20090126_576842.htm