David Chiao, president of US recycler Uni-All Group, recently finished his second term as president of the Bureau of International Recycling's (BIR) nonferrous metals division. He spoke with Argus on his seven years at the helm of the trade group during a period that saw fundamental and transformational changes in the scrap trade. Edited highlights below.
You served as president of BIR's nonferrous scrap division during what could likely be considered as one of the most tumultuous periods ever for the scrap industry. How do you describe the last seven years?
We have experienced a lot of hot topic issues, some expected and some not. And for some of the issues it seems as if they will never end.
In 2013, China initiated Green Fence and then in 2017 National Sword and then in 2018 the announcement that they would ban all scrap imports beginning in 2020. Really from 2018 until now, we have never seen a perfect storm like this. The US/China trade war, China's ban on scrap imports and then the Covid-19 pandemic, all three of these major issues hit us at the same time. And over the course of the last year we have seen the re-opening and locking down again of countries as they recover from the pandemic. And just when it seemed like we were about to finish the ordeal the whole logistics system broke down.
So, I would describe the last seven years as very busy and challenging. Our industry has been greatly affected. It has been an honor and privilege to have served on BIR for the industry. I have learned a lot in the process. I believe anything can be worked out with good negotiation.
What do you see as the biggest issues and challenges facing the industry?
I think the most important thing now is the recycling industry itself. I grew up in Taiwan and during my career in the early 1990s we experienced industries moving out of the country and into mainland China because of environmental issues. A lot of the low-grade or so-called mixed metals were processed in Taiwan and this created pollution, so mixed metals were eventually banned for import. Industries moved to China and essentially repeated what had happened in Taiwan.
China has spent almost 30 years realizing the dangers of pollution. Many of China's big processors are moving out of China to elsewhere in southeast Asia to repeat what they were doing in China. This is a danger. We already know what creates pollution, but we still let it happen. We cannot give something that we do not want to other people. We need to be responsible with certain items and have a conscience.
My successor Dhawal Shah's challenges will likely include working with all the southeast and south Asian countries to find workable programs for nonferrous scrap recycling. How do you compromise with these emerging markets and still meet their requirements? When you look at these issues anyone can make a proposal or tell someone that they can or cannot do a certain thing, but a good proposal is a workable proposal.
We have had programs to update EU processing of low-grade material. We like to see free trade but we also like to see clean trade. Some southeast Asian countries are really learning from China right now. They are planning for pre-shipment inspections and making lists of totally banned low-grade items. Eventually we will see this happen.
I think southeast Asia countries will put in place similar rules that China has to better control scrap imports. The only difference is I think these countries are going to do this in only five years or less. In a lot of these countries, tourism is a vital GDP contribution, no one wants to travel to a country that is dirty. China is a huge country, where a lot of these southeast Asian countries are not and a lot of these countries lack infrastructure to become industrialized.
How has China's role in the metal recycling trade changed?
Like I always say, China may be out of the market, but China will never be out of the equation.
We still need to consider the Chinese market and Chinese policy. For example, they are still importing high-grade aluminum, copper and brass scrap. The thresholds though are so high that very easily we will be penalized for not making the standard. At the same time, all these Chinese processors are moving offshore and processing in other countries and then exporting the finished products back to China again. We still need the Chinese market and it is still a dominant factor to all commodities.
I think China will find a certain balance — some percentage of the market depends on their domestic supply chain and some still rely on the import.
The US is transitioning to post-pandemic life, but this is not the case worldwide. As recycling is such a globally-linked industry, what does this mean for the industry going forward?
We can talk about the pandemic forever. Over the past 18 months we have gotten used to social distancing and remote working. The trade seems like it will never become normal again.
Despite these issues, volumes and margins have been good and the flows which were initially hit when worldwide logistics broke down are recovering now. But I think for businesses everyone has mostly recovered. Logistics issues may take another year to return to normal.
The logistics system used to be a balance between how many containers are coming in and going out and how many are in transit. But now some containers are stuck because countries are in lockdown or there are not enough workers. Malaysia and Vietnam are still locking down, although some industries can operate at up to 60pc of capacity. Even in Taiwan, with the Delta variant, cases are on the rise.
