Economic Development

Building Bridges in China

Local recycling programs are close to turning a profit on scrap metal shipped to Asia.
by | April 2006

Bag them, sort them or run them out to the curb in an all-purpose bin: No matter how localities ask residents to dispose of their recyclables, chances are their soup cans are helping to build a bridge in Asia. And, in a recent turn in the market, bringing unexpected money into local coffers.

China is one of the prime outlets. Rapid industrialization and a reduced amount of available raw material has made it the largest market for recyclables. Fibers and paper are in greatest demand, but a large dam project and preparation for the Olympics have created an immediate need for steel and concrete.

California, in particular, is finding that its recycling business with China is growing increasingly remunerative. The value of the scrap and waste the state shipped there was only $85 million in 1999, but it increased more than ten fold to $875 million in 2004, according to the U.S. Department of Commerce. In part, the increase was due to products gaining value they didn't have before.

The growth in the market and the possibility of profiting from exporting its scrap has led many localities to expand their "acceptable" recyclables list. Not all of the material, however, comes from curbside pick-ups. In addition to household collections of cans, the recyclable scrap waste includes used appliances, left over construction steel and used or damaged automobiles.

In California, the waste management company each local government contracts with decides whether recyclables will be exported. According to Doug Kobold, solid waste planner for the Sacramento County Municipal Services Agency, the increasing value of raw materials has made the export program a plus. The revenue generated from the sales goes back to the local government. While processing costs rise with the economy, the raw-materials market has risen faster, creating an overall increase in revenue.

Many localities, including Sacramento, say their scrap-metal recycling programs are still operating at a loss but are moving closer to profitability.

California is, of course, uniquely situated to benefit from scrap metal exports to China. Its accessibility to that country's ports keeps shipping costs low, and its large population generates millions of tons of recyclable waste every year.

States further away from coastal ports are finding some benefits from the new value in the scrap market. In Colorado, private scrap metal recycling companies move the material over land by rail to cargo ships in various ports. According to Matthew Alvarez, a broker with All Recycling, a Colorado recycling company that ships 900 tons of nonferrouse metal overseas each month, the material brings in over $10 million in revenue every year. Although Colorado localities have yet to realize revenue from the collection and shipment of its scrap metal, there is an environmental benefit in having the material removed from the waste stream.

Whether scrap exporting will continue to be a worthwhile effort depends on markets and supply. Revenue in the scrap industry is cyclical--sometimes profitability is high, but the market has also seen its share of low earning years. Despite current building booms, Asian countries can absorb only so much scrap. For now, though, the absorption rate is high.

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