Scrap Value

Wang Zhiwu has traded down from his Audi saloon, switching it for a used compact. Beijing’s anointed “King of Scrap” is feeling the pinch of the global economic downturn.

Wang is one of Beijing’s biggest electronic waste traders, with each of the two rows of bungalows flanking his 400-square-meter courtyard, close to the iconic Bird’s Nest stadium, packed to the rafters with circuit boards obtained from discarded television sets, computers, printers and other electrical appliances.

This stocky 38-year-old receives real-time fluctuation reports from the London Metal Exchange via his cellphone on each day of trading. However, the latest market data has left him feeling gloomy, with plummeting scrap metal prices weighing on his business.

What is worse, a new government policy on recycling, set to be implemented on July 1, will charge electrical appliance manufacturers in order to subsidize government-authorized “e-waste” recyclers a club Wang is locked out of.

Hazardous

At a glance, Wang Zhiwu can estimate how much gold, silver and copper can be extracted from any heap of circuit boards, and his savvy has become legend in his field. Though more than 100 governmentauthorized “eco-friendly” e-waste disposal companies have opened in China in the last few years, the industry itself runs thanks to businessmen like Wang, supported by millions of small-time traders who go house-tohouse collecting scrap. In China, unlike in developed economies, recycling centers pay consumers for their unwanted electrical appliances.

Unlike these private enterprises, government-authorized recycling centers, subject to strict safety regulations and environmental restrictions, could not possibly make ends meet without government subsidies sustainable waste disposal is just too expensive. They certainly could not afford to pay citizens to dispose of their garbage. In contrast, Wang’s clients, most of them from recycling workshops in Guangdong, focus entirely on the value of metal extracted from e-waste, giving them a somewhat cavalier approach to actually disposing of the huge volumes of largely valueless waste material they receive on a daily basis.

Wang’s goods, like most of the country’s ewaste, are trucked into Guiyu on Guangdong Province’s south coast, where they are sorted entirely by hand. Thousands of employees rip components off circuit boards, while the boards themselves are heated over a coal furnace to melt any remaining solder. Any usable components are sold back to electronic parts markets. Those containing gold, silver and other precious metals are soaked in acid baths to dissolve the plastic and non-precious metal, with the remains passed through another furnace to extract any copper. Unsurprisingly, these processes create horrific levels of pollutants, with most of the boards either incinerated or simply discarded as landfill.

Chlorofluorocarbons, or CFCs, a controversial chemical used as coolant in air conditioners and refrigerators, are released directly into the atmosphere when these appliances are dismantled. While banned in most industrialized nations due to their hugely destructive effects on the atmosphere (CFCs were the main chemical contributing to the hole in the ozone layer), they remain widely used in China.

Aside from precious, non-reactive metals, e-waste also contains significant quantities of toxic heavy metals like lead, mercury, and cadmium, all of which are carcinogenic and have steadily crept into China’s food chain via water and soil. None of Guiyu’s countless recycling workshops have any filtration systems in place to prevent these heavy metals from being dumped directly into rivers or the ocean.

According to a report by the medical school of the local Shantou University, eight out of 10 children in Guiyu have elevated levels of lead in their blood, and the local miscarriage rate is reportedly six times higher than the world average. Due to widespread contamination of the water supply, the bottled water industry, all of which is imported into the area, is the second-biggest commercial sector after waste processing in Shantou.

Follow the Scrap

Wang himself cut his teeth as a businessman during Guiyu’s e-waste processing boom in the 1990s, when Guiyu started treating electronic waste imported from overseas and soon grew to be a global e-waste disposal base. He left his hometown in north Anhui Province after finishing junior high school and hopped from job to job in China’s prosperous southern and eastern coastal cities.

Wang told our reporter he was “looking for something better than an assembly-line salary,” and eventually he arrived in Guiyu, which he remembers liking “despite its choking air.” At a local workshop, he developed his knack for estimating the precious metal content in all types of circuit boards and electronic components, and was thus able to quit his job a year later and start his own scrap business.

As luck would have it, Guiyu’s rocketing pollution was quickly becoming an embarrassment for the central government, which tightened restrictions on imports of foreign e-waste into China (though without closing down any offending workshops). This allowed Wang to focus on the growing domestic market in e-waste, led by the country’s affluent megacities. Wang soon made his way to Beijing, and found very few street hawkers who understood the cash value of the pre- cious metals in the average computer motherboard. At the time, hawkers were selling such components as if they were scrap iron by weight. Wang soon carved out a lucrative niche in the local market. Paying 2,000 yuan(US$310) for a pile of e-waste could earn Wang 100,000 yuan (US$15,650) or more. Few legal businesses can turn a 50-fold profit, but Wang managed it.

Wang’s expertise with e-waste coupled with a strong network of connections in Guiyu helped his business grow by leaps and bounds. At his peak, Wang would send 20 tons of e-waste to Guiyu every two days, all the while using Beijing as the focal point of a growing network of waste collection businesses in north China, which relied on the ignorance of local refuse collectors as to the true value of e-waste, allowing Wang to hoodwink them into paying way under the market rate while believing they were getting a good deal.

Sustainability

“Hazard-free” recycling services were introduced to China amid the fallout of the revelations about Guiyu’s pollution crisis. Growth was slow in 2009, only four such“sustainable” recycling centers were operating in the entire country. However, when a national new-for-old policy for electrical appliances was adopted in 2009, this number soared to 105.

The new-for-old policy grant offers householders a ten percent refund on any new appliance if they turn in an old one at the time of purchase. Initially aimed at stimulating domestic consumption during the financial crisis, the policy also offered hefty subsidies to government-approved enterprises willing to dispose of obsolete appliances in a sustainable way. Unlike the small workshops in Guiyu, these authorized disposal services were vast plants operating under stringent environmental regulations.

Expensive machinery, usually imported from Europe or North America, would break down circuit boards into tiny fragments and separate out metals with electromagnets, with hazardous emissions and waste material kept to an absolute minimum. However, withdrawal of the old-for-new subsidy policy at the end of 2011 brought these plants to a halt, leading to a resurgence of the bad old ways, and returning Wang’s business to full profit.

This situation, analysts warn, is unsustainable. According to the National Development and Reform Commission, China’s e-waste volume is growing by 20 percent each year, and by 2015, some 160 million discarded electrical appliances will have to be dealt with.

Without government subsidies, however, China’s sustainable recycling plants cannot afford to purchase scrap from hawkers, who instead have turned back to Guiyu’s recycling industry. According to a 2010 report by the United Nations Environment Program, China produces about 2.3 million tons of e-waste every year, second only to the United States. Most of this waste material is destined for the heavily polluting workshops of Guiyu.

The government’s new subsidy policy is set to reverse this trend once again. This time, however, subsidies will come from industry rather than the taxpayer. Appliance manufacturers can expect to be charged 20 yuan (US$3.10) for making a television, 15 yuan (US$2.30) for a refrigerator, 8 yuan(US$1.30) for a washing machine or air conditioning unit, and 13 yuan (US$2) for a personal computer.

Authorized disposal companies will receive a subsidy of 85 yuan (US$13.30) for a computer, 80 yuan (US$12.50) for a refrigerator, and 35 yuan (US$5.50) for a washing machine or air conditioner. Moreover, only authorized disposal companies will have market access, with enterprises such as Wang’s outlawed without disenfranchising front-line refuse collectors.

Wang estimates that more than 100,000 people in Beijing earn their living through ewaste collecting and trading. Big traders like Wang, who deal directly with Guiyu workshops stand to lose the most, their prices undercut by government subsidies.

However, Wang told our reporter that, with profits already disappearing, he feels it’s time to change his vocation. He has already rented 4 acres of land in Beijing’s rural suburbs, erecting multi-purpose factory buildings which he plans to lease to manufacturers or offer as storage warehouses. More than 10 years have passed since he entered the Beijing e-waste market, and small-time dealers have gotten wise to the true value of discarded appliances.

“When every street hawker knows the value of a CPU, you don’t have much of a profit margin any more,” said Wang. Born into a poor farming family, he joked that he had finally become a “landlord,” a title which was a badge of shame in the China of his youth.

“Landowning never went out of fashion,”Wang joked. “It has always been the most secure way to make money.”