China Kills Recycling! Waste Monster Keeps Growing!

One of the things that has always fascinated me about microeconomics is how imperfectly it can track the macro picture. For example, on the macro level, we might hear of a country experiencing negative growth, but on the micro level, this means some companies might still be growing at 20 percent a year.

During the Asian crisis of 1997, my firm represented a company that sold what I would call "luxury fruit" into Korea. Korea imports a large percentage of its fruit and the old axiom is that food does okay during recessions because people still need to eat. I'm guessing (but do not know) that fruit consumption probably declined a bit in Korea in 1997, but probably not all that much. I recall (but please don't anyone hold me to this statistic), that fruit imports that year declined around 20%. But Korean sales for my client fell from $2 million a year and rising to $20,000. In other words, his products were pretty much wiped off the Korean map.

And yet there will also be companies that can thrive in difficult times. Our fishing company clients are actually doing quite well right now. Fish sales have generally not declined, but the cost of catching fish has. It has become easier and cheaper to find crew and, most importantly, the cost of fuel has been cut in half.

I mention all of this today because I just read an article in Plastics News (I know it sounds boring, but trust, me it isn't), entitled, "Worldwide Recycled Plastics Trade Plummets." And it is not just plastics. My law firm represents a number of companies in the recycled paper, plastics, and metals industry (a/k/a the scrap business), all of whom sell mostly into China. Until around three months ago, we typically would have at least one recycling deal pending at any given time, many times two. In the last three months, we have received a couple calls from our clients telling us they might have a deal, but not a single one has gone through. The only calls we get from our recycling clients these days are those where they want to discuss how they might seek to collect from their buyers who have stopped paying.

About a month ago, the largest recycler in one of Asia's largest cities told me it "was losing big money on every paper and plastics sale" and the price of metals had fallen so much it would soon be losing money on every metals deal as well. The Chinese companies to whom it sells its product are renegotiating deals after the product has shipped or they are just flat out not paying at all. Like many in the recycling business, this company has a comparatively long term contract with its city and it must continue to pick up recyclable materials. It has had to secure additional warehouse space to store it. This situation is repeating itself across the world. Recycling companies are getting squeezed.

What China related industries are thriving right now and which are really hurting?