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China's quality threshold causing problems for material exporters

China’s Green Fence initiative, introduced in February and likely to continue until late 2013, has unsettled not only exporters in the West but also China’s consumers of secondary raw materials, it emerged strongly at the Bureau of International Recycling (BIR) world recycling organisation’s convention in Shanghai last week.

Paper industry analysts RISI’s associate economist, Minnie Kong, told the BIR Paper Division that China’s Green Fence was temporarily hurting exporters in North America and Europe while also creating problems for those Chinese mills relying on imports.

Despite buying foreign fibre on a scale that could not be matched by any other country, mills in China were anxious not to lose their competitive position in the import market.

Reporting to the BIR Plastics Committee, Michael Schipper, trader for International Alloys, noted a plastics scrap oversupply in the USA owing to China’s Green Fence initiative, resulting in price reductions of 15% in some instances since March. Steve Wong, president of the China Scrap Plastic Association, said Green Fence was forcing many domestic consumers to pay more for their scrap and was thus reducing their competitiveness.

According to Renwu Cai, general manager of Guangzhou GISE-MBA New Plastics Technology, Green Fence was designed “to set up obstacles to illegal enterprises” but even law-abiding companies had been hit by customs clearance delays and thus additional costs.

Of the “unqualified” waste raw materials exported to China in the period 2010-2012, plastics accounted for 56%, non-ferrous for 17% and paper for 9%, pointed out Cui Lei, general manager of the China Certification & Inspection Group (CCIC). He told BIR’s International Trade Council: “Only a small percentage of your exports are of poor quality but you need to give this small percentage your attention or your export efforts will fail.”

Robert Stein, president of the BIR Non-Ferrous Metals Division, described the increased scrutiny of non-ferrous scrap entering China as “a surprise” to many exporters “because of the suddenness of its implementation”.

He also criticised the recent decision by the Indian Government to increase basic customs duty from 0% to 2.5% on imports of aluminium, ferrous and stainless steel scrap. “The markets are the best at determining where our scrap is shipped; the more barriers to free trade, the higher the costs to the processing community who will seek alternative markets,” he said. “We do not endorse implementation of artificial impediments to free and fair trade.”

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