In today’s newsletter, we’ll be talking about the global recycling problem and how it’s leading to rising scrap metal imports in India.

The Story

Like all good stories, this one begins with China.

China was once the global dumping ground for trash. Countries like the US, UK, and Japan shipped their waste (paper, plastic, and metal) to China hoping the country would dispose of it economically. China promptly accepted the trash, burnt it, recycled it, dumped it in landfills. Ergo, they dealt with it like champions. And waste management practices in other more developed countries promptly took a backseat.

Until that is China refused to take more trash. Last year, the Chinese Government banned imports of mixed paper and plastic, and restricted imports of eight types of scrap metal including aluminium. They refused to deal with the environmental and health hazards that came with foreign trash. They said they would rather focus on domestic garbage collection.

And the trash hit the fan.

Japan, for instance, was hit hard. They were shipping most of their plastic waste to China. When these doors closed, they tried to redirect it to countries like Thailand and Malaysia. But these countries have higher quality standards. They weren’t going to deal with the trash as is (like China did). Eventually, though, the Japanese just decided to buckle down and process it domestically.

The British on the other hand simply resorted to burning trash. What they couldn’t burn, they shipped off to Malaysia and Vietnam.

The US struggled, too. Mainly due to the costs involved in recycling. Labour in the US isn’t as cheap as it is in China. So they started doing the same thing as everyone else — they turned to countries like Malaysia, Vietnam, and of course…

India

In fact, once China raised its walls, scrap plastic from the US started inundating Indian markets in large volumes. And of course, we didn’t have the recycling capacity to deal with it either and last year, we issued our own ban on plastic waste imports.

However, we didn’t ban all kinds of scrap imports. The US also generates a large amount of scrap metal (not plastic). And once again, since other developed countries have stricter quality standards, a big part of it was diverted to India. This scrap metal was being sold at pennies on the block. With the prices being so lucrative, Indian importers started binging on this stuff, shipping in large quantities of scrap metal, raising the country’s total imports from the US by 149% last year. 85% of this was scrap aluminium. And yes, this scrap metal can actually be put to good use. But there are problems here.

For one, Indian metal producers, especially aluminium producers are understandably bothered about this development. Aluminium scrap has a measly import duty and since most Indian importers are shipping it at low cost anyway, the real thing (primary aluminium) can’t seem to compete with it well i.e. Why would industries that use aluminium, buy locally when importing scrap is much more cost-effective?

So yeah, it’s really hurting the aluminium industry, but things get worse. Since these importers value profits over quality, they are now using scrap in places where scrap doesn't belong i.e. electricity and utensils manufacturing. And this isn't good for consumers. Not one bit. Because aluminium scrap, unlike the real thing can harbour dangerous amounts of lead and radioactive elements. You do not want to eat off a plate made out of this stuff. Also, scrap metal used in electrical transmission simply stops conducting electricity after a point, leading to steep replacement costs when it does. And all of this has culminated in rather bombastic fashion.

In 2019, India edged past China as the largest scrap importer. But maybe we should take a leaf out of the red dragon’s book and start looking within to fulfil domestic demand, even if it's expensive. The Government is expected to soon unveil a vehicle scrappage policy which incentivises people to send their old cars to the junkyard. When that happens, perhaps scrap metal imports will go down automatically. And maybe we will have stricter quality standards. But until then, you stay safe.‌

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