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Commodities

China's environmental cleanup hits once-thriving scrap trade

A Japanese industry that prospered by feeding Chinese demand faces new reality

Waste not wanted: Japanese exports of recovered cardboard to China have fallen amid stricter quality standards. (Photo by Shinnosuke Ogane)

TOKYO -- Old cardboard paper and other scrap material is piling up in Japan, with nowhere to go as China has toughened restrictions on polluting processors.

"China is serious about taking action on the environment," said an alarmed Masao Kurihara, head of the Japan Recovered Paper Association, a trade group for wastepaper wholesalers. 

China, the world's largest importer of used paper, has lowered the maximum permissible impurity content in imported wastepaper to 0.5% from 1.5% effective March.

The stricter quality standard has prompted Japanese traders to do more business with Southeast Asia instead. The Tokyo association has not exported recovered cardboard to China for three straight months. Japanese exports of used cardboard to China tumbled 40% on the year for the January-March quarter. 

Nor is wastepaper an easy sell in Japan. With high inventories, domestic paper manufacturers have little appetite for buying. They have benefited from the glut by enjoying lower input costs. It is the collectors and middlemen who have suffered. Used paper wholesalers paid just 10 yen ($0.09) per kilogram of used cardboard from waste collectors, down 17% from a high last summer. 

Wastepaper is not the only recyclable material languishing for want of Chinese demand. Exports of mixed metal scrap containing copper, lead and other nonferrous metals in January were 70% below the monthly average for 2017, and down by more than 20% in February.

China's hunger for nonferrous metals surged in the early 2000s during its rapid economic growth, fueling a nearly two-decade run of strong scrap exports from Japan. But an outcry over soil pollution stemming from improper disposal by Chinese recycling companies prompted Beijing to crack down on imports. Prices have been falling since last year. 

These restrictions have a far-reaching impact, hurting not only scrap collectors but also maritime shippers that transport waste.

"Cargo volume has fallen dramatically," said an executive at a major shipping line.

Chinese-bound container shipments from Japan plunged 36% on the year in February, according to the Japan Maritime Center, as wood and pulp, wastepaper and other paper -- the most common category of goods -- tumbled by half. Shipments of paper from the U.S. to China have also tumbled. 

Container vessels with scheduled service typically carry consumer goods like furniture and appliances from China to the U.S. and Europe, returning loaded with wastepaper and scrap materials. Because the U.S. and Europe buy far more goods from China than the Asian country does from them, solid waste plays a vital role keeping ships full on the return trip to Asia. 

Now concerns are growing about the cost of sending empty containers back. "A breakdown in this mutually complementary cycle would put pressure on shippers' earnings," said Takuma Matsuda, a senior researcher at the Japan Maritime Center.

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