Wednesday, 24 February 2016

Quick Fisk: Taipei Times Headline Article On Taiwan's Recycling "Crisis"

Although on Monday I was generally preoccupied with Wanwan's hospitalization and recovery, I nonetheless caught the headline article of the Taipei Times...
"Piles of recyclables on brink of crisis."
This piqued my interest as I have recently been thinking about the garbage collection service in Tainan city and related problems of littering and fly-tipping in the public parks. The sub-heading to the article was...
"SCRAP MOUNTAINS:Falling prices have made government tenders for scrap collection unprofitable, while the heaps left behind make ideal breeding grounds for mosquitoes."
There may actually be a "miscommunication" here. The use of the word "tenders" in the first sentence seems to imply that the government is paying companies to collect "scrap". If the government is paying out money, then that is a cost. Unless there is an income to balance it out, then costs by definition cannot be profitable. It is the selling of recycled materials that generates income. So why would government tenders for scrap collection ever be profitable unless the government was also in the business of doing the recycling and selling the recycled material itself? And, if the selling of these recycled materials was previously profitable, then why would it be done by government and not by private companies? A more generous interpretation is that someone has made a mistake: what the sentence was intended to mean was that the scrap collected by the government is no longer wanted by those firms who actually do the recycling and selling part of the business.

The writers, reporters and editors at the Taipei Times might not be able to get the business part of the sentence right, but at least they are right about the piles of trash left behind being breeding grounds for mosquitoes.

But without reading any further, here's an obvious question: if prices for certain recycled materials had already fallen to a point where, for a given quantity, they could no longer be recycled profitably, then why was the government still collecting them for recycling instead of sending them to the incinerator? If I was the manager of a recycling firm getting my raw materials collected for me by the government, then I would have warned my counterparts in the government agency in advance about possible price changes on the market as a simple courtesy. Not that it should be necessary; the people at the government agency should already understand the importance of prices and be forewarned and ready to shift from recycling to incineration as appropriate. That they apparently were not is surely a sign of incompetence.

Yet the problems with this article continue into the opening two paragraphs:
"Towering piles of recyclable materials awaiting processing are nearing crisis levels in some parts of the nation, public health officials and industry sources said."
So there are piles of materials that can be recycled, but have not yet been recycled (they are "awaiting processing"). OK. But then we are told...
"Contractors are shying away from buying recycled household scrap collected by the Yunlin County Government..."
I'm sorry, what? Why would "contractors" (presumably recycling firms) buy material that has already been recycled? The material they are talking about is surely recyclable scrap rather than recycled scrap. If it was already recycled, then it just needs to be sold to a manufacturer to use again. Or more likely the people at the Taipei Times just wrote this story up on the fly and published it without proof-reading. Another explanation could be that the copy editors whose job it is to proof-read articles aren't doing their jobs properly.
"Gukeng Township Mayor Huang Yi-ling (黃意玲) said that she was forced to move scrap that the recycling center could no longer accommodate to the local public basketball court, following the township’s second consecutive lapsed tender.The township could not find any takers for the contract in spite of reducing prices from NT$1 per kilogram to NT$0.5, she said."
I think we can see what the problem is here. It's not that the local government has collected too much recyclable material, it's that they have collected far too little of it to be worth a recycling firm buying. If the collected material is small enough to be moved to a basketball court, then we are talking about a few tonnes - which, at half an NT dollar per kilogram, is basically nothing. At those prices, you'd have to be recycling hundreds of thousands of tonnes of this stuff (and selling all of it at a slightly higher price) for it to be profitable. That's hundreds of basketball courts worth of scrap.
"Similar problems have been reported by many other centers in Yunlin County."
Why does that sentence not say that similar problems have been reported throughout the whole of Taiwan - why only Yunlin County? If these piles of scrap were the fault of falling prices, then we'd expect to see them across Taiwan and not just in one or two places. That the Taipei Times is reporting this as occurring in several places within Yunlin County, raises the suspicion that this may in fact be the fault of the Yunlin County government. If they couldn't sell this material to recycling firms, then we can ask two questions; first, why haven't they given it away for free or paid the recycling firms to take it, and second, if there was no way at all to get the recycling firms to take it, why didn't they just send whatever they could to the incinerator? Whilst some things shouldn't be burned due to their particular chemical constituents and the health risks posed by burning them, there are surely many things that could be burned but aren't due to limits imposed on greenhouse gas emissions. But let's consider first things first...
"In 2014, Huwei Township’s  recycling center tried to sell its scrap by reducing prices to NT$2.21 per kilogram. However, the scrap not only failed to attract new buyers, but in September last year, an existing buyer decided to prematurely terminate a contract even though the buyer was obliged by contract to purchase Huwei’s scrap until the end of that year. 
A spokesperson from the buyer said the firm lost between NT$100,000 and NT$200,000 every month it did business with the township, and that it saw no way out other than to tear up the contract and pay a NT$200,000 penalty."
So basically the recycling companies are making a substantial loss when dealing with this particular township. What are we to infer from that? One possibility is, as I suggested above, that the township is too small to generate enough material for recycling to be profitable. If the prices at which recycled materials can be sold to manufacturers drop, then a proportionately greater quantity of recyclable material must be collected at no additional cost in order to maintain the profit margin. But there is a limit on how much recyclable material can be collected from a small township like Huwei, and when prices drop, recycling necessarily becomes unprofitable as there can be little to no increase in the quantity of material collected - and certainly not at no extra cost.
"Keelung’s Bureau of Environmental Protection Director-General Lai Huang-hung (賴煥紘) said that the city also saw multiple tenders for the city’s scrap contract lapse until it finally found a buyer this year."
We aren't being told something here. If the situation is really this bad, then how on earth did the Keelung city government find a buyer at all? Did the Taipei Times reporters even bother to make enquiries about this?
"More than 100 Taiwanese scrap-trading businesses stopped operating last year due to falling prices, which industry sources attribute to the deregulation of scrap steel and iron imports from China and cutbacks on Environmental Protection Administration (EPA) subsidies."
Finally, something in this article which actually makes sense. The drop in prices is due to an increase in supply. Fine. But here's a question: could recyclable materials in Taiwan be sold for export to the Chinese, or would the costs of collecting and sorting be far too great to make it profitable? Let's assume the latter is the case and that it's simply too expensive. Why are they so expensive? Obviously there are the costs of finding, collecting, transporting and sorting - but part of these costs are already borne by the Taiwanese residents and businesses from whom the garbage is collected and by the local governments who operate the daily garbage collection service. Could these operations be done more efficiently, on a larger scale and a lower cost? I don't know.
"The price of recycled paper has remained “relatively stable,” declining from NT$5 per kilogram to between NT$3 and NT$4, said a recycler based in Yunlin, who has been in the industry for more than 30 years."
So at least paper recycling is still viable for now, even if the price is also falling.
"However, in metals and plastics, the changes are significant. About seven to eight years ago, the price of scrap steel peaked at between NT$11 and NT$12 per kilogram, but Chinese scrap iron and steel imports pushed the price down to NT$1 per kilogram. The recent rise to NT$3 per kilogram does not make the remotest difference to the industry,” said the recycler, who wished to remain anonymous."
So thanks to China, Taiwanese manufacturers can now get on with making things out of recycled plastics and recycled steel at vastly lower cost than they could seven to eight years ago. And although that is a problem for Taiwanese recycling firms, it is surely a good thing for Taiwanese manufacturers. But that quote mentions Chinese iron and steel imports. What about plastic?
"The EPA’s reduction of subsidies for plastic bottles drove prices for plastic down to NT$5 per kilogram — about 20 average-weight bottles — whereas previously the price for a single bottle was NT$1."
If the EPA's subsidies have been "reduced" rather than simply cancelled, then how much of that NT$5 per kilogram is still subsidy? If the real price (i.e. without the subsidy) is even lower than that, then is that also due to cheap Chinese imports, or is there some other reason?

An interested reader might like to know the answer, but unfortunately the article ends by repeating a press statement from the EPA about piles of trash being breeding grounds for mosquitoes, which is true, and which is a problem, but which is also something everybody with half a functioning brain cell already knows anyway.

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