Realist, not conformist analysis of the latest financial, business and political news

Getting China’s Steel Recycling Wrong – It’s About Rebuilding, Not Pollution

It’s sad to see people getting the basic economics wrong in a story. So it is with this about China and the country’s greater use of recycled, as against virgin, steel. It’s entirely true that recycling steel is more efficient than creating new material from virgin ore. It’s entirely true that there is less pollution from doing so. But the reason China’s recycling more steel is not in order to increase efficiency, nor is it to reduce pollution. It’s because there is more steel that can be recycled domestically.

One way to think of this is that it takes a great deal of steel to produce a society. When we create Society V 1.0 we have to make do with virgin steel – iron ore, coal and limestone. This uses lots of energy and produces great billowing clouds of belched smoke. But we’ve got to do this because we want to build a society and we’ve not built one before. Thus we’ve never had a stock of steel tied up in the society we’ve already built.

Time moves on and we decide we’re ready to build Society V. 2.0. To make room for it we tear down V 1.0. In the rubble of which there’s quite a lot of steel we can recycle in order to build V 2.0. That’s the explanation for this:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Scrap metal is a hot topic right now. Minerals producers have made fortunes over the last decade to slake China’s thirst for raw industrial metals, but in the future their profits could be hit by the Middle Kingdom recycling ever-greater quantities of its own ferrous scrap to meet industrial demand – and, more importantly, cut dangerous pollution levels. It is an interesting time to be a scrap dealer in China. The market for recycled metal in the world’s second-largest economy is booming. Demand for steel scrap for smelting into new material in China surged by almost 40pc in the first nine months of 2018 to around 150m tons, according to the Bureau of International Recycling’s latest figures…. [/perfectpullquote]

They’re not actually measuring demand there, but effective demand. Or, as we can also put it, supply.

China’s growing so fast that they’re already tearing down Society V 1.0 (or perhaps it’s V 1.5, or 2.01 or whatever) and building V 2.0 (or, obviously, V 3.11 or whatever) and they’re building the new from, partially at least, the scrap of the old.

Because it doesn’t matter one whit what we’d like to do about pollution and efficiency if we’ve not built a civilisation before then we don’t have any scrap in it which we can recycle to build the next version. That China is using more recycled steel is simply evidence that the place developed once over the past 40 years and it’s time to give the whirl another spin.

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