SHANGHAI Sims Metal
Management Ltd. will capitalize on Chinas scrap
generation through its strategic partnership with recycler
Chiho-Tiande Group Ltd.
"In addition to being the
largest in conventional recycling, were also the largest
in electronic recycling, so we want to be a part of that story
in China," Michael Lion, chairman of Sims Metal Management Asia
Ltd., said Thursday on the sidelines of AMM sister
publication Metal Bulletins 8th Asia Copper
Conference in Shanghai. "It will be different from the West in
the sense that its going to be much more integrated."
The majority of Chinas
scrap demand is currently met by imports, but as the country
enters a more mature development phase it will start to close
the loop in scrap supply, he said.
The time frame for the evolution
of Chinas scrap market is difficult to forecast in
precise terms, but as with other facets of the countrys
development, it is likely to happen with unexpected rapidity,
Lion said. "The only thing I can say with absolute certainty is
that China continues to surprise with the rapidity of its
Lion said that people are
focusing on the idea that there has to be a more sophisticated,
selective development of the scrap intake structure to deal
with more scrap. "My personal guess is that in the next three
to five years, well see some significant development in
(Chinas domestic scrap generation), and in the next five
to 10 years well see highly significant development from
the embryonic stage it is at now," he said.
As more scrap is generated,
recycling companies like Chiho-Tiande have the opportunity to
become highly sophisticated and vertically integrated, Lion
Chiho-Tiandein which Sims holds a stake of up to 20
percent, including warrants and options, and Lion sits on the
companys boardis already one of Sims largest
customers, particularly for lower grades of scrap. Lion said he
expects the company to develop further expertise in handling
specialized scrap, such as electronic waste.
The future reconstitution of
Chinas domestic recycling sector is likely to have a
significant effect on global scrap flows, scrap pricing and
possibly trading volumes on futures exchanges.
As large, integrated scrap
recyclers emerge, they are likely to do so with a sharper
tolerance to risk, and they might start to view yuan-based
contracts on the Shanghai Futures Exchange or the London Metal
Exchange as an increasingly important hedging tool, Lion
Lion has been a vocal supporter
of Hong Kong Exchanges & Clearing Ltd.s acquisition
of the LME, which is expected to close soon after receiving
final approval from the U.K. Financial Services Authority
amm.com, Nov. 29).
A version of this article was first published by AMM sister
publication Metal Bulletin.