Here's part 1 of my interview with author Adam Minter (on the globalisation of the scrap and recycling industry) and part 2 on China's role in this industry. In part 3 we look at India:
PB: Your reference to India reminds me of one of the sections in your book that I found most interesting (and have recounted to numerous friends), and that’s the role that the cost of shipping plays in all this. What is India's place in the recycling industry? And in what ways is the recycling trade different in India to China? Do you see that shifting at all as (or if) Indian exports to the US increase, and as the cost of labour in China continues to rise?
AM: India plays a curious role in the global scrap trade. It's manufacturing sector isn't nearly as large as China's, nor is it focused particularly on trade with the developed world. As a result, the cheap backhauls that make shipping between the developed world and China so cheap don't really exist for India.
That noted, there are cheap backhauls to India — it's just that they originate in the Middle East. For example, a container can be shipped from Dubai to India's west coast for about US$100 (the trip takes roughly three days). Why? Because India is a major source of agricultural goods to the Middle East, and those containers need to get back to India so they can be used to ship more agricultural goods. As a result, scrap from the affluent Middle East flows disproportionately to India, especially as compared to China.
There are also other economies at work. India is one of the world's major brass manufacturers, and as a result its scrap processors are extremely competitive in bidding for brass scrap around the world, and often out-compete Chinese buyers of the same material. Why India? They like brass! It's really that simple.
If India manages to become a major export manufacturer (and I see no reason to believe that it will) the logistics will start to tilt in its favour and greater volumes of scrap will begin to flow there. The price of labour, despite being the factor that many believe determines where scrap flows, won't make much of a difference. Indeed, over the last 11 years I've watched Chinese scrap labourer salaries increased by as much as 800% while India's have remained stagnant. Yet scrap still flows from the US to China, mostly to the exclusion of India.
If labour were the determinant, scrap would flow to Sudan, where labour is cheaper than both countries. For now, and into the future, the single factor that will determine the flow will be export manufacturing, and where it's located.
