April 1, 2004

2 Min Read
Balancing Act

Patricia-Anne Tom

FROM OIL TO STEEL, raw materials are being gobbled up faster than they can be produced, increasing costs for the waste industry and its customers. And you don't have to listen very hard to figure out that the loud, slurping sound is coming from China.

The hungry “Dragon,” experts say, has been experiencing record economic growth, and subsequently needs raw materials to build its infrastructure. China's gross domestic product grew by 9.1 percent in 2003 — its fastest rate since 1997 — leading to large investments in construction and the automotive and transportation sectors. Steel imports into the country alone jumped by 50 percent in 2003. China also accounted for half of the world's cement consumption last year.

Some people are worried that the country's insatiable appetite will upset the balance of trade. In the past six months, China's high demand for source materials has shrunk worldwide supplies and sent producer prices skyrocketing. And the fact that China is ravenous for oil combined with low global inventories of crude oil, political unrest in oil-producing countries, and the peak summer driving season around the corner, means there's a good chance gas prices could soon set new records, predicts Fimat USA, a New York brokerage.

Whenever prices for steel and gas go up, the costs trickle down to the waste industry's equipment suppliers, haulers and their customers. Republic Services already has had discussions with its vendors to try and balance sharp steel increases, says company Spokesman Will Flower. Ultimately, customers will have to pay their fair share, he says.

But the situation isn't all bad. On the flip side, Flower adds, is what happens in areas such as recycling. Indeed, those who sell recyclables say China's hunger for scrap and recycled paper has never been greater, and plastic prices also are reaching new heights.

Among the Dragon's pillar industries are machinery, electronics, automaking and building. So this could be good news for the U.S. waste industry. When Japanese vendors like Komatsu and Mitsubishi entered the U.S. market with their earthmoving equipment and truck engines, the increased competition helped to improve technology and decrease prices. Moreover, there already are a couple of hints that China's industrial development could tip the scales to our nation's side. China-based Tebian Electric, for example, beat its Japanese and Swedish rivals to furnish equipment for California's power and hydropower grids, while rendering a better deal for the Americans.

The negative effects of China's rapid growth are a painful price to pay right now. But like the philosophy of yin and yang, the effects of the country's development soon should be balanced by a Dragon roar in your favor.

The author is the editor of Waste Age

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