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FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6351
INFO RUEHOO/CHINA POSTS COLLECTIVE
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UNCLAS SECTION 01 OF 02 GUANGZHOU 000888 
 
SIPDIS 
 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: WTRO ECON PGOV CH
SUBJECT: "We Feed Waste, Not Oil" 
 
 
(U) THIS DOCUMENT IS SENSITIVE BUT UNCLASSIFIED.  IT SHOULD NOT BE 
DISSEMINATED OUTSIDE U.S. GOVERNMENT CHANNELS OR IN ANY PUBLIC FORUM 
WITHOUT THE WRITTEN CONCURRENCE OF THE ORIGINATOR.  IT SHOULD NOT BE 
POSTED ON THE INTERNET. 
 
¶1. SUMMARY: Guangzhou GISE-MBA New Plastics Technology General 
Manager Eric Wang and MBA Polymers Operations Manager Ron Rau told 
Special Envoy to China and the Strategic Economic Dialogue 
Ambassador Alan F. Holmer during a visit to their factory that the 
economies of scale have made them an efficient reprocessor of 
plastics in China. Nearly 95% of what GMP recycles becomes new 
products, with GMP turning plastic waste into resins and GMP's 
partner, Guangzhou Steel recycling non-plastic waste in its plant. 
There are difficulties operating in China (VAT, tariffs, energy 
shortages) but with China the largest consumer, and tenth largest 
producer, of plastics and planning to begin a plastics recycling 
program, the logic of location was obvious.  END SUMMARY 
 
Background 
---------- 
 
¶2.  (U) Guangzhou GISE-MBA New Plastics Technology Co., Ltd. (GMP), 
a joint venture between U.S. electronics waste recycler MBA Polymers 
Inc (MBA) and steel recycler Guangzhou Iron & Steel Enterprises 
(GISE), went into operation on November 2005.  The $12 million 
plant--located in Guangzhou's Nansha Development Zone -- is MBA's 
first attempt at large scale recycling of consumer electronics and 
household appliances. It has a forty thousand ton reprocessing 
capacity, producing 26,000 tons of recycled plastics. 
 
One's Trash is Another's Goldmine 
--------------------------------- 
 
¶3.  (U) Wang told Ambassador Holmer and his delegation (including 
the Consul General, SED Managing Director Dan Wright, Embassy 
Beijing Financial Attach David Loevinger and Congen officers) that 
many consumer electronics and household appliances, which are 
cheaper to dispose of than to repair, can be recycled and the 
plastic resins captured used in the production of new products. 
GMP's business is to recycle the sixty percent of consumer appliance 
waste that most metal recyclers, which want to extract just the rare 
and precious metals, simply dispose of in landfills.  GMP's ability 
to extract the three most common plastics from these products - 
polypropylene (PP), high impact polystyrene (HIPS), and 
acrylonitrile butadiene styrene (ABS) - has attracted interest from 
large consumer appliance and electronics firms like GE, Flextronics, 
and OEMS in south China. 
 
 
Cleaner, Greener, and Cheaper: 
Feeding Waste, Not Oil 
----------------------------- 
 
¶4.  (U) According to Rau, there are almost 10,000 plastic recyclers 
in China.  These small and medium sized recyclers use a 
labor-intensive process to retrieve different types and grades of 
plastic from mixed plastic waste.  Wang remarked that this process 
brings laborers into frequent contact with dangerous chemicals and 
results in pollutants that are often dumped into the environment. 
Rau added that this process allows recyclers to pick out only a few 
types of plastic and is very inefficient.  In contrast, GMP uses a 
revolutionary technology that amounts to "above-ground mining." 
Developed by MBA after $30 million in investment and thirteen years 
of research, the process uses a combination of density separation 
and MBA's proprietary technology to separate plastics waste from 
non-plastics waste. GMP then cleans the plastics and processes it 
into BB-sized pellets that consumer electronics and appliance makers 
inject into molds to make keyboards, computer monitor shells, and 
other plastic parts.  Rau said that nearly 95% of what GMP recycles 
becomes new products.  GMP's partner, Guangzhou Steel, recycles the 
non-plastic waste in its plant. 
 
¶5.  (U) Aside from being greener, this process has other advantages. 
 Traditional production of "virgin" plastic requires refining crude 
oil and using chemicals to create the final product - a process that 
is energy intensive and polluting.  GMP only uses 10% of the energy 
used by a virgin plastics producer.  GMP representatives' boast that 
"we feed waste, not oil" to make plastics. 
 
¶6.  (U) Wang told Ambassador Holmer that production of GMP plastics 
is cheaper than virgin plastics.  GMP imports treated plastics waste 
from the European Union and Japan. (Note: Japan and the European 
Union mandate that all consumer appliance and electronics be treated 
before disposal.  Consumers pay for this waste to be collected, 
washed, and shredded before disposal.) While the vast majority comes 
 
GUANGZHOU 00000888  002 OF 002 
 
 
from Japan and the European Union, 10 percent still comes from the 
United States.  GMP usually buys the plastics for as little as $100 
a ton or may even get it free.  The low cost of the raw materials 
and plant start-up - an MBA plant is about half the price of a 
virgin plastics plant - enables GMP's products to be an economical 
alternative to virgin plastics. 
 
Any Color You Want As Long As It Is Black 
----------------------------------------- 
 
¶7.  (U) There are drawbacks to using recycled plastics.  As distinct 
from virgin plastics which can take on a variety of colors, GMP's 
plastics can only be in black or gray as the mixture of colored 
plastics prevents the use of different tints. Recycled plastic is 
also slightly lower in quality. However, Rau noted positively, most 
of the properties of the original plastic are maintained. 
 
Why Locate a Recycling Plant in China? 
-------------------------------------- 
 
¶8.  (U) In response to Ambassador Holmer's question about why MBA 
chose China to start its first plant in China, Rau responded that, 
to be economical, MBA must be close to Original Equipment 
Manufacturers (OEM) and others that utilize plastic. In addition, 
China is the largest consumer and tenth largest producer of plastics 
and plans to begin a plastics recycling program.  Rau and Wang added 
that GMP's entire output is sold within China. 
 
¶9.  (U) Was MBA planning to operate a large scale plant in the 
United States?  Rau said this would prove too costly; there are only 
a few plastics recycling programs in the U.S. and these programs 
supply little of the raw material needed for MBA's plant to be 
cost-effective.  At the same time, collecting, washing, and 
shredding the plastic waste would be expensive and difficult for MBA 
do on its own. On top of that, adding to the expense are labor and 
regulation compliance costs.  As a result, Rau said, MBA's 
California plant remains only a pilot program. 
 
Of Course, Issues Remain 
------------------------ 
 
¶10.  (U) As for difficulties operating in China, Wang and Rau said 
that, while local government officials do not present too many 
problems, Chinese Customs officials have arbitrarily declared each 
ton they use to be worth $430 or roughly 4 times the actual value 
when they assess the value-added tax (VAT), 17.8%; an additional 
tariff of 8.6% is also added.  COMMENT: Using the values above, a 
rough calculation shows that this raises GMP's pre-production costs 
to 21.4 cents a pound not including transportation costs. The 2007 
spot price for a pound of Colored Pre-consumer PS Regrind is 66 
cents a pound. END COMMENT. 
 
¶11.  (U) Energy shortages are also problematic.  GMP may receive as 
little as an hour's notice before power is cut off; this can happen 
3-4 days/week and the situation is likely to persist into the 
future.  Unlike many companies in south China, GMP has yet to 
purchase a generator.  Rau also remarked that he thought the Chinese 
government could enforce regulations more uniformly.  To achieve 
that end, he suggested trying to get the Environmental Protection 
Bureau to be more active in enforcing standards with the smaller 
recyclers which frequently pollute.