California Doing Its Best to Balance Trade Deficit--With Scrap : Cargo Ships Return to Asia Laden With Recyclable Materials

Times Staff Writer

Carson-based National Metal & Steel, which in 1953 was the first U.S. company to export scrap metal to postwar Japan, has a long and profitable relationship with the Japanese, exporting as much as 6 million tons annually to the country in the 1970s.

"Since 1963, I've made over 70 trips over there," said Harry Faversham, president of National Metal. "For the first 10 years, it was not unusual to go to Japan bearing gifts like televisions. Now, the TVs and almost everything else is coming this way from Japan."

National Metal's trading record and Faversham's experience are allegorical. Like National Metal, California's recycling industry is the pioneering national leader in the Pacific Rim recyclables trade, a booming business primarily involving the recovery, processing and shipping of scrap metal and waste paper.

Much of the surge in recycling sales can be linked to the cresting wave of Asian products that have been--in Faversham's words--"coming this way." Asian exports arrive in container ships that, when emptied, beg for return cargo, prompting shippers to offer attractive freight rates for cargo that can be shipped back to the Pacific Rim. Enter the U.S. recycling industry with material needed in Japan, Taiwan, South Korea and other Asian nations.

U.S. recyclers, led by California-based companies, have created an American trade wave. U.S. firms boosted their exports of waste paper from 408,000 tons in 1970 to 3.75 million in 1986, according to the American Paper Institute. California companies accounted for a large portion of the increase, nearly doubling their 1981 export totals by shipping 1.6 million of the 4.3 million tons in U.S. paper waste exports last year.

California accounts for 36% of all U.S. waste paper exports, and the paper-hungry Pacific Rim buys over 80% of the recyclable waste paper exported by the United States, according to Richard Stovroff, a recycling consultant at the San Francisco-based S&S; Services. Stovroff said trade in recyclable paper was worth about $600 billion in 1987.

Force in Scrap Metal

"Companies in this state have done a tremendous job of promoting and selling paper in the East," Stovroff said. "You couldn't ask them to do much more."

The state is also an important force in the trade of scrap metal, exporting about 1.4 million of the 10 million tons shipped last year, according to the Santa Barbara-based Gildea Resource Center, which recently studied recycling as part of its on-going research on environmental management matters.

"California is a major part of the exporting industry because of the relatively low level of recyclable consumption within the state," said Herschel Cutler, executive director of the Washington-based Institute of Scrap Recycling Industries, a national trade association. "Recyclables . . . are exported when domestic demand doesn't begin to approximate the supply."

The slack demand for scrap metal in California is in part the result of a decline in the state's steel industry, a slide that began 10 years ago, according to Faversham. Initially, National Metal's export sales efforts were concentrated in Japan, but like most exporters, the company has diversified in the past two decades.

"The shipments began to taper off as Japan began to industrialize," Faversham recalled. "Then Taiwan began to need more scrap; then South Korea; then Indonesia; then India; then China. South Korea is probably the largest recipient of our exports today."

In South Korea and Taiwan, much of the scrap from National is remolded into bars. In Japan, much of National's automobile scrap is reincarnated in the form of new vehicles. California firms are also finding markets in India, Indonesia, the Philippines and Taiwan.

Taiwan, with few woodland resources, was also one of the top five importers of recyclable waste paper in 1987. The demand for waste paper in Taiwan should continue, according to Lung Tsuen-ni, deputy director of resource technology at Taiwan's Industrial Technology Research Institute, an agency that assists Taiwanese industry.

No Demand for Glass

California "is in a very good geographic location for (recyclable) trading," Lung said. "We are and will continue to be one of . . . California's leading partners in this . . . trade."

The other leading importers of waste paper include Korea, Mexico, Canada and Japan. In all, more than 90% of Japan's waste paper imports originated in the United States, according to Kensuke Kobayashi, a vice director at Japan's Ministry of International Trade and Industry.

Kobayashi, who recently visited Los Angeles to speak at a conference on recycling and export markets co-sponsored by the Gildea Center, said there was no great demand for recyclable glass or plastic in Japan.

The lack of foreign demand for recyclable glass and plastic and recycling technology like shredders, and the relatively weak trade in finished products made from recyclable material--sheet metal, metal bars and finished recycled paper--were among the many subjects discussed at the recent export conference in Los Angeles.

Some conference participants said the state and federal government should help boost exports of all goods by sponsoring trade missions and negotiating to increase access to Asian markets.

"We can create more jobs by selling finished material abroad," said Paul Relis, executive director of the Gildea Center. "Also, there's no reason California shouldn't develop more recycling technology. We should export technology and recycling know-how."

Change in Direction

Japan is willing to meet with state officials to explore ways to expand trade in recyclable goods, Kobayashi said.

"We think it is desirable that U.S. waste exports . . . increase as a result of the market mechanism," Kobayashi added. "But we are willing to cooperate with the California government and the U.S."

However, Faversham said U.S. exporters, bolstered by a weakening U.S. dollar that makes their products cheaper, are already beginning to make inroads into the finished goods market. For example, Faversham said, steel exports have increased dramatically since July, 1987.

"In the past, it was the Pacific Rim moving a tremendous amount of product over here," he said. "Now, that's beginning to change."

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