Preface

In recent years, China has adopted the strategic approach of "two resources, two markets" (domestic and international resources, domestic and international markets), which has to some extent alleviated the bottleneck of resource shortages during its economic boom. However, this approach has not fundamentally improved the economic efficiency, stability, and sustainability of China's resource supply, especially its metal resources.

With the continuous upgrading of industrialization, urbanization, and national consumption, the amount of municipal solid waste generated has increased year by year. These municipal solid waste contain abundant recyclable metal and non-metal resources, which are figuratively called "urban mines".

"Urban mines" can not only turn waste into treasure, but also are an effective way to alleviate resource constraints and reduce environmental pollution. They are also regarded as an important strategic resource to support the country's economic development in the future.

Currently, China's urban mining industry is developing rapidly, but in the process of development, a series of serious problems have also emerged, such as imperfect recycling systems, lack of key technologies, low product added value, and even the industry's reliance on government subsidies.

Wang Chang, chief expert of the National Social Science Fund Major Project "Development and Utilization of Urban Mines from the Perspective of National Metal Resource Security" and professor of the Metal Resources Strategy Research Institute of Central South University, pointed out that this is due to the lack of in-depth understanding of the nature, development model, and development trend of the urban mining industry, which has led to the failure to take appropriate measures.

The National Social Science Fund is the main channel for China to support basic and interdisciplinary research in the field of scientific research. It has 23 disciplinary planning and review groups and three separate disciplines: education, art, and military science. It has formed a project funding system including six categories: major projects, annual projects, special commissioned projects, follow-up funding projects, western projects, and Chinese academic translation projects.

Taking the two fundamental questions of "How to scientifically understand the relationship between the development and utilization of urban mines and national metal resource security" and "How to effectively develop and utilize urban mines to improve the national metal resource security capacity" as the starting point, Wang Chang studies the mechanism of urban mine development and utilization, judges its development prospects and its impact trend on national metal resource security.

"More importantly, it is necessary to compare and learn from international experience, study typical cases, review and reflect on current policies, and optimize the model, overall strategy, and policy system for the development and utilization of urban mines in China."

Wang Chang said: "The National Social Science Fund Major Project is currently the highest level of government-funded project in the field of humanities and social sciences in China. This research has significant theoretical value and practical significance for China's metal resource security and ecological civilization construction."

1. Essential Characteristics of the Industry

　　After more than 300 years of mining and utilization since the Industrial Revolution, 80% of the world's industrially usable mineral resources have been transferred from underground to above ground, accumulating around humans in the form of garbage, with a total amount of hundreds of billions of tons, and still growing at a rate of more than 10 billion tons per year.

　　In China, with the continuous upgrading of industrialization, urbanization, and consumption, various wastes such as waste steel, waste non-ferrous metals, waste electronic products, scrapped automobiles, and scrapped machinery and electrical equipment are growing at an average annual rate of 10%, with an annual output of more than 4 billion tons. Urban mineral resources are extremely abundant.

　　 The urban mining industry, by recycling and utilizing traditional "garbage," can not only save resources but also solve China's current serious "garbage siege" crisis and create environmental value.

　　By 2020, the regeneration of copper, iron, aluminum, and lead alone can achieve energy saving of 135 million tons of standard coal at the source and reduce sulfur dioxide emissions by 1.85 million tons, equivalent to a 13.4% contribution to China's sulfur dioxide reduction target.

Social Attributes of Urban Mines

　　In this regard, Wang Chang pointed out that these fully demonstrate the dual attributes of the urban mining industry—social attributes and natural attributes : the former refers to its provision of public services in environmental governance for society and the public through the processing of urban waste, thereby bringing ecological value; the latter refers to its characteristics as a resource, which is also the most basic attribute of urban mines.

　　"China's basic conditions for metal resources determine that the country's self-sufficiency capacity is relatively poor. Coupled with the rapid growth phase of China's mineral resource consumption in the next 10-15 years, the overall security of important minerals in China is clearly insufficient."

　　Wang Chang said: "Not only will the structural contradictions in resources lead to a further increase in the dependence on foreign countries for bulk mineral resources, but the mismatch between resource distribution and industrial layout will also become more prominent."

　　The "China Metal Resource Security Report" by the Metal Resources Strategy Research Institute of Central South University shows that China's dependence on foreign countries for important mineral products such as iron ore, copper, and aluminum has exceeded the safety alert line of 50%; the excessive dependence on overseas resources has led to China's metal mineral products international trade being trapped in a long-term dilemma of "prices rising when buying and falling when selling."

　　In this regard, Wang Chang emphasized that urban mines contain abundant recyclable resources, with metals being the main valuable materials. Compared with natural mines, they are high-grade urban rich mines. For example, the grade of gold mines in China is generally 3-6 grams/ton, and the gold concentrate obtained after ore dressing is only 70 grams/ton, while the gold content in waste computer motherboards is 250 grams/ton.

Natural Attributes of Urban Mines

　　"Currently, domestic attention is generally paid to the social attributes of urban mines while ignoring their natural attributes. The consequence is that enterprises pay more attention to the environmental value created by waste treatment, "waiting, relying on, and asking for" government subsidies, and lack the motivation to independently explore deep processing technologies. The development of the industry relies more on government promotion."

　　Wang Chang pointed out that if we can look at urban mines more from the perspective of resources and develop deep processing technologies to develop them in the direction of materials, the added value of urban mines will be greatly improved, and their original market nature will be restored. Enterprises will no longer mainly rely on the government, but more on innovation-driven and market development, forming a virtuous cycle.

　　The traditional native ore processing industry chain includes mining, ore dressing, smelting, and deep processing. The corresponding industry chain links for urban mines are recycling, dismantling, rough processing, and recycling, and recycling is the biggest problem hindering the development of the industry.

　　As a product of industrialization and urbanization, the metallogenic conditions and mechanisms of urban mines depend on the degree of social awareness and artificial intervention. Their dispersed characteristics in thousands of households have put forward higher requirements for the construction of industrial networks for the recycling system.

Recycling Entities and Transformation

　　Currently, China's urban mine recycling network is mainly based on physical recycling. Because there are no threshold restrictions on recycling, the collection groups are a large number of guerrillas and small workshops.

　　Compared with regular enterprises, individual households or small workshops have formed a de facto monopoly due to their lower comprehensive costs, resulting in a large part of the resources entering informal channels, while regular enterprises are "left with nothing to work with."

　　Wang Chang stated that with the advent of the O2O recycled resource trading platform in the Internet+ era, the predicament of asymmetrical recycling information can be effectively broken, and to a certain extent, the regional limitations of recycling can be overcome. In the future, enterprises that have built a good online-offline interactive recycling network can build their core competitiveness from the source.

　　At the same time, Wang Chang emphasized that the regional monopoly of recycled resources is mainly determined by the effective coverage radius of the recycling network, in addition to cost factors. Unlike other recycled resources, urban mines have "subsidy qualifications".

　　Since China's urban mining industry is still in its infancy, the state has specially established a fund for the treatment of discarded electrical and electronic products. However, only enterprises that have obtained the qualification for the treatment of discarded electrical and electronic products in accordance with relevant regulations and handle products listed in the national "Catalogue of Discarded Electrical and Electronic Products to be Treated" can apply for fund subsidies.

　　“By the end of 2014, China had announced four batches of subsidized enterprises for the treatment of discarded electrical and electronic products, totaling 106 enterprises, and the fifth batch will only have 9,” Wang Chang pointed out. With the development of the industry, the industry concentration will further increase, and subsidy qualifications will be further concentrated in the hands of a few large enterprises.

　　In fact, the state has clearly stipulated that enterprises whose dismantling volume is less than 20% of their dismantling capacity, enterprises whose irregular dismantling volume exceeds 5% of the total dismantling volume for two consecutive years, and enterprises that fail to meet environmental protection standards will be eliminated. However, this has objectively further narrowed the scope of subsidized enterprises and further formed regional monopolies.

　　Wang Chang said: "Subsidy qualifications will become a scarce resource for enterprises. In order to serve the regional layout strategy, large enterprises will consider subsidy qualifications more when acquiring companies to obtain regional monopolies, rather than the assets of the acquired enterprises."

2 Enterprise Development Models

The essential characteristics of the urban mining industry and the DNA of its own enterprises determine the development model of the industry and enterprises, and its historical development also determines their future development path.

　　 Wang Chang pointed out that there are currently four typical development models for urban mining enterprises: material technology type, channel type, home appliance manufacturing type, and third-party platform type.

Material Technology Type

　　" Material Technology Enterprises emphasize the natural attributes in the dual attributes of urban mines, maximizing the enterprise's interests by deeply mining the resource value of urban mines.

　　Wang Chang said: "Generally speaking, material technology enterprises enter the urban mining field from mining and metallurgy fields, focusing on research and development investment in high-end recycling and deep processing technologies of urban mines, so their products have higher added value."

　　Taking Umicore Group in Belgium as an example, it has developed from a global materials technology company focusing on application fields into a booming international materials technology and recycling company, capable of recovering about 20 precious metals and other non-ferrous metals from a wide variety of raw materials, ranging from industrial residues to scrap materials.

　　It is precisely based on the technology and proprietary technology in the properties of precious metals and other metals that Umicore can recycle and classify and store metal waste and refine and process it, thereby maximizing the value of resources.

　　GEM's development model is similar: relying on material processing technology to recycle and utilize e-waste, it has applied for more than 400 patents by the end of 2013, and led or participated in more than 50 national standards and more than 50 industry standards, thus laying the foundation for its leading position in the field of recycled resource utilization.

　　In addition, since the urban mining industry also has network characteristics, it also has high requirements for the logistics system.

Channel Type Enterprises

　　Wang Chang pointed out, Channel Type Enterprises relying on its own strong recycling outlets, distribution centers, and transportation capabilities, it grasps the network characteristics of the urban mining industry, focusing on building a recycling network and forming unique advantages.

　　"This type is represented by China Resources Recycling Development Co., Ltd., which is the only recycling enterprise designated by the State Council's administrative agency and the only central enterprise in China whose main business is the recycling and processing of recycled resources. The company's self-built channels account for about 20% to 25% of the total recycling volume, while the proportion of self-built channels in other enterprises in the industry is usually below 10%. "

　　China Resources Recycling not only has built a nationwide recycling network, but also integrated the recycling network of the original supply and marketing cooperative system. Currently, it has initially established seven major regional recycling networks in 23 provinces (autonomous regions and municipalities) including the Bohai Rim, Northeast China, East China, Central South China, South China, Southwest China, and Northwest China. It has nearly 50 branches and subsidiaries, 11 large national-level recycled resource industry demonstration bases, 3 regional distribution and trading markets, more than 70 sorting centers, and more than 5,000 recycling outlets.

Home Appliance Manufacturing Type

　　The so-called Home Appliance Manufacturing Enterprises is due to the fact that home appliance enterprises, as the main producers of electrical and electronic products, have their own strong genes in resource acquisition and logistics networks, thus forming a unique development model in the urban mining field.

　　Wang Chang pointed out that the initial motivation for home appliance manufacturing enterprises to enter the urban mining field comes from the pressure of extended producer responsibility—recycling and disposing of waste home appliances.

　　Taking TCL Group as an example, in 2003, it established Huizhou TCL Environmental Technology Co., Ltd., which mainly engages in the dismantling and processing of discarded electrical and electronic products. Later, it successively established TCL Abo (Tianjin) Environmental Development Co., Ltd. in 2009 and Shantou TCL Deqing Environmental Development Co., Ltd. in 2012.

　　"Through green product design, green manufacturing, and harmless recycling and processing of waste electronic and electrical products, TCL Group plans to achieve the self-circulation of smart home appliances and the ecological circulation of the entire industrial chain."

　　Wang Chang said: "This type of enterprise not only controls the product terminal but can also transform its sales network into reverse logistics. It is expected to establish a smart home appliance product life cycle management system, and it will have good development prospects in the future."

　　In the "Internet+" era, more and more enterprises have begun to build online recycling platforms. This development model closely follows the characteristics of urban mining resources being scattered in the hands of consumers, integrating online and offline resources, aggregating both supply and demand through network platforms, and using the Internet to build a complete industrial chain ecosystem.

　　Taking Aihuishou.com, the first C2B electronic product bidding recycling platform in China, as an example, it mainly recycles mobile phones, laptops, and other electronic products through computers, mobile clients, door-to-door recycling personnel, and express delivery. It also allows selected recyclers to enter the website to bid for the recycling of consumers' used electronic and digital products.

　　For usable used products, Aihuishou.com will publicly sell them; for discarded electrical and electronic products that can no longer be used, they will be handed over to GEM for harmless environmental protection treatment through cooperation.

　　This model leverages the characteristics of internet resource sharing, transcending time and space, real-time interaction, and personalization. It can effectively alleviate the scattered and disorganized situation of urban mining, forming a closed-loop development model of information flow, capital flow, and logistics through the synergistic development of online platforms and offline logistics warehousing.

　　Wang Chang said: "This is a new development model that fully embodies the network characteristics of urban mining and will be the most important way to recycle urban mining in the future."

3 Industrial Development Trends

　　On March 5, 2015, Premier Li Keqiang first proposed the "Internet +" action plan in the government work report of the Third Session of the Twelfth National People's Congress. On July 4, the State Council issued the "Guiding Opinions on Actively Promoting the "Internet +" Action", encouraging internet companies to participate in building urban waste recycling platforms and innovating recycling models for renewable resources.

　　In fact, driven by policies and the market, the internet boom is sweeping the urban mining industry as never before; as a development trend, urban mining platform companies have emerged.

　　 Wang Chang pointed out that the combination of China's urban mining industry and the internet is mainly manifested in three ways:

　　First, internet companies such as Aihuishou.com are transforming renewable resources, with the internet industry moving into the urban mining industry, having a first-mover advantage in online transactions.

　　Second, renewable resource companies such as Sander Environmental are becoming internet-based, moving from the urban mining industry to the internet industry, with abundant offline resources and a good grasp of industry development trends, giving them an industry advantage.

　　Third, third-party platforms such as Wangyou Second-hand Network provide public facilities and services, aggregating buyers and sellers through e-commerce applications and services, highlighting information advantages.

　　Wang Chang said that the "Internet + Urban Mining" model can effectively utilize the internet to reduce transaction costs and solve the problem of information asymmetry, using the long-tail effect to aggregate demand and forming a huge market for urban mining recycling.

　　However, in the specific implementation process, there are still defects such as high costs, repeated construction, inconsistent testing standards, low efficiency, and poor results. Wang Chang said, "In the future, through the combination of intelligent manufacturing and big data management, an urban mining ecosystem will be formed through the Internet of Things and the internet, changing the existing defects of internet recycling platforms."

　　In fact, China's current urban mining enterprises mainly rely on "policy subsidies"; therefore, they lack motivation in developing advanced processing technologies. Low capital investment leads to weak technological development capabilities, few breakthroughs in key technologies, backward processing technologies, and extremely low levels of technology and equipment. They also lack the ability to properly handle pollutants associated with renewable resource processing.

　　Wang Chang believes that although the current situation is unsatisfactory, from the industry's development trend, the urban mining industry is making efforts towards high-end recycling and reuse, and will pay more attention to technological research and development in the future.

　　Leading companies such as Umicore and GEM are constantly climbing to the high end of the industrial chain—from primary recycling to high-end recycling and reuse and smart services, developing the added value of urban mining as a resource, and building the core competitiveness of enterprises. Wang Chang said, "The future development of the urban mining industry will inevitably be transformed into self-circulation."

Panasonic's Experience in Japan

　　Panasonic has been implementing its self-created circular recycling method, the "Self-Circulation Plan," since July 2013. The materials used in this plan are supplied by recycling factories such as the Panasonic Environmental Technology Center, in which Panasonic has a stake. This center collects and dismantles discarded home appliances manufactured by Panasonic, Toshiba, and the former Sanyo Electric (now part of Panasonic) in accordance with legal regulations, and recovers resources.

　　This method not only realizes the extended producer responsibility system but also ensures the supply of key materials for home appliance companies. However, this method places high demands on resource recycling and processing technologies. If home appliance factories individually recycle and process their products, it means that each company needs to transform its forward logistics into reverse logistics and have its own processing center or cooperative processing enterprise, which will inevitably cause another waste of resources.

　　Wang Chang said: "In the internet age, resource sharing, resource reuse, and resource optimization have become effective ways for enterprises to build core competitiveness. Therefore, the development of the urban mining industry will gradually achieve a combination of self-circulation and joint development, with multiple enterprises jointly establishing recycling enterprises, establishing a product life cycle management system, transforming from fulfilling producer responsibility to ensuring the supply of advanced materials, and achieving win-win results."

Improving Industry Concentration

　　Wang Chang specifically pointed out that China's renewable resources are currently in the early stages of improving industry concentration, and the trend of accelerated reshuffling is obvious. Large enterprises in the industry and large enterprises outside the industry that are eager to enter the renewable resources industry have begun to compete for various scarce renewable resource processing qualifications, accelerating their mergers and acquisitions and paying more attention to the qualifications of acquired enterprises.

　　As far as the urban mining industry is concerned, the fund subsidy system and the increase in the number of enterprises in the industry have significantly increased recycling costs, while the prices of outputs are constantly declining. Therefore, the willingness of individual dismantling enterprises whose survival space is constantly being squeezed to be acquired is gradually increasing, the competitive landscape is being optimized, and both the speed of industry integration and the degree of concentration will significantly increase, benefiting related group-type leading enterprises.

　　In other words, favorable national policies are more conducive to the development of group-type leading enterprises, objectively promoting their accelerated mergers and acquisitions. Wang Chang pointed out that with the expansion of the processing catalog of waste electrical and electronic products, the introduction of a series of favorable policies such as processing enterprise qualification licensing, tax incentives, and government guidance, early-stage group-type leading enterprises have begun to quickly seize opportunities through "financing with one hand and restructuring with the other."

　　Wang Chang said: "For example, China Recycling Corporation has been seeking to expand its scale and extend its industrial chain through industrial mergers and acquisitions. After investing 1.8 billion yuan in Qinling Cement and listing through a backdoor listing, it changed the main business of Qinling Cement to the recycling and processing of waste electrical and electronic products. GEM has also rapidly deployed in the deep processing of metal materials by acquiring companies such as Zhejiang Dewei and thereby obtaining relevant national subsidy qualifications."

　　In addition, in order to achieve its business expansion and operational layout in the environmental protection field, Sander Environment has continuously acquired equity stakes in three renewable resource companies. It currently has six waste electrical and electronic product dismantling enterprises, with a dismantling capacity of nearly 9.5 million units, of which five are included in the dismantling fund subsidy list, with a fund subsidy dismantling capacity of nearly 7.5 million units. Sander has thus entered the first echelon of e-waste disposal.

　　In the process of rapid industry reshuffling, the dismantling capacity of enterprises has been significantly improved; however, the backwardness of the recycling system has led to an overcapacity in dismantling, and the construction of the recycling system and resource acquisition will become equally important issues in future mergers and acquisitions.

Promising Industrial Market Prospects

　　Wang Chang said that with the continuous expansion of the subsidy scope for waste electronic and electrical appliances, the urban mining industry in China will gradually enter the "fund subsidy system" in the future, and the introduction of a series of favorable policies also indicates its broad development prospects.

　　The "Regulations on the Recovery and Treatment of Waste Electrical and Electronic Products", implemented in 2011, established a high entry threshold for the processing of e-waste, resulting in a growing scarcity of qualifications for waste electrical and electronic product recovery and dismantling, but effectively avoiding vicious competition within the industry.

　　The latest announcement, jointly issued by the Ministry of Finance and the State Taxation Administration on June 25, "Notice on Issuing the Catalog of Value-Added Tax Preferential Policies for Resource Comprehensive Utilization Products and Services", grants tax rebates to several items that previously did not enjoy preferential treatment and were difficult to implement, such as waste batteries, waste metal products, and waste rubber, directly increasing the profits of resource recovery processing enterprises.

　　Wang Chang said: "With the continuous introduction and strengthening of national incentive policies, more and more enterprises are actively participating, and the market prospects for urban mining industries are promising."