Robin's CRT Demand Forecast

Forecast is cloudy.   But winter is coming.

As regular readers and members of WR3A know, I am the staunchest defender of the integrity of export markets for reuse items, and have tried to push back against the hysteria over Cathode Ray Tube (CRT) exports in particular.  The CRT is a beautiful thing.  It was built like a battleship.   A typical CRT lasts 25 years and is a very decent display device.  

It is more fashionable to have an LCD or plasma or LED, and it's space conscious, but there is none of the "functionality" trade-off to continued use of a CRT monitor, as compared to a Pentium II desktop.   The refresh rates on a good CRT are actually better than an LCD.   Some people, such as internet cafe operators in developing countries, prefer something that lasts longer, survives high heat waves, and is difficult to steal.  I prefer the big CRT television in my house because I can channel surf 5 times faster than I can on an LCD in a hotel room.

Since I've made my position so clear, many readers who have been exporting their CRTs are now calling me and saying "We agree!  Buy ours!"  The phones start to ring...

What you must also hear me say:  "It's a buyers' market."   

It absolutely AIN'T a seller's market.  Buyers dictate the terms.  If I have 5,000 CRTs this week, I  can find good homes for 5,000.  But if I get 10,000, the quality specification will change - I may still be able to ship only 6,000.  The other 4,000 will be voted off the island and recycled.  WR3A members are frustrated that the more supply we obtain, the pickier the buyers get... because it is the poor buyers in developing nations who get to dictate the terms of a buyer's market.

The price offered for reuse CRTs is crashing through the dang floor.  As Hong Kong and Kuala Lumpur and Jakarta and Singapore and Shanghai upgrade to LCDs, they are flooding the reuse market with working CRTs.   There is still demand, but just like corn or wheat or milk, the supplier cannot dictate the price.

They also don't particularly like buying from the USA.  Shipping costs are high, and Korea, Taiwan, Japan and Singapore are all upgrading displays and generating very nice CRTs for the secondary market.  When you add USA environmental groups which call them "primitive" and send letters to their governments alleging pollution, you can't be surprised by the "don't call us, we'll call you" tone of these manufacturer takeback programs.

Some American recyclers respond by leaving the market and shredding up the CRTs.  As the price of copper and lead go up, they say it doesn't make as much economic sense to export.  State legislation pays you to destroy them, and besides, the export market has already become the social-stigma-equivalent of dating a black man in Birmingham Alabama in 1959.  Those who sell overseas risk being are branded as "export-lovers" by our competitors, and those who shred are called "Stewards".   

This is all natural in the free market.  What I don't like is the moral speeches from those who choose to destroy rather than export for reuse.  And I don't like that the losers are the poorest internet users in the world.

How does an Ethical "E-waste" Exporter continue in fair trade in a crashing market?  

First, study the market.  Make sure that you are not just clinging to old sales models.   I've quoted Danny DeVito before (Other People's Money) about the best buggy-whip maker who made the last best buggy whip.   I've read since 2001;  the subscription pays for itself.

Second, be comfortable breaking even.   If you can just ship the monitors for free, the avoided disposal cost may be worth it.  Five years ago we were paid $7 apiece for white monitors... now it's a lot of work to sell them for $1.50   But it's still environmentally preferable if done in a fair trade manner.

At a certain point, the price of LCDs will fall to where their estimated life of 5 years is offset by their reduced shipping cost (more fit per transport container).  Some of the emerging markets, such as BRIC nations, will continue to enjoy increasing wealth per capita.  At a certain point, CRTs may still have demand, but relegated to a non-credit-worthy environment.  Just as farmers will turn to producing high-protein-muscle-building-whey when children as still hungry for milk, the refurbishing market may abandon the SKD (professional refurbishing factory) business.  

Every month that my company inspects computer monitors for working CRTs, we know there is a chance we won't get paid for a shipment.  That's still worth it to me.  I'd like to be the last guy in America to get the last working screen into an internet cafe in West Africa.  But WR3A will find it very hard to broker loads for other suppliers as we enter this stage.

At that point, the CRT monitors would become suitable only for direct-reuse, a market which is a) applauded by BAN, and b) notorious for its "informality", compared to the contract manufacturers which BAN and ETBC have vilified.

I digress.  But the point is:

  1. CRT demand is declining rapidly as a percent of the display device market.
  2. The display device market is increasing wildly, promoted through huge growth and over-production
  3. CRT demand in absolute numbers is steady, but supply (from displaced CRTs) is increasing.  
  4. It's a buyers market
  5. The buyers of CRTs are poor.
It kind of resembles automobile manufacturing.  Poor people in the 1970s still needed small cheap cars, but USA auto manufacturers didn't want to chase that market.  They decided to make big expensive cars for richer people, and left the manufacture of little cars to Asia.  The CRT is the little cheap car with a low margin, sold to people with bad credit.

What Good Point Recycling is doing is charging generators almost the same for the reuse items, and selling them cheaper than the other exporters, while getting pickier about quality (or in cases like Mexico, paying to properly recycle whatever swing in the market dictates for "reuse" CRTs that cannot be moved economically).

That's our niche, we have clients willing to pay us for their stuff that can still be reused.  The ones who want to get paid are good people, but let them by plane tickets and go sell their working stuff like we do.

I have personally bent over backwards to create WR3A and to establish easier ways for the good companies to sell their material.  What I run into in my marketplace is clients who have been told we are a bad operation, because we export.  The recyclers I applauded as Stewards five years ago are exporting almost nothing.  The investment has all been made overseas.  The overseas SKD and contract manufacturers have put in glass processing, established zero-import of cadmium phosphors in their POs, gotten ISO14001 and ISO9000, etc.

What should we do?

The CRT reuse market in the for-profit sector may be down to the final 18 months, and we are transitioning to charging everyone for everything.  Even notorious junk exporters are charging for CRTs now.    The market may pick back up again when some of the CRT molding machines close (Samsung Klang skipped retooling and is in its final death march for 2012), the smartest thing might be to charge for them and warehouse them like airplane parts.  But the price war in LCDs, and the coming of LEDs, is causing the market to bristle for, at best, a glut of recently-replaced CRTs (from people who respond to the LCD price war crash by upgrading), and at worst, a further slow in demand in the CRT reuse market. 

We are still paying for CRTs from WR3A members who have stayed with the organization from the beginning.  We are still exporting to the SKD factories which, as I have emphasized, are less "informal" than the largest and best E-Stewards, full of engineers and technicians who are the aspiration of their nations.  Those men and women are starting to outgrow CRTs, they are growing into larger companies.  This little episode in the early millenium when they were depicted as wire burning chimps will be over, and their willingness to refurbish CRTs will probably be limited to markets like United Nations sponsored school and internet programs.  

The United Nations and charities may find donated working CRTs to be a boon to the non-profit digital divide sector.  But they have been labeled "toxic waste" by so many people, that the easily-sued, trigger-happily sued donors may walk away from students who cannot leapfrog their way to an LCD.

ICT programs will help to develop new markets, which Cisco and Dell and HP and Lexmark will benefit from... if they aren't beaten to it by Wistron, Foxconn, BenQ and Proview.

For the history books, the story of CRT exports is going to look a lot like the story of yellow cheese vs. white cheese.  That's a reference to a Political Science course I took at Carleton College, about the Interstate Commerce clause and the attempts by Wisconsin and Minnesota to protect their cheese factories by regulating the color of the cheese.  I cannot even find any reference to it on google.  It was all the rage, cheese color protectionism, back in the day.

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