Pictured above, from left: Dylan de Thomas, Brent Bell, Pablo Leon and Hamilton Wen

Postconsumer plastic scrap has been a primary target of the import bans China has introduced this year. Additionally, import licenses for plastic scrap have been harder to come by, while import quotas have been reduced.

Panelists during the second plenary session, China’s Impact – The Ban and Beyond, during Plastics Recycling 2018 discussed the impact of China’s actions on the plastics recycling industry. The event, organized by Resource Recycling, was Feb. 19-21 in Nashville, Tennessee.

“China is completely off the table,” said Hamilton Wen, director of California-based Newport CH International’s plastics division. As a result, the company’s plastics brokerage business has experienced a “complete upheaval,” he added.

While Newport CH is looking at other markets worldwide, sales come down to quality, he said. “It is no longer a seller’s market. Now it is who has the best material.”

Pablo Leon, Asia manager for the Spanish company Fosimpe SL, with operations in Shanghai, said China’s actions should not have come as a surprise. “The bans have been rumored for some time.”

However, Leon added that he believed that China has gone too far with its actions.

Brent Bell, vice president of recycling for Waste Management, Houston, said that 30 percent of the tons the company processes are exported, with the primary destination historically having been China.

In response to China’s actions, the company has developed alternative markets in India, Southeast Asia and even the U.S. for the nearly 30 percent of its tonnage that was previously shipped primarily to China, he said.

Wen said Southeast Asia offered a tenuous alternative to shipping to China, however, citing problems at the ports in the region related to the “sheer amount of volume” being shipped. Additionally, he said he felt it was only a matter of time before these countries started to enact laws and procedures similar to those China has adopted.

Dylan de Thomas, vice president of industry collaboration with The Recycling Partnership, Falls Church, Virginia, agreed, saying, “Other countries are looking to China for what they want to do in the future.”

He added,” I’m bullish on domestic capacity, personally.”

De Thomas and Bell agreed that educating residents on what is and is not acceptable for recycling is an important factor, as it affects the degree of inbound material contamination material recovery facilities (MRFs) experience. 

Bell said contamination rates of 0.5 percent, as China has specified for incoming plastic scrap shipments, will be difficult to achieve with 15 percent inbound contamination rates at MRFs.

Reducing contamination at the MRF hinges on resident education, which Bell said was a “hard exercise to go through” and that there are no “silver bullets” that can apply in all situations.

As a MRF operator, Bell said, it is important for WM to talk with the communities it serves to see if they still want their recycling programs to include recyclables that may have limited demand and value.

The changes in China’s policies toward imported scrap have created real challenges for municipal programs, de Thomas said, with communities re-evaluating the materials their recycling programs accept. 

While he said improving quality was a “big part” of the answer to the questions posed by China’s recent actions, demand for recycled plastics also must increase.

Bell agreed, saying, “We need demand to exist to make the recycling system work.”

To that end, WM is talking with companies about including recycled content in their products, he said.

While Bell said he supports China’s effort to clean up its environment and have the material quality the country’s consuming companies deserve, he would have liked to have seen a longer time frame for implementation of the government’s changes to import policies.

Leon said he felt the Chinese government “may have gone too far,” adding that “all the plastics they were receiving were not junk.”

“There will be markets for low-grade plastics,” Wen said. “They will take time to develop.”

He continued, “This material has value. It will get recycled somewhere.”

Hong Kong-based Nine Dragons Paper (Holdings) Ltd. has announced its unaudited results for the six-month period ending Dec. 31, 2017. The company reports a sales increase of 34 percent to $4 billion in the half year, and gross profits that rose by 80 percent compared to the second half of 2016. Nine Dragons also indicates its profit margin rose from 18.3 percent in late 2016 to 24.5 percent in late 207.

In its management discussion and analysis, the firm’s executives say they have developed strategies to cope with the Chinese government’s recovered fiber import restrictions.

The analysis authors write, “As government environmental policy becomes more determined and stringent, and environmental enforcement becomes more extensive and rigorous, [the] group has adopted a proactive strategy to achieve the appropriate balance between selling prices, sales volume and inventory levels for optimal profitability, and has recorded historical high sales revenue and profits during the period.”

In describing its strategy, Nine Dragons’ managers write, “Although the import of recovered paper into China has become more restrictive, the group is still able to maintain a flexible procurement strategy that is based on the selection and purchase of raw materials offering the most optimal cost-value relationship by closely monitoring the market price trends of different sources. The purchase value of domestic recovered paper accounted for approximately 57.3 percent of the total value of the group’s purchase of recovered paper in the period.”

In the outlook section of its analysis, the company’s managers portray Nine Dragons as a firm that can benefit from paper mill capacity cuts in China and also hints that the scrap import restrictions may yet pose problems.

“Noncompliant capacities in the packaging paperboard industry will continue to be shut down,” write the company’s managers. “New capacities of Nine Dragons Paper will offer more high-quality products to replace low-quality products in the market. Nevertheless, new capacities are expected to emerge during certain periods and imported raw materials will also be tightened, representing challenges to be met by the group.”

Projecting optimism, the managers add, “Nine Dragons Paper will adopt an effective strategy to adjust for changing supply-demand dynamics in the market, and enhance upstream and downstream integration along the supply chain in order to create the optimal synergy for the best shareholders’ value in the long term.”

Aluminum prices in late February 2018 drifted slightly downward but remain within sight of a six-year London Metal Exchange (LME) high of $2,290.50 reached in January 2018.

A J.P. Morgan analysis, however, notes that Shanghai Futures Exchange (AHFE) aluminum inventories “continue to surge over the last six months, increasing by some 90 percent.” This has caused the premium of SHFE to LME aluminum to shrink to only $73 per metric ton versus the five-year average of $305 per metric ton.

J.P. Morgan also notes, “There are some concerns as to what would happen to Chinese aluminum exports in the event that the United States enacts import duties or quotas on aluminum imports and whether the Chinese exports would go to other markets.”

A Commerzbank analysis, meanwhile, observes, “One can only hope that the Chinese government’s months of fighting ‘illegal’ aluminum smelters will lastingly eliminate the oversupply and generate greater transparency.”

The same analysis also states, however, that despite winter anti-pollution efforts in China that mandated aluminum smelter cutbacks, “Nonetheless, the latest trade figures show that exports of aluminum products [from China] in December 2017 and January 2018 exceeded 390,000 net metric tons in each month, despite the reduction in output. This points to ample supply on the aluminum market.”

Copper began the last week in February with a price rise, as higher imports to China and strong economic data cemented expectations of solid demand from the world’s biggest metal consumer. Three-month copper on the LME closed up 0.2 percent at $7,110 per metric ton, not far from a four-year high of $7,312 achieved the prior month. The red metal struggled later in the same week, as did zinc.

Robust economic data in China reinforced expectations of strong demand for primary metals. Primary copper imports to China rose 13 percent in January 2018 compared with December 2017, while refined nickel imports doubled month-to-month and refined zinc volumes rose by 287 percent.

Chinese imports of scrap metal, meanwhile, fell to the lowest level in nearly two years in January 2018, after restrictions were introduced. Copper scrap imports were down 28 percent year on year. The price of copper in China surged in late 2017 on expectations that lower scrap imports to China would increase demand for refined metal.

In the steel sector in China, the municipality of Tangshan has proposed a plan to require local steel mills to lower their production rates by 10 to 15 percent even after the winter cuts are lifted. This could be a positive for global steel prices and for high-grade iron ore producers.

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The Institute of Scrap Recycling Industries (ISRI), Washington, has served its members for 30 years. In that time, few years have brought as much change as 2017 did, the association says. ISRI highlights the impact of these changes and the role the organization has played in helping the industry navigate the changing landscape in its 2017 Annual Report.

“Many will look back at 2017 as the year China announced its ban on certain scrap imports,” says ISRI President Robin Wiener. “While this dramatically alters the landscape of our industry, many other changes are also taking place, causing the industry to continue to evolve as it has so many times in the past. Changes in the administration in the U.S., shifting global trade policies, new technologies, an overhaul of the U.S. tax structure and more have all impacted business, markets and trade. Throughout all of this, the one constant has been ISRI working hard to assist and advocate on behalf of our members and the recycling industry,” she adds.

In addition to the industry’s response to China, other ISRI highlights from 2017 covered in the report include:

• achieving the resumption of the U.S. Mint’s Mutilated Coin Redemption Program;
• successfully advocating for provisions in the U.S.’s tax reform package to encourage investment in recycling equipment;
• the creation of the MRF Council to help with issues concerning the collection, recovery and processing of curbside recyclables;
• the development of guidance for a new NAFTA (North American Free Trade Agreement) trade agreement;
• state advocacy efforts to promote industry interests among legislators, lieutenant governors, attorneys general and other policymakers;
• a revised safety outreach program;
• successful education and training programs, including the ISRI Convention & Exposition, Operations Forum, Commodities Roundtable and ISRI Safety & Environmental Council meetings;
• partnering with groups such as Keep America Beautiful, JASON Learning and Earth911 to promote the benefits of recycling; and

• releasing a study on the economic impact of the industry.

“ISRI accomplished many positive things for the industry in 2017,” Wiener says. “However, none of it would have been possible without our members and volunteer industry leaders. As we have just concluded our 30th anniversary, we can now look back and see how much the industry has changed and the important role ISRI has played in its evolution thanks to our membership.”

She adds, “With the start of 2018, ISRI is excited for the future that lies ahead.”