For more than two decades, recyclers and traders around the world have been able to send paper and plastic scrap to China in loads that were far from containing one uniform material. That era is clearly coming to an end, according to presenters at the 2017 Paper & Plastics Recycling Conference Europe event, held in Warsaw in early November.
Craig Robinson of Cycle Link UK said a series of policy initiatives and announcements emanating from China had been “causing sleepless nights” for recyclers throughout 2017. Robinson said trade associations and manufacturers within China may ultimately influence that nation’s government to ease back some restrictions, but the nation’s central government is “determined to make this change.”
He said the closure of some mills will fit into a government strategy to decrease pollution and to rein in perceived excess capacity. When he visited China in July 2017, Robinson indicated paper mills at that time were given as little as two hours’ notice that environmental inspectors were on their way, and the inspectors “were checking everything” he indicated, all the way down to proper signage at facilities.
Subsequently, said Robinson, Chinese mills at times in 2017 sharply reduced their orders and “hurt Chinese mills’ reputation” in the European market. “We’ve become incredibly risk averse” he said of both sellers and buyers in Europe and Asia.
Robinson said he foresees more virgin pulp heading into China as a result, although OCC that can pass pre-inspection at a European port is likely to keep flowing.
As far as regulations within China, Robinson said his colleagues there tell him “nothing is confirmed until it is confirmed.” Speculation at the conference included a rumor that some of China’s largest mill companies may receive a waiver on a proposed 0.3 percent contamination level if they can demonstrate their mills are sophisticated enough to deal with contaminants.
Thijs Cox of Netherlands-based Ciparo BV said when China proposed its new restrictions to the WTO (World Trade Organization), it quickly agreed to them thanks in part to China using environmental regulation as its reason. However, member states have subsequently objected and “there is hope” that not all restrictions will stand as proposed.
Cox said that China recorded a 28 million metric tons per year recovered fiber deficit in 2016, and no matter how much effort it puts into additional domestic recovery it will be difficult to close that gap quickly.
Nonetheless, Cox said China’s government had good reason to introduce some of the restrictions, and 2017 likely marked “the end of an era” in terms of the ease of sending lower quality shipments to that nation.
Plastic scrap shipments to China have been even more severely affected in 2017, according to a presentation prepared by Steve Wong and delivered by Brian Taylor of the Recycling Today Media Group.
According to Wong, who is chairman of the Hong Kong-based Fukutomi Co. Ltd. and president of the China Scrap Plastics Association (CSPA), during some years this decade China has “absorbed more than 60 percent of world exports for plastic scrap.”
That came to a halt in 2017 with the National Sword port and facility inspection regimen and is unlikely to return with the national government’s pending ban on imported postconsumer or residentially sourced plastic scrap.
As it has on the paper side, China’s central government says it intends to replace this material with domestic supply starting in 2020, according to Wong. To reach that target, he added, China will have to increase its plastic scrap recovery amount from 246 million tons in 2015 to 350 million tons by 2020.
Whether that supply is collected or not, any inbound material will not return in its former fashion. Wong noted that of the 24 items China has asked the WTO to allow it to ban at the end of 2017, eight of them are postconsumer plastic scrap grades.
Subsequently, both importers and shipping companies have eased back from these types of shipments starting as early as August 2017. Wong indicates it has created a “supply and demand imbalance situation to last for some time” and that “recycled pellet prices [are] climbing up continuously in China while [plastic] scrap prices outside China are moving the other way.”
A potential shortfall of some 7 million tons annually of recycled plastic materials in China is leading to opportunities for plastic scrap reprocessors to install capacity in nearby Vietnam and Thailand, according to Wong.