Asia’s appetite for plastic scrap remains restricted

The difficulties for plastic scrap that began with harsh import policies by the government of China continue to plague markets in that nation and the rest of Asia, according to the most recent update from Steve Wong, executive president of the China Sustainable Plastics Association (CSPA).

Wong, who also is CEO of Hong Kong-based Fukutomi Recycling Ltd. and serves on two committees of the Brussels-based Bureau of International Recycling (BIR), says any improvements anticipated in Asian demand for plastic scrap have instead been “impacted by the recent flood damages, coronavirus and sanctions imposed by Western countries.”

The Chinese government severely restricted plastic scrap imports starting in 2017 and has solidified the ban for 2021, and it may be adding more scrutiny to trade in recycled-content pellets. Writes Wong, “As from Sept. 1, China would introduce stricter regulations on the standard of recycled pellets whereby the customs [agency] in China will inspect more containers of recycled pellets to crack down [on the] importation of recycled pellets that do not conform with requirements for uniform color, size and packaging.”

Continues Wong, “Later on in the year, the Beijing authorities will enact more strict controls on the mechanical and chemical properties of the recycled pellets. Violations to the latest regulations will be fined at a minimum of RMB 500,000 ($72,800). Some recyclers and downstream customers are holding back their orders until the situation is clear as to what they can import without violating the latest regulatory changes.”

The nation’s ongoing campaign against plastic scrap imports has roiled a market that was entirely different just five years ago. According to International Scrap Trade Database figures gathered by the Washington-based Institute of Scrap Recycling Industries (ISRI), in 2015 China imported more than 7.3 million metric tons of plastic scrap in 2015, representing 48 percent of the globally traded total.

As of August 2020, difficulties in trading plastic scrap have grown beyond China’s borders. “The scrap plastic industry is getting more challenging, as less quantity is available in the market and pricing does not match customers’ targeted prices,” writes Wong. He says the government of Laos has imposed a 15 percent tariff on imported plastic scrap, and the government of Thailand is indicating it will “no longer issue permits for the importation of plastic scrap, with an exception of imports for [immediate] re-export after being processed in a designated free trade zone area.”

Wong also refers to the reluctance of shipping lines to handle plastic scrap, a problem that also has affected shippers of metal and paper scrap to China.

“Most shipping lines are not accepting shipments of scrap plastic for Hong Kong, as they misinterpret China’s recent complete ban on solid waste imports [to] include Hong Kong,” he writes. “Also, they are wary about a possible change in the import rules in Hong Kong for plastic scrap, in complying with the Basel Convention as of Jan. 1, 2021.”

One nation with activity is Vietnam, Wong says, with bids for polyethylene (PE) films and polypropylene (PP) “big bags” coming in at a higher price than neighboring Malaysia and Indonesia. “Vietnam has a vast cheap labor force and strong domestic markets for recycled materials,” says Wong. “With all the import restrictions and slow market in China, more recyclers are focusing” on the Association of South East Asian Nations (ASEAN) country, he adds.

The slack demand for plastic scrap and recycled-content pellets can be seen as driven by regulations, says Wong, since “prime material prices have advanced with a range of three to eight percent during the period, partly due to converters’ feedstock replenishment, plus the prime materials’ upstream cost increase. Nevertheless, the [price of and demand for] recycled pellets cannot benefit from it.”

Concludes Wong, “The future of the plastics recycling industry lies in geopolitical situations in China, the containment of the globe’s pandemic situation, recovery of domestic and overseas markets, and impacts of structural changes resulting from the pandemic that have reshaped our way of life.”