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China's plastics recyclers look overseas amid government crackdown

Steve Toloken | PLASTICS NEWS

  Kathy Xuan

China's ongoing crackdown on recycling companies and its mid-July announcement it will ban imported scrap plastic is likely to shift investment in plastic recycling to other countries.
Several Chinese recycling executives, for example, said the tougher conditions at home means that companies are increasingly looking to set up factories where the material is sourced, like the United States, or in places where it would be cheaper to process, such as Southeast Asia.
Early data suggests trade flows could be changing. Exports of scrap polyethylene from the U.S. to China dropped 50 percent since March, in the wake of China's National Sword crackdown that began earlier this year.
At the same time, scrap PE exports grew to India, Vietnam and Taiwan, according to data from the Washington-based Institute of Scrap Recycling Industries Inc.
Beijing's crackdown, which it says is needed to protect the environment and public health from overseas waste, is causing China's large recycling sector to look internationally.
Parc Corp., a Romeoville, Ill.-based plastics recycler with operations in both the U.S. and China, said it's actively working with several Chinese recyclers to set up operations in an industrial park in the United States.
The company said its partners would process recycled materials into pellets or other products, both for the domestic U.S market and for export back to China, since recycled pellets would not be considered "foreign garbage" that China is banning.
"The eye will be on the U.S. domestic market, developing the demands, and meanwhile, shipping to China, for the hungry, starving, Chinese market," said Parc CEO Kathy Xuan.
Partner investors hope to "land in the U.S. pretty soon," said Xuan, who is well-known in the industry and has also been involved in plastics trade associations in both China and United States.
Interest started earlier this year but has picked up as China's crackdown tightened, she said.
The head of the China Scrap Plastics Association agreed that Chinese firms are looking to shift operations because of National Sword and Beijing's July 18 notice to the World Trade Organization that it planned to ban imports of 24 kinds of scrap, including all of the major grades of waste plastics.
"Regarding setting up operations in the States, this is already happening," said Steve Wong, executive president of Beijing-based CSPA. "The way I look at it, at this moment a lot of people ... have to move their operation either to Southeast Asian countries or recycling at the source."
Wong is chairman of Hong Kong-based Fukutomi Co. Ltd., and is a member of the plastics committee of the Brussels-based Bureau of International Recycling.
But moving to other countries carries big risks for Chinese firms, he said.
After China's last major crackdown on plastics recycling, the Green Fence operation in 2013, some Chinese recyclers tried to shift but the success rate was "really low," Wong said. "Probably only a few percent of people can manage to stay in the business after they move to overseas countries."
The industry is better prepared now but he predicted it would still be challenging.
"I would hope the success rate would be lot higher but still I think 80 percent of the people would not be able to survive after they move out of China," he said.
From a U.S. perspective, ISRI said that the recycling industry needs to explore new markets.
"Since quality upgrades may not circumvent the import bans that the Chinese government plans to implement, alternative markets and vertical supply chain expansion will need to be explored," ISRI said in a July 28 market report. "There isn't a single market that can provide an alternative to China."
The association said better sorting, cleaning and processing equipment could provide a "more refined product that would be more appealing to domestic consumers."
Hong Kong environmental group Green Earth said mainland China's ban is placing Hong Kong plastic recycling at serious risk. U.S. plastic recyclers said they're still assessing, but could handle more material.
There's evidence that China's ban provides an opening to boost recycling within other Pacific Rim countries.
Speaking at an Aug. 2 opening of a new PET bottle recycling facility in New Zealand, Environment Minister Nick Smith said China's ban "will reduce end markets for our recyclables and makes it even more important that we are able to recycle on shore."
The New Zealand facility, Flight Plastics, is the country's first factory capable of recycling PET bottles back into food-grade material, and has the capacity to recycle 75 percent of the PET collected in the country, Smith said. Funding for the project included NZ$4 million (US$2.98 million) in government grants.
Beyond increasing local supply, Smith said it is also important to tackle demand, and for New Zealand manufacturers to use more recycled materials.

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