May 2019

Following the tightening of the policy of controls on plastic scrap imports into Malaysia, Vietnam and Thailand, as well as the cracking-down on illegal recycling operations, many recyclers moved their recycling processes to other South East Asian countries such as Laos, Cambodia and Myanmar. Typically, those recyclers to have moved in this way will be using high-capacity machines with the hope of early capital payback and will be tending to do more recycling of plastic scrap items that are easier to process.

When these patterns become a common strategy, it alters the demand and prices for these easy-to-process scrap items, creating zero-margin situations after processing. Nevertheless, the items that are more difficult to process have challenges of their own. As it is hard to find outlets for many of these materials, the only solution seems to be found in recyclers who are willing to bring in more advanced recycling technology and spend more time and effort in processing.

E-plastic recyclers are encountering many difficulties owing to severe overcapacity problems as the amount of e-plastics or WEEE available does not increase in proportion to the investment in high-capacity machinery. The shift of recycling operations to low-cost and policy-friendly countries such as in West Africa and Central America appears to be a new round of migration for recyclers from China.

Recently, Malaysia stopped the importation of “unwanted” plastic waste into the country. Tight controls on solid waste imports have been implemented by the government to crack down on plastic waste coming into Malaysia but which has evaded the controls within the confines of HS Code 3915.

In Thailand, the licensing authority for plastic scrap imports has changed hands from the Department of Industry to the Department of Trade. As approval of import permits is still very restrictive, with import costs as high as THB 120,000 (around US$ 3700), it is very difficult to make a profit in this trade.

Imports of plastic scraps into Vietnam have recently resumed, but on the strict terms of a bond fund system to guarantee cost of shipment repatriation. In addition to the tight restrictions, importers must place deposits with shipping companies prior to shipping as many of the latter are wary of the risks associated with plastic scrap shipments to South East Asia.

In China, demand for imported repro-pellets is not strong enough to prompt an increase in pricing. This may be a reflection of the negative effect of the trade war, as the shift of the product manufacturing process from China has gradually eased the demand for recycled raw materials.

To address the policy risk in the long term, in light of the globally defensive attitude towards waste inflows, recyclers are tending to place their processing operations in locations close to the waste supply streams. Apart from exporting the pellets to China or other countries, recyclers can extend their operations into product manufacturing. Nevertheless, many recyclers in China have failed to achieve a continuation of their operations because they have an incomplete understanding of local rules and practices, in addition to other communication problems.

The international trade and movement of plastic scraps is thought to have gradually reduced whereas the trade in repro-pellets is expected to increase in the future.

Dr Steve Wong (黃楚祺 )  - Dr Steve Wong (黃楚祺 )  (China)

Dr Steve Wong (黃楚祺 )

Fukutomi Co Ltd (CHN), Executive President of the China Scrap Plastics Association, Board Member of the BIR Plastics Committee

May 2019