September/October 2019

Raw material prices, both of prime virgin and recycled plastics, have been continuously decreasing since the end of last year without any signs of improvement. Some prime engineering grade plastics such as PA66, PMMA and PC have dropped by more than 50% while other general plastics are down more than 30%. Scrap plastics are no exception with the price of PE film scrap declining 20-30% since May. While China is the core market for plastic recycled materials, the weakening demand for plastic products has a widespread effect on South East Asian countries. Factories have been clearing their current stock before they place new orders owing to price and market volatility. The trade war between the USA and China is also having an impact across all industries.

Downtrends for prime, recycled and scrap material prices appear to be “the new normal”.  

With recyclers having migrated from China, it is estimated that the recycling factories in South East Asian countries add up to no less than 10,000, including all local factories. This number is considered reliable given that there are more than 500 recycling factories in smaller regions such as Hong Kong. While the number of factories in Taiwan is similar, other South East Asian nations such as the Philippines, Indonesia, Vietnam, Malaysia, Thailand and their neighbouring countries should have much larger numbers as they are popular locations for recyclers.

In fact, the quantities of plastic scrap required by these factories for normal operations are quite substantial. Nevertheless, supply is constrained by the import policies of such countries as good-quality scraps are scarce and the cost is high. Alternative scrap supplies such as single polymer production scrap or its clean regrinds are unable to fill the gap and most recycling factories are not operating full time. It is not uncommon for these factories to operate at a loss; some have decided to close down to prevent further losses while others have chosen to continue to bear these losses while waiting for a market turnaround.

Although the Basel Convention amendment is not to take effect until the beginning of 2021, some plastic scrap importing countries have already started early with new standards and practices regarding import procedures. Exporting countries such as Japan and a few EU member states have been quick to follow and are becoming more cautious when it comes to the flow of plastic scraps and shipment bookings. It has become a new problem for recyclers living on imported plastic scraps; they are at that crossroads of either continuing while bearing losses owing to negative margins, or closing down to avoid additional losses.