September 2020

The Chinese market has improved slightly in the last few months but continues to be impacted by recent flood damage, the Coronavirus and sanctions imposed by Western countries. Alongside the USA announcing that China is no longer safe to visit and with Japan funding firms to shift production out of China, the contraction in exports amid global lockdowns has continued to devastate demand. 

As from September 1, China introduced stricter regulations whereby its customs officials will inspect more containers to crack down on imports of recycled pellets that do not conform to uniform colour, size and packaging requirements; violations will attract minimum fines of RMB 500,000. Later in the year, the Beijing authorities will enact more strict controls on the mechanical and chemical properties of the recycled pellets. Some recyclers and downstream customers are holding back their orders until there is greater clarity regarding what they can legitimately import.

The scrap plastics industry is becoming more challenging as lower quantities are available on the market and their pricing does not match customers’ targets. The Laos government has imposed a 15% tariff on scrap plastic imports while Thailand will no longer issue permits for the importation of plastic scraps, with the exception of those that are for re-export after being processed in a designated free trade zone.

Most shipping lines are not accepting cargoes of scrap plastics for Hong Kong where the government has recently announced regulatory changes regarding such imports. Also, there is wariness surrounding a possible change in plastics scrap import rules in Hong Kong to comply with the Basel Convention as from January 1 2021.

More enquiries for scrap are being received from Vietnam, especially for PE films and PP big bags, offering prices 10-20% higher than Malaysia and Indonesia. Vietnam has a vast, cheap labour force and strong domestic markets for recycled materials. With all the import restrictions and with the slower market in China, more recyclers are focusing on Vietnam once again.

Despite sluggish overall demand owing to dwindling supply and buyers adopting a wait-and-see attitude, prime material prices have climbed by 3-8% of late, partly as a result of converters replenishing their stocks and an increase in upstream prime material costs. However, recycled pellets have felt no benefit despite trade enquiries.

The future of the plastics recycling industry lies in what happens within China, in the containment of the pandemic, in the recovery of domestic and overseas markets, and in the impact of structural changes resulting from COVID’s reshaping of our way of life.