Recycled Plastics Industry Struggling, Players Need to Be Rational

By Shi Lan, Kim Lian Innovation Network Science and Technology Limited Company, Recycled Plastics Analyst

Industry’s disadvantages are obvious, and the trend of production will be standardized

1. Disorder
At present, the recovery rate of domestic waste plastics in China is still low; recovery methods vary from firm to firm. Supply quality is far from uniform, and is unstable. As a large consumer of plastic products, China depends on imported polyethylene waste plastics, still importing more than 30% of consumption. The average price of imported waste plastics is soaring; profitability of domestic processing enterprises is under pressure.
China’s polyethylene recycling industry is not concentrated, either in terms of ownership or geography, leading to imperfect waste treatment and other related equipment systems. The industry is in disorder.
2. Backward production technology
China’s processing and reuse of polyethylene waste plastics has been developing for nearly 30 years, and technical progress is not readily apparent. First of all, sorting of polyethylene waste plastics relies mostly on manpower, and its cost accounts for 1/3 of that of all processing and processing, greatly constraining profit. Next, in the processing stage, technology makes it difficult to guarantee the quality of recycled polyethylene granules. A large proportion of products are still low-grade, limiting applications. Third, at least 90% of the recycled polyethylene processing enterprises are capable of producing only 1 000-3 000 t/a, and leading enterprises are few.
3. Policies lack clarity
China has many policies and regulations on waste resources, but refinement and flexibility of various industries are not high. The polyethylene industry, an important industry of the new recycling economy, is suffering from "policy failure" and "market failure". It cannot be supported but has become a target of environmental protection crackdown.

Environmental protection inspections & import ban

On July 27, the general office of the State Council issued an implementation plan for "prohibiting the entry of foreign waste into the country and promoting reform of the system for managing the import of solid waste". The office has put forward a comprehensive ban on the entry of foreign waste and improved the system for managing the import of solid waste. In August, the Ministry of Environmental Protection carried out clean-up and rectification on electronic waste, waste tires, waste plastics, waste clothing, dismantling of waste appliances and other recycling industries. China’s recycling industry is in a critical transition. Inspection of environmental protection and the import ban make our recycling industry difficult to run.
1. The import base is huge, and the constrained supply of recycled plastics is a serious loss
Recycled plastic imports have a larger base, and after the prohibition of imports, the overall supply suffered serious losses. In 2016, the apparent supply of recycled plastics was 25 461 700 tons, and imports amounted to 6 961 700 tons, accounting for 27.34%.
With the constrained supply of imports, most enterprises look to sources in domestic recycling areas. However, the recycling system is not perfect at the top, so the current recovery will not make up for a reduction of nearly 7 million tons of imported waste plastic.
2. Operating rates continue to decline, as prices rise
Since April this year, the overall operating rate of domestic plastic recycling was about 50%, and it continued downward to below 20%; the whole domestic renewable plastic market is basically in the doldrums. The supply is obviously insufficient, pushing up the price of recycled materials.  
3. Less raw materials, higher costs, profitability shrinking
Environmental protection has significantly reduced the supply of recycled plastics, pushing up the cost of raw materials. At the end of July, the life source of waste plastic is expressly prohibited, the supply of raw materials which is highly dependent on imports – recycled polyethylene (PE) and recycled polyethylene terephthalate ester (PET), recycled polypropylene (PP), regeneration of recycled polypropylene foamed polystyrene (EPS) products etc. – has  been very tight. Most enterprises will shift attention to domestic recyclable materials. Demand is further increased, and the prices of raw materials continue to rise.
In 2017, profits of PP recycling enterprises were down. This year, profits continued at RMB100-300/t, RMB100-200/t lower than in previous years. At present, recycling business is difficult in itself, and pressured by the recent environmental rectification efforts, most firms are significantly less active.

Policy transition window – enterprises need to deal with rational transformation

The domestic recycling system is still not perfect, and domestic supply is unlikely to improve rapidly in a short term. The sector has three positive trends: first, as the renewable resource industry is considered to be an environmental protection industry as well as part of the recycling economy, capable large and medium-sized enterprises improve a variety of environmental protection procedures and equipment investment, so the probability that such enterprises will lead the industry in the future is great. Second, some foreign firms will produce recycled PP particles and export them to China. Third, some large domestic producers have been transferred to foreign countries and imported to China locally after being digested recycled particles locally.
At this policy turning point, recycling managers need to be rational. Under the high pressure to protect the environment, the late standardization of production will become the survival protection of renewable enterprises.