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Scrapping the scrap: China's Waste Bans

China’s waste bans will have an impact on the polyolefins markets. Our analyst Ashish Chitalia goes into more detail.

1 minute read

China’s efforts to control waste plastic imports began in 2014 with “Green Hedge Action”, but has more recently introduced an outright ban in “Sword Action”. The impact on polypropylene seems to be mixed, while virgin polyethylene demand, and therefore production, will benefit.

Scrapping the Scrap 2014 to 2018+

PTT, Wood Mackenzie Chemicals' Global Polethylene Long Term Supply & Demand

The impact on polyethylene

Source of Chinese Polyethylene Scrap Imports (polymers of ethylene, kta)

Source: PTT, Wood Mackenzie Chemicals' Global Polethylene Long Term Supply & Demand

With China being the largest recycler of polyethylene waste by volume, the impact of the China waste ban will be large, stimulating recycle investments elsewhere and strengthening virgin resin demand and pricing in 2018.

  • Increased investment in countries where waste material originates
    The US and Europe are improving their capability to recycle resin. With new supply volumes of polyethylene impacting the global balance, more volumes from domestic recyclers could impact the price further.
  • New recycling facilities in other Asian countries
    Countries like Malaysia, India, Indonesia and Vietnam who are second in-line recyclers are likely to benefit from China’s waste ban. These countries are expected to consume a greater percentage of recycled polyethylene in the domestic market, impacting the virgin polyethylene consumption.
  • Virgin resin demand to rise in China
    Reduction in China’s recycling volumes will strengthen virgin resin demand and prices, and we anticipate domestic demand growth in 2018. This ban will help reduce the waste accumulated locally from Chinese consumption, but the volumes are smaller than imported waste. The net effect is that China is expected to consume a greater percentage of virgin plastics in the next couple of years.

The impact on polypropylene

China Polypropylene Overview – Self-Sufficiency

Source: PCI Wood Mackenzie Global Polypropylene Long Term Supply & Demand

China has historically imported less polypropylene scrap for recycling, as realised polypropylene prices in China are lower than Europe and North America.

  • Less polypropylene waste exported to China than polyethylene Only around 1Mt of polypropylene was exported to China in 2016, compared with 2.5Mt of polyethylene in the same year, polypropylene caps and closures and injection moulded containers are recycled in low volumes.
  • North American and European prices incentivise domestic recycling
    Polypropylene prices in North America and Europe are higher than in Asia. Therefore, more domestic recyclers are keeping polypropylene in-region to yield better returns. China is self-sufficient in virgin polypropylene, and typically prices are the lowest in the region, making recycled polypropylene even less attractive for converters.
  • Higher operating rates for Chinese assets
    The waste import ban will lead to higher operating rates for Chinese assets, which can lead to higher prices in the region. Recycled polypropylene can be used to drop-in replacement applications such as cutting boards, ice scrapers, shovels, watering cans and automotive battery cases.