The China Connection: Plastics recycling challenges

Author Argus

Podcast: Nearly two years after China's ban on imports of plastic waste, what are the implications for plastic waste trade flows for the rest of the world?

China's ban on the imports of plastic waste has had a significant impact across the rest of the world given it's a vital cog in the global market. The impact of the ban was felt instantly particularly for the US and Europe, which were exporting a large percentage of their recycled plastics to China. As recycling efforts are a top concern, what does the future hold for the US and Europe? Will Collins, Associate Editor for Argus' European polymers, and Michelle Klump, Editor of the Argus Polymers report, discuss the factors that could influence any meaningful changes to recycling statistics.

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Will:  Hello, and welcome to this next podcast in Argus’ China Connection series. In this episode, we will be talking about China’s ban on imports of plastic waste and looking at the implications nearly two years on, on plastic waste trade flows and the waste and recycling industries in the US and Europe. My name is Will Collins, and I am the associate editor responsible for Argus’ European polymers coverage, sitting in London. For this international edition of the podcast I am joined via Skype by Michelle Klump, who edits the Argus Polymers report and particularly handles our Americas market coverage. Hi Michelle…

Michelle: In the summer of 2017, China’s government filed a notice to the World Trade Organization saying that by the end of the year, it would forbid the import of what it called “foreign garbage” from other countries. The decision was environmentally driven, particularly because of concerns that contaminants and hazardous elements in the waste were causing harm in China. The decision also says a lot about the image that China wants to present to the world, from an environment perspective. It has also experienced a rapid growth in its own plastic consumption and – based on the frequently reported statistic that seven of the ten worst plastic-polluted rivers in the world pass through China – has issues to tackle in handling of its own waste.

Will: The impact of the ban was instant and – according to official statistics – absolute. In 2015 and 2016, the last two full years before the ban was announced, China imported nearly 15 million tonnes of plastic waste, of which around 37pc came directly from Europe and the Americas, and a further 22pc came from Hong Kong, which was an entry point for 100,000t/month plus of American and European plastic waste. In almost two years since the ban came into force, it has recorded just 52,000t of imports in total. The suddenness of the ban had huge implications for the US and other western countries, which had been become accustomed to exporting a large percentage of their recycled content to China for processing. What actual impact have you noticed in the US, Michelle?

Michelle: China’s “National Sword” policy has had a noticeable impact on the trade flows of recycled “scrap” waste out of the US. In 2016, exports to China represented 40pc of all US plastic scrap exports. For the full year 2018, that number dropped to 4.4pc, and so far in 2019, China represents only 1.3pc of all US scrap resin exports.

Total US scrap resin exports

To some extent, some of that volume that had been sent to China is now being shifted to other parts of the globe. Looking at the 2019 data, the top five destinations for US scrap resin include: Canada (22.2pc), India (17.32pc), Hong Kong (10.5pc), Malaysia (5.85pc) and Mexico (5.5pc). But in the full year of 2018 – the first full year the China scrap ban went into effect – total scrap plastic exports from the US declined by nearly 45pc. Totals for the first eight months of 2019 show continued declines and are down by another 44pc versus the first eight months of 2018.

What about in Europe?

Will: Europe has also increased exports of waste to countries like Turkey and Malaysia, but not anywhere near enough to offset the loss of China as a destination for scrap plastic. In total our exports of plastic waste fell by a similar amount – about 49pc – comparing 2018 with 2016.

Based on 2018 and 2019 trade data, Europe now has an additional 1.5mn tonnes of plastic waste that it needs to deal with, compared with 2016, because of reduced exports. This is on top of the underlying growth in production of plastic waste in Europe. Just exporting to other countries in Asia may also not be a long term solution, as many are following China’s lead by imposing their own restrictions.

The importance of this goes beyond the waste industry and become a problem for the plastic industry itself. It comes at a time, particularly in Europe, when public scrutiny of plastic waste and the impact that it can have on the environment if not properly disposed of, is high. If the public sees waste building up, or increasingly being sent to landfill or burnt, because of China’s ban, scrutiny will increase. This then has the potential to harm demand for plastic in the long term – you’re already seeing a number of brand owners and retailers pledging to cut back their use of plastic.

Michelle: Yes, although the size of the K global plastics trade show in Duesseldorf last month, which expected over 200,000 visitors, shows the enormous scale and diversity of the plastic industry, and the extent to which it is interwoven into everyday life. Consumers may want to reject plastic, but there is often a lack of viable alternatives.

Will: Sure, the industry has time to act, but it knows that this is an issue that it can’t ignore. You could see that from the huge number of circular economy-linked exhibits at the fair. The question is how can we deal with the waste, particularly without the option to export to China?

Michelle: Right, and the US was already not doing a great job of recycling – in 2015 – the most recent year for which the EPA has collected data – US plastics recycling rates were around 9.1pc. PET had the highest rate at 18.4pc, followed by HDPE at 10.3pc, LDPE/LLDPE at 6.2pc, PP at 0.9pc, and PS at 1.3pc.

New data has not yet been released, but some estimates suggest that the US plastics recycling rate in 2018 could have fallen to as low as 4.4pc, with expectations that it could fall further in 2019, particularly if other Asian countries that have still been accepting US scrap material decide to follow China’s lead.

Will: For Europe we did recently get some new data, showing recycling stats for 2018. They actually showed that Europe has managed to slightly increase its recycling rates between 2016 and 2018, despite the loss of China as an outlet. The data was surprising, because it effectively means that volume of plastic reported as “sent for recycling” domestically in the EU increased by 45pc, or 2.4mn tonnes, in just two years from 2016 to 2018.

Michelle: And, taking the stats aside, what do you think this will mean for Europe’s recycling industry?

Will: Well, it’s not going to make things any easier for Europe. Anecdotally, China and other export markets were typically seen as an outlet for difficult-to-recycle waste, which could then be classified as recycled. Europe’s plastic recycling industry is almost exclusively based on mechanical recycling, which typically needs the waste to be sorted into homogenous streams to produce high quality recyclates. Europe has implemented some pretty ambitious recycling targets, including to recycle 50% of plastic packaging waste by 2025 and 55% by 2030. With less of an outlet for difficult-to-recycle waste, it’s going to be even more imperative for Europe to enact plans to increase the recyclability of plastic products that are going on to the market, to meet these targets.

In a sense, the ban could drive development, as it means another waste stream that needs to be dealt with. But recent information from the EU, which is trying to drive uptake of recycled plastic to 10mn t/yr by 2025, suggests that getting the waste itself is not the problem, it’s producing something of consistently high-enough quality for the converting industry to actually use it.

Michelle: Yeah, the issue is clearly how we can deal with the waste. I don’t think the US has managed quite as well as Europe. Although there is no concrete data from the government, you can see the pain being felt in the earnings reports of major solid waste service companies in the US. Just to highlight an example, US Waste Management, one of the top two largest solid waste service companies in the US, continues to see its recycling program as a major headwind for its profitability. In its most recent third quarter earnings report last month, the company said its blended average commodity price in the third quarter of 2019 had declined by 40pc compared with 2018 and was down by 8pc from the 10-year-low reached in the second quarter. To be clear, those figures represent more than just plastic, but it gives you a feel for how such companies have been hit by having fewer markets to send recycled waste.

In an effort to improve prices for recycled material, US Waste Management has instituted a plan to be more stringent about the materials that it will accept. That has resulted in a higher purity waste stream, which can command a better price, but it is leaving more content to be landfilled.

The US doesn’t have the same recycling targets, but a number of individual companies have made their own pledges. The difficulty for them is getting the quality and consistency of material that they need to hit these targets.

Will: One area in which the China ban could be something of a blessing in disguise is chemical recycling, which has received a lot of attention in Europe as a solution for turning difficult-to-recycle waste into something that the converting industry can use with no restrictions. At the moment, it has not been widely demonstrated on a large commercial scale in Europe and, particularly in the case of pyrolysis which turns plastic waste back into an oil that can be refined back into various polymers, there are questions about where a consistent, high volume stream of difficult-to-recycle waste would come from to feed a large commercial scale plant. A lot of this is likely to be taken out of the plastic waste streams that are currently being sent to incineration or landfill. But the loss of China as an outlet will mean that there is this high volume waste stream that was being collected and earmarked for recycling, a lot of which is likely to be suitable for use by the pyrolysis guys.

Michelle: Yes it’s certainly true that this may help to drive investment in that area. The situation is similar in the US, with plenty of projects, but still a way to go before they start to make a meaningful contribution to recycling stats. There are still some issues to overcome, but with focus and investment the industry is confident that it can do that.

I think what this ban has done is show is how fast China can act, and the impact that its decisions can have on the rest of the world. The issue of plastic waste is global, whether talking about where the waste is generated or where it ends up. Flows of plastic waste have moved to other countries, but there are limits. If the west wants to stop its recycling rates from falling and prevent more plastic waste going to landfill and incineration, it will need to change and adapt.

Will: But there is also an opportunity. Necessity can be the mother of invention and there is already a lot of focus on the issue of improving recycling, again particularly in Europe. One final thought: the ban shows China taking a focus on the environmental issue of plastic waste. In other regions, this has led to the implementation of recycling targets and restrictions of certain products. As the largest global plastics market, and one of the fastest-growing, China is a vital cog in the global market, and there is certainly the possibility that this won’t be the last Chinese environmental decision to have an impact beyond its borders in the plastics industry.

Michelle: Right. Well, thanks for a nice chat, Will, and thanks everybody for listening. Be sure to check out the next episode in this podcast series, and for further information, please check out the Argus Polymers report.

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