Scrapping the scrap

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

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.

The impact on polyethylene

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

Source: PTT, PCI Wood Mackenzie 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.
Ashish Chitalia – Polyolefins

Author: Ashish Chitalia – Polyolefins

Ashish leads polyolefins research at PCI Wood Mackenzie, with responsibility for developing strategic tools and analytics products to integrate commodity polyolefins into the existing PCI Wood Mackenzie chemical research. Prior to Wood Mackenzie, Ashish held various roles in research and consulting for commodity and value-added products. He has a broad background in projects ranging from refining to petrochemicals, solvents to specialty polymers and catalysts to plastics converter goods. Ashish holds a  a Bachelors and Masters in Chemical and Biological Engineering from SUNY Buffalo. Contact: Tel: +1 713 470 1600