It can be a dirty business….
Source of picture: www.China-environmental-news-blogspot.com
By John Richardson
THE sharp drop in plastics recycling in China has added 8-10 percentage points to virgin polyolefin demand growth in 2009, estimates a major Asian producer.
“It’s a much bigger than we had anticipated and we’re of course evaluating whether recycling will remain at the same depressed level next year,” the producer added.
This appears to further confirm the impact of the recycling dip which we first recognised as important to the China growth story back in July.
Polyethylene (PE) demand is expected to grow by 31.5% in 2009 with polypropylene (PP) rising by 24%, according to Shanghai-based commodity information service CBI.
A second producer gives the following four explanations for the dip in recycling:
1.) Tougher regulations governing imports. “Legislation was made more rigorous because of environmental protests over water supply being polluted during the scrap cleaning processes,” said this second producer. But interestingly, he added: “The central government faces the problem that tougher regulations are threatening the livelihood of millions of people. For example, in one inland province some 500,000 were employed in the re-processing industries, earning 4,000-5,000 Yuan a month compared with just a few hundred Yuan before the growth of recycling. Beijing is under a lot of pressure from local authorities to relax the rules.” Clearly, this is a situation that needs to be monitored
2.) Less availability of scrap-plastic imports as a result of reduced exports of finished goods from China. During the global economic boom years, huge quantities of refrigerators, TVs etc were shipped to the West from China wrapped in plastic which was then returned to China
3.) The bankruptcy of a lot of traders in Q4 last year who dealt in scrap plastic and a reluctance of those still in the business to take the plunge again. Credit in China has also been so abundant that it’s been very easy to borrow money to buy cargoes of freshly-manufactured resin
4.) The Delta between recycled and virgin material not being wide enough for most of this year to justify using the second-hand stuff (it has to be at least $400/tonne)