Nearly 30 years ago, The China Syndrome was a movie that addressed what could occur after a nuclear power plant meltdown. Today, the China syndrome is a condition giving U.S. plastics recyclers a headache for several reasons.
* The volume of recycled plastics that China imports - much of it from the U.S - means the industry can't expand because of a lack of material.
* Insatiable demand in China has triggered bidding wars, driving prices up, creating a situation where there is more demand for materials than supply in the U.S.
* Lastly, there is concern that if China dropped out of world markets, the U.S. would not have enough capacity to process all the plastics being collected.
``The Chinese are outbidding us and outbidding each other, meaning we can't get all the supply we need,'' said the top executive of a U.S. recycler of PET containers at Plastics Recycling 2007 in Dallas, Feb. 13-14. The conference was sponsored by Resource Recycling Inc. of Portland, Ore.
Compounding the situation, the cost of shipping recycled plastics in the U.S. from the West Coast to the Southeast is six times the cost of shipping the same material to China, said several plastics recyclers at the conference.
``Because of the trade imbalance, there is more commerce coming this way,'' said Dennis Sabourin, executive director of the National Association of PET Container Resources in Sonoma, Calif. ``It is significantly less to ship containers with plastics scrap from the West Coast to China than to ship them to reclaimers'' in the southeastern U.S.
In 2006, China imported nearly 13.4 billion pounds of recycled plastics in 2006. That's a threefold increase from 2000, according to data from the Plastics Recycling Committee of the China Plastics Processing Industry Association in Beijing.
One-third of that came directly from the U.S., or indirectly from the U.S. through Hong Kong, said Terry Lam, vice president of T&T Group Inc. in Humble, Texas. Lam calls T&T the biggest plastics scrap buyer in North America and the largest plastics recycler in China.
In a conference presentation, Lam said the two most highly imported recycled plastics were polyethylene at 3.9 billion pounds, and PVC at 2.6 billion pounds. China's Plastics Recycling Committee data does not separate PET resins as a category, Lam said.
He noted that China uses another 4 million pounds of scrap sourced inside China. ``Based on present growth rates, the plastics recycling growth rate in China will double every four to five years,'' he said.
This is the double-edged sword facing U.S. recyclers.
``The $64,000 question is how long will China stay in the market,'' said another U.S. recycling executive, who wished to remain anonymous. ``What will motivate them to drop out?'' The executive, whose firm recycles PET, high density PE and other resins, said that there are 400 million pounds of baled PET going to China every year, which is 38 percent of what is collected in the U.S.
``The China market could close in a day with any commodity,'' the executive said, ``and, if that commerce stopped, you would have bales lined up in the desert and there would be no place for it to go because of a lack of infrastructure to handle that much additional material.''
Despite the current high demand in China for recycled plastics, Lam hinted that would change in an instant if the country enforced the new pollution-control-technology standards it issued in January 2006.
That standard would present challenges for 95 percent of the estimated 40,000-60,000 Chinese plastics recyclers that don't have what Lam called ``environmentally friendly equipment.'' If enforced, it would put a lot of them out of business, he said.
Also, there is talk in China of clustering plastics recycling businesses in an industrial park - which also might adversely impact the smaller companies.
Lam said China's Plastics Recycling Committee estimates that only 2 percent - or 400-600 - of Chinese recycling companies have more than $5 million in sales and that 90 percent are family-owned businesses, often with operations in workshops at their homes.
In a scenario like that, he said quantities of imported plastic scrap would drop dramatically.
Lam said U.S. firms need to understand that the Chinese plastics recycling industry has an abnormal supply chain, the product supply is not stable and the price of plastics scrap may fluctuate greatly in a short period of time.
``There is not much interaction between upstream, middle stream and downstream producers,'' he said.
Michael Burns, managing partner of resin purchasing consultant Resin Technology Inc. in Fort Worth, Texas, agreed that recyclers and processors must pay attention to China when developing their resin purchasing game plans.
``The No. 1 cost for plastics processors is resin,'' Burns said. ``It accounts for 50 percent of the cost of their finished goods. Anyone with a resin-buying plan needs to know what is happening in the Asian market and how it affects their markets.''