GUANGZHOU, CHINA — Plummeting oil prices and tight money are putting the squeeze on recyclers, say attendees of a recent forum held by the China Plastics Processing Industry Association in Guangzhou.
“The price of oil has dropped about 30 percent. But in the recycled business, we can't cut prices by 30 percent,” Dennis Lam, director of Hong Kong-based scrap plastics trader Manifold International Ltd., told Plastics News.
From a June peak of $115 per barrel, oil prices tumbled to less than $70 per barrel, after OPEC ministers meeting in Vienna declined to cut back on their own production.
The price drop has been driven by the U.S. fracking boom and weakening demand from slowing economies in Europe, Japan and — ironically — China.
Fan Yu Shun, president of Lianyungang Long Shine Plastics Co. Ltd., identified tight credit as a key industry challenge.
Speaking through an interpreter, Fan said, “Banks are becoming more stringent.”
The problem is especially acute, Fan said, for small-and medium-sized companies in a capital-intensive industry — which describes much of the plastics recycling business in China.
Despite the money crunch, Fan's company is pushing ahead with plans to more than double capacity at its 20,000-square-meter plant in Lianyungang, Jiangsu province, to 50,000 metric tons per year.
As China enters the third year of its “Green Fence” regulations regarding the import of scrap plastics, attendees are bullish on the toughened environmental standards from both business and an environmental point of view.
“The government regulations are actually supporting the development of the recycling business,” said Li Jin, general manager at Suqian Zhengyang Plastics Co. Ltd.
The rules and regulations are very clear, said Steven Tan, director of international operations at Guangdong Kingfa Science and Technology Co., Ltd., which claims to be the country's biggest recycler and was a co-sponsor of the forum.
“After Green Fence, everyone knows to clean and sort materials that they bring to China,” Tan said.
Green Fence has “eliminated the weak businesses and created more business for us,” said Hu Xichao, deputy CEO of Shanghai Tianqiang Environment and Science Co. Ltd., a smallish (50 workers) firm that recycles 20,000 metric tons of polypropylene, polyethylene, PVC and ABS annually.
Speaking through an interpreter, Hu reckoned the tough rules offer her company a golden opportunity to cooperate with U.S. companies implementing sustainable development policies.
President Lingzhang Zeng of Ganzhou Hengxin Plastic Co. Ltd., is a strong backer of government-sponsored industrial parks for recyclers. Three years ago, Hengxin opened a 100-worker, 10,000-square-meter facility in one of these industrial parks. “It's good for environmental protection and it's good for the recycling business,” he told Plastics News through an interpreter.
Ganzhou Hengxin is an 8-year-old recycler in Jiangxi province with annual sales of about 70 million RMB ($11 million).
Increasingly, recyclers are factoring the rules and regulations into their long-term planning.
Some are shipping scrap to Southeast Asian countries for pre-processing. At a Thailand plant, Manifold annually sorts and cleans 2,000 metric tons of scrap PP and PE for export to China.
Others are taking steps to control quality at the source. Long Shine has a 4,000-square-meter plant in Japan and plans to open a plant in Los Angeles to clean and sort plastic film before exporting it to China.
Some Chinese recyclers say they admire their U.S. counterparts.
“In the U.S., the recycling business is good, so I'm sending my son to America to study the industry,” the feisty Hu said.
