More than 70 percent of China's plastics recycling companies have left the industry over the past three years, taking hundreds of thousands of jobs away, according to Zhou Kaiqing.
Zhou is executive director of Banglue Zixun Co. Ltd., a Nantong, China-based company that provides business intelligence, training and an online platform for plastics recyclers. He shared two of his most recent reports with Plastics News.
Many small recyclers have shut down because they failed to meet environmental standards, he says in a report. Current players include those who have survived the industry-wide consolidation with relatively big scale and resources. Other companies are expanding into the recycling business with capital accumulated from other industries.
According to Zhou, China's waste plastics imports peaked in 2012 at 8.88 million metric tons, then dropped to 7.88 million metric tons in 2013 due to the “Green Fence,” and slightly recovered last year to 8.26 million metric tons. To put things in perspective, that's still the third highest year in history after 2012 and 2011 (8.38 million tonnes).
Based on historical data, he predicts that 2015 imports will decline by 10 to16 percent.
“The reason is simply the lack of profit,” he says, which he also presented at an industry forum. Transportation costs, import duties and value-added-taxes are fixed, but recycled resin prices have tumbled due to falling oil and virgin resin prices. “We need the next balancing point of supply/demand and pricing.”
“When virgin resin prices are low enough,” he asks, “even though recycled resin still offers environmental and social value, what's the market and business value?”
For the plastics recycling business model to continue to function, he argues that society (community, government) needs to pay for the environmental cost while recyclers improve the value of their products.
He also estimates that prices for imported waste plastics will reach their bottom in mid-2015 and start an upward trend from there.
“History repeats itself, but there's no fixed formula for the future. It's just my personal opinion,” he adds.
Zhou also points out some interesting trends in the industry.
Back in 2008, China's approved import volume for polyethylene, polypropylene, PET and PVC were more or less the same, showing a fairly even distribution between the four types of resins.
But PVC imports have since dropped, Zhou said, as a result of changing market conditions and business value.
PE now makes up about half of China's total waste plastics imports, and PET secures a solid 30 percent.
Another visible trend is industry consolidation. The number of companies applying to import waste plastics has fallen by 25 percent. In the meantime, average reprocessing volume at these companies has almost doubled from 8,200 metric tons in 2008 to 15,800 in 2015, showing a less fragmented and more consolidated industry with fewer but bigger players.
In terms of geographic distribution, about a third of China's waste plastics imports in 2014 entered through ports in Guangdong province. Shanghai and nearby Ningbo took 28 percent combined, and Tianjin and Qingdao in North China represented 22 percent. Fuzhou and Xiamen made up for 13 percent.
It's also interesting that China's waste PET imports mostly went to Shanghai and Ningbo. In fact, 65 percent entered China through Shanghai and Ningbo, 18 percent through Guangdong, 10 percent through Fuzhou and Xiamen, and 7 percent through Tianjin and Qingdao.
Zhou also notes that the industry's low profitability is not a result of supply or demand, but rather the intense competition within the industry. He calls for more cooperation throughout the value chain.
He also foresees five major trends that could revolutionize the industry: the general public's rising awareness of recycling, recycling channels going electronic, logistics management becoming more web-based, increasing transparency of product value, and the growing role of financing in supply and demand.