China's National Sword continues to cut into US recycling

Nashville, Tenn. — Many plastic recyclers are probably making their best quality bales ever, but the seismic shifts in the marketplace, thanks to China's National Sword program, have people still scrambling to move the material.

That's the view of Hamilton Wen, director of the plastics division at Newport CH International LLC of Orange, Calif., a broker of recycled plastics.

Global market conditions for recycled plastics are evolving due to the implementation of China's National Sword, which essentially banned the import of a variety of recycled materials into that country, including plastics.

"It's tough, just because you are making the best quality you ever have, which you probably are right now. Let's be honest, the stuff you are making is probably better than it's ever been. You are probably also getting paid historically very low pricing for it," Wen said.

There was a time, really not that long ago, when exporting recycled plastics essentially meant selecting a buyer in China.

"Basically, before, when we used to get plastics, the question was where in China do we send it? Which port is the best port? Where are the best customers for it?" Wen said. "Now that's completely off the table.

"We've had to completely shift, look for new markets, basically anywhere in the world. So places we've never looked at before," he said. "It's pretty much a complete upheaval, our entire plastics brokerage business.

"Previously it was really a seller's market, right? We can all agree," he said. "It's really shifted to who has the best material. We look for quality because there's not enough venues to take the stuff, so they're being extremely picky with what they want to buy, the price they are willing to accept. The strategy, how we trade, has all changed," he said at the recent Plastics Recycling 2018 conference in Nashville.

Pablo Leon, Asia manager for plastics recycler Fosimpe SL of Segovia, Spain, sees the same.

"I think that now most of the suppliers ... are doing their best quality ever. And even with that, it's not enough to move the material," he said.

With China's move to eliminate plastic scrap imports and create a better domestic collection market, companies are looking at other countries in Southeast Asia as outlets for the material.

Thailand, Vietnam and Malaysia are often mentioned as destinations. Setting up operations in those locations, or even shipping plastics to these spots, present both risk and opportunity.

With volumes dramatically increasing to these destinations, existing infrastructure is being stretched to handle the amount of material.

"The sheer amount of volume is going to be a huge problem for these countries. They are not really prepared for it. If you look at China, at least they had the framework," Wen said. "A lot of Southeast Asia countries don't have this."

Wen is concerned that exporters will ship lower quality materials to those countries that are not equipped to handle that type of material. And that eventually will mean stricter rules in those places.

"We don't know what's going to happen. But I can probably tell you for certain something will change. They will enact new laws and procedures. But nobody knows for sure when or how strong it will be. So it's very uncertain right now in Southeast Asia. Even now we're starting to see issues at the ports in various countries from the sheer amount of volume that's been shipped over there." Wen said.

Wait times at ports are increasing as more and more containers of recycled plastics are finding new homes.

Leon believes China eventually will lessen restrictions on importing plastics, but times will never be like before.

"China is still an export-based economy, so eventually they will need these materials," he said. "So we see some uncertainty in the future. We know for sure China is not going to be back to what it used to be. The dirty materials are not going to get in anymore. And probably the lower grades, either. But we feel they have done too much."

Investing in creating systems to decrease contamination in recycled plastics takes money, and with the market conditions for recyclers these days, that can be difficult.

Companies in markets with higher landfill rates can afford to charge more and still be competitive with disposal fees. But other parts of the country will see plastic recyclers unable to compete with low landfill costs, said Patty Moore, a long-time plastics recycling expert.

Waste Management Inc. is the largest recycler in the country, handling some 10 million tons of recyclables in its material recovery facilities each year, including plastic, paper and metals. Brent Bell, vice president of recycling at Waste Management, has witnessed the changes in the world markets.

"I think that if you look at the ones and the twos [PET and high density polyethylene], we've historically moved those domestically and had a great relationship with domestic partners in moving those materials," he said.

"I will say the that the lower grade plastics, the threes through sevens, we're really trying to extract the values out, pull those fives [polypropylene] out, with some of our facilities today and really make the best value that we can with the materials that are available today," he said.

There is always going to be what Bell called "low value" materials in the residential recycling stream that will require conversations with municipalities and customers to find an economic way to handle those plastics.

Wen believes new markets for lower grade plastics will develop over time. "It's already developing. If you are a supplier, you probably are already seeing this. There is a little more demand for it," he said.

Moore, president of Sustainable Materials Management of California, said there is some negative pricing for certain low value plastics, where people are paying to move the collected material that's then being landfilled.

"At some point, simply it doesn't make sense for suppliers to collect and recycle it any more. Some suppliers don't have a choice. They are under contract to have to collect and recycle and market certain things " Wen said. "At some point it doesn't make sense any more, economically."

Bell said that while changes are needed, his company is not backing away from plastics recycling. "We're in it for the long haul. We've got to make this work."

"As long as this material has value, it will get recycled somewhere," Wen said. "Just, ideally, it has to be done in some controlled, planned way."

Improving quality "is a big part of the answer," said Dylan de Thomas, vice president of industry collaboration at the Recycling Partnership, a non-profit group that works to boost curbside recycling.

"But that's only part of the equation," he said. "Demand is a big part of it. We're increasing supply, but we also have to increase demand [from end users]."