China's Jan. 19 announcement of a sweeping, phased-in ban on many single-use plastics not only caught the attention of environmental campaigners, but also it's likely to have a significant impact on polyethylene markets globally.
The new policy from Beijing sets up bans on disposable plastics, including nondegradable bags, straws and cutlery to be phased in over five years. The wide-ranging policy includes limits on plastic microbeads in daily use goods, as well as rules for specific sectors, like getting rid of disposable plastics in hotels by 2022 and a phased-in ban on plastic packaging in China's popular express delivery services starting in 2022 in major cities and provinces and expanded nationwide by 2025.
Analysts said the broad initiative is also likely to impact use of recycled content in products in China and dovetails with Beijing's plans to limit imports of plastic scrap under its National Sword policy and to modernize the country's inefficient domestic recycling industry.
Gerard Selvaggio, vice president at Blue Clover Polymer Solutions in Princeton, N.J., said that his firm "was surprised to see how quickly the Chinese government is looking to ban certain single-use bags, straws and cutlery."
"For the ban to take effect in just two years for certain products, that's far quicker than most corporate guidelines to increase their recycled content," he added. "This ban should have a negative effect on global PE average margins over the next several years. Today, U.S. producers are being helped by very cheap natural gas and ethane pricing, while Asian crackers are having to cut back operating rates due to negative margins on naphtha to PE."
Wood Mackenzie senior consultant William Liu projected that the regulation would reduce plastic consumption.
"Polyethylene consumption will be impacted as it is the main [feedstock] to produce bags and packaging films," said Liu, who added that as the ban rolls out to more cities and substitute materials gain traction, China's use of polyethylene will be further impacted.