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China & South East Asia

Economic correction measures in China may cause growth to slow in the coming months, which may pose uncertainties in the demand for recycled materials. And with increasing domestic reuse in exporting countries, dwindling plastic scrap supply to South East Asia is threatening the survival of recyclers in the region.

Most prime prices - including PP, PE and PET - have been rising in the last two weeks on the back of increased demand, higher feedstock costs, low inventories and production interruptions amid China’s power crunch. Following the government’s order to curb electricity usage in more than 20 provinces, operations at many petrochemical plants have been suspended for between one and six days a week. The impact on the supply chains for prime plastic materials and downstream manufacturers are not known.

Recycled LDPE pellets are the most demanded reprocessed materials and have been selling well following the prime price hikes. For the first time since the pandemic began, prices for natural recycled LDPE pellets have climbed as high as US$ 955 per ton and black pellets to US$ 720 per ton CNF China main ports. Even higher prices are reported in South East Asia: US$ 1150 per ton for natural and over US$ 800 for black. Prices for recycled PP, PET, ABS, PS, PMMA and Nylon pellets remained almost the same in the second half of September, with some upward adjustments of US$ 20-100 per ton depending on quality and colour.

Customers in China are cautious and even pessimistic given that power outages might continue to have an impact until next year. Additionally, changes in government policies, geopolitical issues with the rest of the world, the ripple effect from the collapse of giant Chinese property developer Evergrande Group, pandemic-related restrictions and logistics issues are still directly affecting industry and the Chinese economy.

Scrap recyclers are not benefitting from the above-mentioned price hikes and improved market conditions. Recovered plastic scrap feedstocks have been in short supply owing to export restrictions out of developed countries as well as strong demand within Europe and the USA. Most recyclers in South East Asia are operating at barely half of their production capacity and are struggling to survive given the high costs of imports, labour and rent. As an example, grade A post-consumer LDPE film costs US$ 580 per ton, while reprocessed pellets are selling at US$ 955 per ton in China and at US$ 1130 or more in South East Asia. It does not make sense for recyclers to sell the recycled pellets to China while the domestic market can accept a price premium of US$ 180-200 per ton. Recyclers must process in countries with low import costs and overheads in order to keep their factories running in a financially efficient way.