China & South East Asia
In China, the government’s stringent COVID control policy has paralyzed Shanghai, putting other cities - including Beijing - on edge. Moreover, supply chain disruptions have recently sent ripples through the commodity, stock and currency markets, contributing to slow growth and negative market sentiment.
In Asia, the shortage of imported scrap supplies has been aggravated by increasing domestic recycling within exporting countries, thus diverting a proportion of these streams. Also in this context, the Ukraine conflict is making it extremely difficult to book shipments while high freight costs render exports of low-end items unviable.
The following table shows recent prime prices taken from China’s major virgin polymer websites, quoted in Renminbi (RMB) which has an exchange rate of 6.7385 to the US dollar at the time of writing:
New York oil prices settled at US$ 103.09 per barrel (the fifth monthly gain in a row), supported by a possible oil embargo imposed by the EU on Russia.
Regarding prime materials, the Chinese markets have been very much impacted by the spread of COVID. Most resin prices have declined amid bearish demand owing to ongoing lockdowns across the major manufacturing and transportation hubs of Shanghai, Beijing, Guangdong and Jilin. Supply chain disruption has contributed to slow growth and negative market sentiment, with the Chinese currency dropping almost 4% from Yuan 6.37 to the US dollar in late April to Yuan 6.7 two weeks later.
The polyolefin, PET and PVC markets in South East Asia, Europe and the USA have weakened after months of surges. The latest Dalian futures have settled US$ 40 lower for PP and PE, reflecting the gloomy economic outlook among Chinese players. Engineering grades are slow amid flagging demand. In addition, players are cautious and pessimistic about the volatility in oil prices/currencies, pandemic-related complications and the geopolitical situation.
Recycled pellets are not adversely affected by the slow market demand for prime resins as, nowadays, recycled content is a prominent promotional plus for brand owners.
Since China’s National Sword initiative began in 2017, scrap plastics exports have declined steeply from the USA, Europe and Japan. The Basel Convention amendments have further restricted plastic waste exports from OECD to developing countries. Lately, some major shipping lines have announced a ban on plastic waste shipments.
Plastic wastes have now become such scarce feedstocks for the recycling industry. Domestically in the USA and Europe, supply is limited and expected to remain so in the short term. There are insufficient recycled materials to fulfil voluntary and mandatory recycled content requirements. A solution to increasing the supply of recyclables through collection systems is required imminently.
A recent report suggests that total collections of post-consumer waste in the USA were 5.7% lower in 2020 when compared to 2019. The drop is probably due in large part to fewer collections during the pandemic-related lockdowns, although the collection totals had already started to drop in 2017. The decline is attributed to plastic bans and export restrictions to China and South East Asian countries.
US post-consumer plastic waste collections through materials recovery facilities account for half of the nation’s plastic waste collections. Total plastic waste is estimated at 4.5 million tons and only 8% of post-consumer wastes was exported overseas in 2020 as compared to 12% in 2019, with most exports destined for Canada, Mexico and Europe. In the end, Asian recyclers would have received only a small fraction of the total export volumes.
In Asia, therefore, scrap plastics availability has been further reduced by the lower collected and sorted quantities for export from the USA. There is a shortage of sorted, accessible materials for processing and many plants can only process single-resin recyclables. Therefore, it will become even more challenging for Asian recyclers to acquire enough scrap for their operations.