China has closed the door to plastic; where will a window open?

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China’s decision to halt import on almost all categories of plastic and poor-quality cardboard and paper has thrown the global waste industry into turmoil, writes the UK Restructuring Advisory team at Duff&Phelps.  The UK re-processing sector is at risk as waste management companies lack capacity to dispose of recyclable materials appropriately and costs multiply.

China was the world’s biggest processor of recyclable materials. However, in July 2017, its government told the World Trade Organisation that it intended to halt the import of 24 grades of plastic, textiles and paper, saying the items were often contaminated with dirty or hazardous material. Plastics, including PVC and polyethylene, were also covered by the ban, along with mixed batches of paper and cardboard.

Geoff Bouchier, managing director at Duff & Phelps, stated: “The UK, which has little capacity to recycle plastic, has been trying to locate newer markets since the possibility emerged that China might shut its door. In the absence of alternatives, those operating in a commodity market will face chaos in the short-term, creating a huge strain on financial resources, with cashflow being particularly badly hit in many cases.”

China’s dominance in manufacturing means that for years it has been the world’s largest importer of recyclable materials. In 2016, it imported 7.3m tonnes of waste plastics from developed countries including the UK, the U.S. and Japan.

“The UK won’t be alone in experiencing considerable disruption,” Bouchier continued. “For many leading companies, the restrictions imposed by China have moved them to seek out new markets to send recyclable waste materials to, including Vietnam, Indonesia, Malaysia and Thailand, among others. However, other regions globally are also targeting these markets, which will mean that UK recycling businesses will need to do much more to ensure improvements in quality so that they become preferred suppliers.  But that takes time and investment in a period when the industry is in short supply of both,” he added.

He concluded: “Waste management and re-processing businesses are facing three distinct challenges – the speed at which their core market evaporated, global competition for new markets and the costs of having to store and sort waste, which is increasing daily.”

“Local recycling units are now dealing with the very real issue of increasing costs as they strive to sift and sort here in the UK before shipping to new markets already swamped since the closure of the Chinese market.”


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