Top takeaways from recent talk on China’s import bans

As China pushes forward with the proposed waste and scrap material import bans, recycling industry insiders in the US speak on unfolding dilemmas, expectations, and long-term strategies with journalists as well as attendees of the recent webinar hosted by the Recycling Partnership.

 

Here are some of the key takeaways both waste processors and generators ought to know:

 

  • China not only intends to implement a ban on 24 types of materials, including mixed paper and scrap plastic, but also a 0.3 percent contamination threshold – an impossible standard that essentially amounts to an outright ban for most materials.

 

 

  • Cleaning up the supply at both the generator and MRF levels is vital for the industry’s survival. MRF operators, including Casella Recycling in Massachusetts, Balcones Resources in Texas, RethinkWaste in California, and Dem-Con in Minnesota, are in the process of slowing throughput, upping labor, and investing in new sorting tech in an effort to improve material quality.

 

  • Short-term hurt is inevitable as China’s vast market isn’t easily replaceable. Though many MRF operators and waste and recyclable exporters have found alternatives, margins remain slim, especially because single-stream tons have lost about half their value in the past month or so alone.

 

  • Material price drops – worse even than those seen during the 2008-2009 recession – benefit US companies that use recycled materials, specifically those who make items such as cardboard, plastic bins, and yarn. For instance, Unifi Inc., which uses recycled plastic bottles to manufacture yarn and packaging, is able to keep production costs at bay due to China’s new policies.

 

  • While price drops may hurt recyclers in the short-term, the decline has stimulated domestic demand for scrap paper and plastic that is no longer in stiff competition with virgin resins produced cheaply using shale oil processed in US plants. Large corporations, including Target, Proctor & Gamble, Keurig Green Mountain, Campbell Soup, and Coca Cola, are further fueling demand by requiring their suppliers to use more post-consumer material.

 

  • The hike in domestic OCC prices isn’t likely to convince China’s government to allow foreign fiber to flow through their ports. President Jinping is probably willing to ride out short-term mill disruptions for long-term economic, environmental, and political gains.

 

  • While both mixed paper and cardboard prices have plunged since July, cardboard or old corrugated containers (OCC) fetch higher prices at $91 per ton (down from $217), as compared to $43 per ton for mixed paper (down from $121). Companies can reduce the amount of mixed paper and increase OCC volumes simply by focusing on separation.

 

  • China’s exit could become a public relations problem for the recycling industry as landfilling reusable materials may become a necessity. Widespread storage of materials, sending streams to competitors, amping up manual labor, and installing sorting tech are all efforts agencies and MRFs across California are implementing to avoid such a PR crisis and outlast the storm.

 

  • Municipal recycling contracts could evolve overtime to reflect the true cost of recycling. Many MRF operators are seeking contracts with municipalities that require an equal stake in the risks associated with recycling. Companies, such as Dem-Con, have said they’re simply avoiding contract bids without equal distribution of burden.

 

Finally, to thrive under chaotic markets requires the industry to band together and, especially, to forge partnerships with those who have successfully weathered the storm in the past. So, if you generate, handle, or process waste and would like to strengthen your position in this uncertain market, please contact our industry veterans at Berg Mill Supply.

 

As we have done in the past, Berg Mill continues to work hard on creating solutions to overcome fluctuating commodity markets, including opening markets in other countries, forging strategic alliances, and improving domestic processing capabilities.

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