National Sword the precursor to outright material bans?

Actions recently taken by National Sword-wielding Chinese agencies are beginning to resemble the FBI’s efforts to combat drug smuggling in the eighties. In the blown-out style of Netflix Narcos, 172 enforcement officers raided 16 warehouses around Guangdong, capturing five smugglers- claimed by officials as members of an “organized illegal gang”- as well as $146 million in scrap plastics and metals.

The raid that captured 85 thousand tons of recycled materials was organized through trans-agency cooperation, including Customs of Shantou City, the General Administration of Quality Supervision, Inspection and Quarantine, the Ministry of Environmental Protection, and the Industry and Commerce Department. Their resolve is clear, as the agencies have indicated they will continue to “strengthen efforts against waste smuggling”.

Large-scale raids such as this and the overall quality-control efforts implemented as part of the National Sword campaign have had profound effects on US plastic exporters and may impact the US economy as a whole. China is the largest US plastic export market, receiving nearly 500 thousand metric tons of recycled plastics other than PET in a single year. The Institute of Scrap Recycling Industries (ISRI) conducted a study that suggests US recovered commodities exports generate $28.85 billion in total economic benefits.

In just the first six months since its implementation, China’s National Sword crackdown has had far-reaching effects that will likely continue through 2018:

• Some exporters have seen as much as a 40 percent cut in export volumes. These same merchants have yet to recover from equal volume reductions caused by China’s first quality-control campaign dubbed Green Fence.
• There have been outrageous hikes, as high as 100 percent, in forwarding fees on imports in China. Transportation fees have increased from about $2900 per load to $5800.
• Mixed-plastic bales simply have nowhere to go, allowing domestic buyers to charge suppliers to offload materials.
• Even Chinese mills are suffering. Low-grade plastic mills are shutting down due to the lack of imports. Some purchased stock is just sitting in US warehouses as Chinese buyers have advised against shipping them for the time being.
• As the campaign ramps up and stricter bans are implemented, some Chinese importers are shutting down mills in favor of moving operations to countries in Southeast Asia.
• There’s been an increase in exports to alternative markets, including the Middle East, Latin America, Bangladesh, India, and Pakistan.

So, what does all this mean for the future of US low-grade recycled plastic exports to China? The future remains unclear as the full effect of the National Sword remains to be seen. However, there are rumors and indications that China may be considering further material bans…

ISRI leaders are concerned with the quick change in leadership at China’s Ministry of Environmental Protection and the lack of details regarding the shift. Chinese officials are refusing to shed light on, or deny, recent rumors regarding potential bans on importing scrap commodities into China.

Merchants may want to shift focus to emerging Asian and alternative markets as China closes the door on US scrap exports. If you’d like to partner with industry experts to overcome the effects of China’s crackdown and gain a foothold in emerging markets, contact us at Berg Mill Supply! With over half-a-century’s experience in the recycled commodities industry, Berg Mill has created a vast market network.