China’s material bans affect some materials more than others

China makes rumors official, notifies WTO of solid waste imports ban

In the latter half of July, China notified the World Trade Organization (WTO) of their proposed solid waste imports ban, citing environmental and human health and safety concerns as the primary reasons for the material embargo.

According to the WTO filing, the prohibition will cover four classes and 24 different types of recovered commodities, including unsorted paper, household plastic wastes, recycled textiles of living and man-made materials, and steel slag. The notification names specific materials with international trade codes, including:

  • ethylene (HS 3915100000)
  • styrene (3915200000)
  • vinyl chloride (3915300000)
  • PET (3915901000)
  • other plastics (3915909000)
  • unsorted waste paper (4707900090)

The ban – with an effective date set for September 1st and expected completion date of December 31st, 2017 -  should come as no surprise as it trails the heels of China’s former Green Fence Initiative and this year’s National Sword campaign, both efforts to clean up recycled imports through heightened inspections and tight-fisted licensing.

Prior to building the Fence, China faced heavily polluted cargo that drove up domestic sorting costs and increased landfill volumes.

China’s WTO notification causes a frenzy

Many industry insiders vocalized their fear that the ban would severely disrupt recycling in the US and Canada. These fears are not unfounded: China is the largest importer of North American scrap commodities. In 2016 alone, they received a total of $5.6 billion worth of solid waste cargo from the US, according to the Institute of Scrap Recycling Industries (ISRI) data.

ISRI president Robin Wiener has warned major job loss and reductions in tax revenues could ensue, stating “a ban on imports of scrap commodities into China would be catastrophic to the recycling industry.” Both the Office of the United States Trade Representative and the US Department of Commerce have been notified.

Will the bans impact all materials equally?

Though the ban will be painful for most US recycling businesses, the future of wastepaper in particular will not be as bleak as previously thought. Scrap paper represents a significant portion of US recycled exports to China, which accepted 13.2 million tons worth $1.9 billion last year.

There are three classes of recovered paper (RCP): old corrugated containers (OCC) account for 60 percent of export volumes, old newspapers (ONP) holds 35 percent, and mixed paper 15 percent. The ban specifically targets unsorted or mixed scrap paper rather than recovered cardboard and newspaper.

However, 15 percent is still a big deal as it amounts to about an 80,000 forty-foot equivalent units (FEU) of cargo loss per year. With such a drastic drop in demand, mixed paper prices are expected to reach record lows – not so good for wastepaper exporters.

On the flipside, China’s manufacturing sector is heavily dependent on other classes of scrap paper. If the former RCP price hikes and buying frenzies are any indication, China will continue to purchase recycled cardboard and newspaper from the US, “the largest and most dependable source of scrap paper for China’s manufacturing sector”.

Additionally, as Chinese regulations tightened, scrap paper export volumes to alternative markets in Southeast Asia and the Indian subcontinent increased significantly, signaling the emergence of robust replacement markets.

Though markets are shifting, exporters can at least enjoy stable, low freight prices for the foreseeable future due to increased use of mega vessels and infrastructural expansions.

The best strategy to overcome the challenge – and it will be a significant challenge – of stricter import standards is to partner with other experts in the industry. 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.