China is the largest importer of waste. In 2016, they accepted 7.3 million metric tons worth about $3.7 billion. This volume equates to 56 percent of the world’s waste imports, including half of waste paper exports worldwide.
When China notified the WTO on July 18th of their intent to place an outright ban on 24 types of waste, the global industry was rightfully shaken. With clarification still needed, many speculate the potential side effects of such a sweeping policy.
Here’s what may happen in the global recycling industry as China’s bans take place:
Low-quality material may have nowhere to go.
China accepted tons of lower-quality material, but as their market closes to materials with higher rates of contamination, many fear otherwise recyclable waste will be diverted to landfills or incinerators.
This effect was observed after the Green Fence was erected, specifically with plastic grades 1 through 7. The US did not – and, in all honestly, still does not – have the capacity to handle the scrap plastic that was once being sent to China, resulting in disposal.
Alternative markets may expand.
Inadequate European and North American recycling infrastructure may mean waste generators and suppliers will increase exports to markets in Southeast Asia, the Middle East, and Latin America.
Other growth markets, specifically for paper, include Mexico, Vietnam, Canada, the Netherlands, India, and Thailand.
Market prices will fluctuate.
As China halts imports of certain materials, they will switch to using other primary raw materials in production, causing hikes of some commodity prices and decreases in others.
For example, mixed paper may take a hit depending on how China decides to define “unsorted” paper, but old corrugated containers (OCC) – aka the ubiquitous cardboard box – may do very well as Chinese paper mills replace mixed paper feedstock with OCC. Cardboard is one of those commodities every exporter should keep in their inventory as prices always seem to do well or better than expected.
Municipalities with single-stream recycling systems will suffer.
Single-stream systems are convenient for consumers and increase the available feedstock, but at a cost – higher contamination levels. Until more markets open for lower-quality materials, cities will have to toss certain would-be recyclables, including rigid plastics, plastic bags and film, and most mixed plastics. Such suspensions are already underway in areas including Madison, Wisc., and Portland, Ore.
Material Recovery Facilities (MRFs) without adequate sorting and processing technology will suffer.
When China’s Green Fence blocked more than 800,000 tons of low-quality materials from entering the country, suppliers and exporters lost shipping fees and revenues compounded by disposal charges.
With the intent of remaining relevant in Chinese markets, MRFs and processors quickly updated equipment with new sorting tech and increased workers on the line. Those who didn’t quickly went out of business.
And, of course, while upgrades help processors produce cleaner materials, these costs will be passed on to taxpayers and producers.
Where there is change, there is opportunity: Improving US recycling infrastructure.
To get to the point, waste handlers and processors should evolve. And they don’t have to go it alone – there are organizations and proposed government policies that can help municipalities and private companies clean up their act.
For instance, while the Zero Waste Development and Expansion Act recently introduced in the US Congress would invest $100 million in recycling facilities, The Closed Loop Fund is currently financing US recycling programs with the goal of achieving a circular economy. In 2016, they provided 11 projects with almost $25 million.
And aside from seeking federal and non-profit financing, businesses within the industry ought to team up to benefit from each other’s unique perspectives. So, if you generate, handle, or process recyclables 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.