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China Market Commentary

Supported by improving oil prices, the market was stable with price levels generally improved by 5-10 percent in the last few months. Higher demanded materials such as PET, PS and ABS had their prices increased by more than 10 percent during the period.

– By Steve Wong, Executive President, CSPA; Chairman, Fukutomi Company Limited; Committee Member, Plastics Committee of BIR; Committee Member, WEEE Committee of BIR

While China is determined to improve the ecology condition, unrelenting regulatory controls of the plastics recycling industry continued to prevail. The ultimate objective to get rid of small recyclers without proper recycling facilities and to stop the importing and recycling of polluting scraps is getting more apparent.

There were vigorous crackdowns in December 2016 of small recycling factories and warehouses not operating with proper recycling facilities in Shunde of Guangdong Province through measures of seizing factories, arresting owners, disconnecting utility supplies, and destroying illegal workshops. Some factories tried to avoid the problems by stopping production, forcing workers to take an early leave for the Chinese Lunar New Year; leaving the decision on how to proceed for after the holiday. The crackdown exercise was considered the largest ever in terms of scale, which might become a “new normal” in China. It may imply a trend of tightening pollution controls.

Aside from the environmental protection policy, the relatively high labor cost and operation cost in China are discouraging participants of the industry to stay in China. Relocation of business operations to Southeast Asian countries and diversification of markets could be an option for some.

Outlook

The fact that massive crackdowns of illegal recycling operations being executed by the action team from Central Environmental Protection Department is an implication for China’s determination to weed out the small recycling operations and put ecology improvements on the right track. Recyclers with direct source scrap suppliers and processing facilities meeting compliance standards while maintaining high production capacity and efficiency are going to win.

Plastics Beat

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