A ban of import of waste into China, known as the “Sword Action” initiative, is likely to increase the use virgin plastics in the country in the next few years, according to a Wood Mackenzie senior research analyst.
Commenting on the ban, which came into effect in January 2018, Ashish Chitalia predicts a reduction in recycling volumes in China will strengthen virgin resin demand and prices.
“We are anticipating double-digit domestic demand growth of 10% in 2018,” said the research analyst.
While the ban will help to reduce the waste accumulated locally from Chinese consumption, the volumes are smaller than imported waste.
“The net effect is that China is expected to consume a greater percentage of virgin plastics in the next couple years,” he pointed out.
This, according to Chitalia, could lead to higher prices in the region, as operating rates for Chinese assets increase. On the other hand, the US and Europe are improving their capability to recycle resin.
As polypropylene (PP) prices in North America and Europe are higher than in Asia, domestic recyclers will aim to keep the material in the region to yield better returns.
“With new supply volumes of polyethylene impacting the global balance, more volumes from domestic recyclers could impact the price further,” the Wood Mackenzie expert added.