Not all disruption is triggered by digital technology. Regulation, and the pricing signals that flow from it, can be just as powerful. With the introduction of China’s National “Plastic Sword” signaling the end of open importing of plastic scrap into China, the global marketplace has been disrupted. Western countries like Australia — that rely on exporting scrap plastics as a means of managing part of that waste stream — will have look to alternatives. While other export markets are expected to become alternatives, this is a chance to reassess local market opportunities for recovering and processing valuable plastics. 

The National Sword of China strikes

Following the Green Fence of 2013, this year China announced an even stronger policy to eliminate low-quality scrap plastics imports. The policy, which is called the National Sword, is the largest disruption to hit the global recovered plastics market, and signals the end of open importing of plastic scrap.

In May this year, Dr Steve Wong, President of the China Scrap Plastics Association and Managing Director of Fukutomi, was quoted by Plastics Recycling Update as saying “(the National Sword will) effectively ban the import of plastic scraps and some other solid waste by stage and category before (the) end of 2018”. Only a month later, in the same publication, he reported that 85,000 tonnes of scrap plastic and metal was seized from 12 warehouses with multiple arrests. 

Within China, processors and manufacturers are examining options, with Plastic News in July reporting that the policy may even lead these businesses to move operations to the US to access recycled plastic feedstock. Dr Steve Wong was quoted saying that this major disruption is an opportunity for businesses to consider new locations for processing and manufacturing operations, but added that the viability of some are yet to be proven.  

While these alternatives are being set up, exporters of scrap plastic have a new challenge: do they increase their cost base to increase the value of each bale, or do they stockpile mixed materials?

Australia, like other Western countries, is just beginning to feel the effects of the Chinese National Sword with export markets being hit. This means that the national and regional conversation needs to start in earnest. There needs to be an increased understanding of the value of the various recovered plastics and, importantly, active dialogue about effective and viable plastics circular economies in our own domestic economy.

Export or value add

Australia is known for resource exports with large mining operations across the country. Yet, little is mentioned about the reliance on export markets for the recycled plastics recovered here.

The reality is that Australia exports an estimated 2/3 of all recycled materials for off-shore processing, with China being the largest trading partner. This is not unique, with the US amongst others relying heavily on China for processing and returning clean plastic pellets as well.

The Chinese National Sword is seen by some as a negative market disruption yet by others as an opportunity — both a business opportunity and an opportunity to start the conversation about true plastics circular economies.

Where the door to China closes, other SE Asia countries may fill the gap, ensuring exports can continue. However, this simply delays the inevitable as shipping low-value mixed plastics to other countries does not guarantee that they will be re-purposed.

It is time for the conversation to shift from “waste management” to “recovered resources”. The circular economies for scrap plastics need to be viewed through market principles. Waste holds low value and continues to be an economic and environmental burden for society. Resources are tradable and valued.

Like all commodity trading, market forces determine the viability. Unlike other recovered resources, the marketplace for recovered plastics is relatively young and very complicated. There are more than 400 variations of plastic for every single type of metal; and only a handful of used plastics have sound markets.

Creating value in plastics circular economies will be a central conversation at the Plasticity Sydney conference where Dr Steve Wong will be presenting on 31 October 2017. Which-50 is a Media partner for the event.

We are always on the lookout for examples of market and commercial disruption. Reach us on LinkedIn if you have a story to tell.

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