China’s demand for recycled polyolefin resin as a percentage of overall demand fell from an estimated 25-30% in 2014 to 15-20% in 2016, while virgin resin demand increased proportionally, due to the fall in virgin, industry sources said last week.
The shift in demand began from October 2014 to January 2015, as virgin CFR FE Asia (China) PP homopolymer and high density polyethylene film prices plunged about 29% and 25% respectively, in the wake of the collapse of crude oil prices.
This eroded one of the key competitive advantages of recycled material — low cost, sources said.
The trend accelerated in 2015 as the Chinese government enacted pollution control measures on the recycling industry.
“Since 2015, China’s Ministry of Environmental Protection (MEP) is working on a ban [recycled plastic processing], and is restricting imports in the meantime,” said a PetroChina analyst.
“The [government] has been closing small recycling reprocessors to curb pollution,” said a Sinopec PP manager, adding that small family businesses make up the bulk of China’s recycling sector.
China imported an more than 420,000 mt/month of recycled polyolefins in 2014, a third of which is PP and the remainder PE, he said.
By early 2016 imports have fallen to about 320,000 mt/month, down 24% since 2014, he said. China domestic-origin recycled polyolefins is also comparable, if not bigger than import volumes.
China’s total virgin PP demand was an estimated 20.3 million mt in 2016, up 5.4% year on year and up 11.5% since 2014, according to data from S&P Global Platts Analytics.
“Good virgin polymer demand growth in China this year may be due to the shift away from recycled resin rather than a pure expansion of overall demand,” another industry source said.
A shift in demand of even 5% away from recycled PP over the last two years would be an estimated loss of about 1 million mt and a corresponding rise in virgin PP resin demand, according to Platts data.
