The China Ban Is Driving Commodity Prices Down

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On January 1st, 2018, China implemented a ban on imports of 24 categories of recyclables, including mixed plastics and mixed papers. This ban hit the U.S. recycling industry hard because China was the largest buyer of these commodities, receiving over 50% of total exports.

In March 2018, the Chinese government went further still, and imposed unattainable contamination thresholds (0.5%) on the remaining imported materials, with any non-conforming loads sent back at cost to the exporter. In short, they practically outlawed imports of almost all recyclables.

The latest step is scheduled to take place in July 2019, when eight categories of scrap metal will be added to the ‘restricted’ materials list for importing.

What’s Behind China’s Decision?

China’s domestic market for recyclables has been steadily increasing, to the point that they now have less requirement for imported feedstock into their recycling plants.

The government also stated that they had become sick of being the ‘dumping ground’ for other countries’ rubbish. Previous material quality that the U.S. and other countries sent to China was in many cases so contaminated as to be un-recyclable, instead having to be sent to landfill. Mixed plastics loads received into Chinese docks often contained as much as 40-50% trash.

How the Ban is Affecting U.S. Markets

For the last 20 years, China has had a huge appetite for scrap materials to feed their recycling plants. This meant that U.S. Materials Recovery Facilities could sell mixed plastics and mixed paper without much sorting or quality control. That allowed the MRFs to run at a very high capacity and process and sell large volumes of material.

Otherwise known as MRFs, these are industrial facilities where the mixture of single stream recyclables is sorted back into its individual components.

With the sudden withdrawal of their major buyer, MRFs across the country have had to scramble to find new markets. But the sum of the remaining buyers, including domestic recyclers and secondary international markets have struggled to absorb the massive quantities of material that China used to buy.

This has caused commodity prices to fall hard in response. Even those MRFs that weren’t selling directly to China have been affected by the ban, because the remaining buyers can be much more selective in the quality of the material that they accept, and can pay less for it. Many operators have stockpiled huge quantities of sorted materials while they try to find a buyer that will accept their material and will pay them somewhere close to the amount that it cost them to collect and sort it.

Recycling facilities have responded to the increased quality requirements by slowing down their processing lines to remove more contamination from the recycling stream.This increases processing costs, while also reducing the amount of material the facilities can physically accept. Additionally, the removal of more contaminants results in more waste material being sent to landfill, which further adds to the cost of processing the recyclables.

Some scrap metal markets also experienced destabilization in the second half of 2018 from tariffs introduced as part of the ongoing trade war between the U.S. and China. In September, China’s scrap paper imports dropped 23% and its scrap metal imports dropped 44% following the implementation of tariffs.

States Suffering the Most from China’s Withdrawal

Although all states have been affected to a degree, some are faring worse than others. In some cases, the combination of lower commodity prices and the higher cost of sorting has pushed single stream recycling costs up above those of trash. These 13 states have been affected the most as of September 2018:

  • Alaska
  • Arizona
  • California
  • Hawaii
  • Idaho
  • Massachusetts
  • Montana
  • New Hampshire
  • New Mexico
  • New York
  • North Carolina
  • Oregon
  • Washington
What Your Business can do to Safeguard Recycling Prices

As the combination of lower commodity prices and higher processing costs is putting pressure on the industry, businesses may see their recycling prices rise as a result. Some states are also restricting the types of materials accepted for recycling.

To protect your business from the risk of higher fees, ensure that the materials you’re recycling are free from contamination. Two key areas to focus on are reducing the amount of food contamination in your recycling stream, and following the list of acceptable items to the letter. Users putting items into the recyclable stream that they think ‘should’ be recycled can account for up to a quarter of total volume, making it a major source of contamination.

If you are uncertain exactly which materials are accepted in the recyclable stream for each of your site locations, your NWA account manager is here to help.

How NWA Protects your Business

NWA waste experts constantly monitor the commodities market to evaluate the current conditions and trends. More importantly, we apply our years of experience within the waste industry to work towards finding future solutions for our customers.

Future Developments in the Recycling Industry

China has stated that it will ban all scrap imports by 2020. This is partly in response to the current trade war with the U.S., and also due to their ‘Blue Sky’ environmental initiative to become more self-sufficient in resource management.

In response to China’s withdrawal from the market, there has been a new focus on developing recycling plants within the U.S. In the long-term, this will make the U.S.less dependent on foreign markets.

In time, this will be very positive for recycling in the U.S., pushing up the standards of recyclable materials in the marketplace and forcing any companies that are producing low quality materials to drastically improve their systems, or fold their operations. This will enable the growth of a true circular economy, where better quality recyclables can be used as feedstocks to create better quality end products. However, in the short to mid-term, there will be some turbulent market conditions to negotiate.

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