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China has cumulatively imported about half of the global plastic
waste over the past few decades. Concerns of plastic waste
polluting landfills and rivers in China have become increasingly
acute in recent years. In 2013, China introduced a policy/operation
referred to as the "Green Fence" designed in part to improve the
quality of the plastics waste coming into the country. Five years
later, China launched the "National Sword Campaign", which
effectively banned the importation of plastic scrap from other
regions. As a result, China's total polyethylene (PE) and
polypropylene (PP) plastic waste imports in 2018 tumbled by 99%
versus 2017, or the equivalent of nearly 3.2 million tons according
to trade data sourced from the Global Trade Atlas (GTA). Domestic
recycling facilities were also put under active supervision in
order to assure that regulations were strictly enforced. Licenses
to operate these recycling facilities were either canceled or
suspended for facilities failing to comply with the stricter
regulations.
The National Sword Campaign was touted as a key component in the
over-arching plan to reduce plastic waste in China. In recent
years, China has invested in the promotion of reusable shopping
bags, plastic waste related education, and the implementation of
strict regulations around trash-sorting. During this time, plastic
waste levels have increased exponentially, driven in part by the
rapid development of e-commerce businesses.
As of January 19, 2020, the Chinese government decided to take an
additional step in its quest to combat plastic waste, announcing a
new set of stringent regulations focused on reducing plastic
consumption in different industry sectors. These regulations are
scheduled to be phased in with specific goals set by the end of
2020, 2022 and 2025. The details of the policy are listed
below:
Prohibited plastic products in production and sales:
Sales and production of plastic shopping bags with thickness
less than 0.025mm (25 microns) and polyethylene agricultural mulch
film with thickness less than 0.01mm (10 microns). The timeline for
this particular action is not yet clearly specified in the official
Chinese document.
Plastic medical waste (syringe, pouches, etc.) is prohibited
from being recycled and converted into a new plastic product. The
timeline for this particular action is also in question and not
clearly specified in the official Chinese document.
Production and sales of disposable foamed plastic tableware,
cotton swabs, and personal care/beauty products containing plastics
beads will be prohibited by the end of 2020.
Sales of personal care/beauty products that contain plastic
beads are prohibited by the end of 2022. It is assumed that the gap
between production and sales restriction dates is designed to allow
time for existing inventories to be sold.
100% ban on importation of plastic scrap.
Prohibited or restricted use of plastic
products:
Non-degradable plastic bags - Usage will be reduced/prohibited
in stages. By the end of 2020, in the four municipalities (Beijing,
Shanghai, Tianjin, Chongqing), the capital city of each province,
and other yet to be determined cities, the use of non-degradable
plastic bags in shopping malls, supermarkets, pharmacies,
bookstores, catering packaging, and various exhibition conferences
will be banned (thicker bags above 25 microns are assumed to be
included). By the end of 2022, the regulations will be extended to
all areas above the prefecture-level (prefecture refers to cities
ranking below a province and above a county) and coastal counties
before extending out to smaller regions by the end of 2025.
Single-use tableware - Non-degradable plastic straws utilized
in the catering industry will be banned nationwide while
non-degradable plastic tableware will be prohibited for cities in
the prefecture-level and above, by the end of 2020. By the end of
2022, the rules will be extended to counties in an effort to reduce
the consumption of non-degradable plastic tableware in the catering
industry by 30%.
Single-use plastics supplies in hotels - Single-use plastics
supplies such as toothbrushes, slippers, personal care items
contained in plastic bottles, etc. are prohibited from being
offered in nationwide star-rated (larger, mainstream) hotels by the
end of 2022 before the policy is extended to all hotels, taverns,
B&B, etc. by 2025.
Delivery plastics packaging - Non-degradable plastic packaging
bags and single-use plastic woven bags in postal delivery offices
in Beijing, Shanghai, Jiangsu, Zhejiang, Fujian, Guangdong, and
other major provinces will be banned by the end of 2022. The use of
non-degradable plastic tapes will also be restricted by the end of
2022. The same scope will be extended to postal offices nationwide
by the end of 2025.
In addition, the Chinese government has also listed other terms
designed to strengthen the policy. Plastic regulations are expected
to be incorporated into laws but there are no specific details
available at this time. The government will set a standard
evaluation system to verify that key manufacturers are following
the specified requirements. Companies involved in illegal
production, sales, and use of banned plastics will be reported for
investigation and be added to the "dishonesty record", which would
jeopardize their business. In addition, the government plans to
create more relevant infrastructure in public places, encouraging
consumers to use degradable bags or paper bags in lieu of
disposable plastic shopping bags. The government will also support
research and technology development in related fields to help
achieve targeted goals. Now the key question is: What are the
implications of these policies on the plastics value chain? The
answer will not be easily quantified as there are many variables
that could play a part in affecting the overall outcome.
Relative to demand, the banning of polyethylene (PE) shopping
bags and agricultural mulch film that are less than a specific
minimum thickness would mean thicker bags and films will be
produced in the near-term if alternative material solutions are not
developed for these applications. Restricting the uses of
disposable plastics bags will likely lead consumers to adopt
alternative materials such as reusable PP woven and nonwoven bags
as a replacement. Although there is discussion around degradable
plastics replacing PE and PP demand for single-use applications,
there is still a lack of clarity regarding what is considered
acceptable as degradable under the new rules. This dilemma stems
from some known degradable products currently available in the
market that are produced using virgin resins mixed with additives
to become degradable, while there are also materials considered to
be naturally degradable such as Polylactic Acid (PLA). Costs are
always an important factor in any business decision. The current
economics associated with the production of biodegradable plastics
(whether blending additives with virgin resin or using inherent
biodegradable materials like PLA) have yet to achieve desirable
economies of scale and therefore remain expensive relative to
conventional PE and PP virgin resins. Until biodegradable
technologies mature and become cost-competitive, most of the goals
around the use of biodegradable materials appear unrealistic and
are therefore unlikely to significantly impact near term resin
demand despite the Chinese government's bold attempt to encourage
the transition to biodegradable materials designed to replace
single-use plastics in 5 years. The impact on PE demand from the
restrictions on disposable tableware products in hotels and
catering takeaway businesses may also not be significant as most
cutleries and food packaging for delivery orders in China are
produced with polystyrene. PP is used for making single-use
plastics straws, but the volume is considered small and not
expected to have a significant impact.
However, these policy changes do have major potential effects on
other regions. The National Sword Campaign has effectively blocked
scrap imports from other regions since 2018 and has been a huge,
demand driver for virgin PE and PP as much of the scrap demand has
been replaced by virgin products; now with the adoption of this
latest policy and given the very competitive local markets for
virgin resin in China, other net export regions could face
additional challenges beyond the existing global oversupply
conditions if China's demand for virgin PE is reduced. IHS Markit
will continue to monitor this very dynamic situation as any
reduction in plastics consumption will require a combination of
changing consumer buying patterns, technological breakthroughs, and
significant infrastructure investments.
IHS Markit offers a long-term outlook on supply and demand globally
and on a country level, along with a live capacity database and
trade flow analysis on a country-to-country basis in our
World Analysis service. In addition, the World Analysis
also provides 10-year price and margin quarterly updates for North
America, West Europe, and Asia.
Posted 03 February 2020 by Joel Morales, Executive Director, Polyolefins Americas, IHS Markit
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