China is upending the global plastics market. The world’s biggest user of scrap has stopped accepting shiploads of other countries’ plastic trash as it phases in a new ban. That’s bad news for the recycling industry, as China has been a major consumer of salvaged materials it processes into resin that ends up in pipe, carpets, bottles and other cogs of modern life.
China has begun buying brand new plastic to replace all the recycled scrap — and that’s great news for U.S. chemical makers such as DowDuPont Inc., which are rushing to find markets for millions of tons of new production amid an industry investment binge. U.S. exports of one common plastic are expected to quintuple by 2020.
“It’s a good time to be bringing on some new assets,” Mark Lashier, Chief Executive Officer of Chevron Phillips Chemical Co., said in an interview last month as he marked the opening of two polyethylene plants in Old Ocean, Texas. “If you pull recycled plastic out, that market demand is going to increase.”
China is undoing decades of effort that built a massive scrap recycling industry — the cheapest way to produce plastic products for its growing economy. The country accounted for 51 percent of the world’s plastic scrap imports last year, with the biggest contribution coming from the U.S., according to the Institute of Scrap Recycling Industries, an international trade group.
Supply Shift
Now China is changing course, telling the World Trade Organization in July that it will stop accepting imports of used plastics and paper by Jan. 1 as the nation takes steps to clean up its industrial pollution. The China ban could shift about 2 percent of global polyethylene plastics supply from recycled to new material, Vincent Andrews, an analyst at Morgan Stanley, said in a Nov. 30 report. The country has already halved its purchases of scrap polyethylene from a 2014 peak, he said.
The U.S. is the only country in a position to quickly fill the gap, said Jonas Oxgaard, an analyst at Sanford C. Bernstein & Co.
That’s because the U.S. has become the cheapest place in the world to make plastic, thanks to a fracking boom that’s created a glut of natural gas, the main feedstock for manufacturing. Taking advantage of low gas prices, chemical producers have invested an unprecedented $185 billion to build new capacity in the U.S., according to the American Chemistry Council, an industry group.
Natural gas prices at $3.50 per million British thermal units would be about $20 a barrel on an oil equivalent basis, Royal Dutch Shell Plc said during an investor briefing on Oct. 13. West Texas Intermediate crude futures traded at $57.40 a barrel at 5:04 p.m. Singapore time.
To read the full story, visit https://www.bloomberg.com/news/articles/2017-12-06/china-s-blow-to-recycling-boosts-u-s-s-185-billion-plastic-bet.