Chinese Packaging Import Restrictions Update – National Sword Initiative

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This week we attended the CIWM technical meeting in Belfast to discuss the implications of the recently introduced National Sword Initiative for UK exporters of recyclable material into China. For those that are not aware the Chinese authorities have restricted the issuing of import licenses to companies who have previously shipped Plastic and Mixed Paper grade material into the country. It is seen by most as a way of the Chinese government improving their environmental performance and reducing pollution. The reliance on the Chinese market for UK exporters has resulted in some now struggling to move material.

Back in 2013 the authorities had attempted a similar strategy with the introduction of the ‘Green Fence’ protocol although back then it was only targeted at lower quality material as opposed to the industry as a whole. Those businesses who were effected the most decided to identify new end markets once they realised how dependent they were on China but unfortunately many resorted to shipping tonnage as soon as the protocol was lifted.

The Chinese market has been the largest in taker of UK material since the Packaging Waste legalisation was introduced and for many has been the facilitator of lower value packaging recovery notes given the volume’s exported. While material sellers will have to contend with finding new markets, UK producers registered under the Packaging Waste legalisation may find that the cost of evidence notes increases if these new markets cannot be identified.

During 2017 numerous media reports outlining the problems ahead drove enough concern through the markets to see recovery note values hit a high of £85.00 per tonne. What was surprising was that all the published supply information contradicted the media reports. With the note value soring new end markets came online with Turkey along with other Asian countries providing outlets for the material. It is hoped that by identifying these end markets early that we can forgo the same volatility in 2018 although some aren’t convinced.

The general tone of the meeting was one of dejection with most raising the same issues. A call was made for the government to step in and take action although some dissenting voices stated that those who find themselves in difficultly obliviously hadn’t learnt the lesson from the previous restrictions. While one can have a level of sympathy for those businesses struggling, to expose your business to the reliance of one market must be considered shortsighted at the very least.

So as we head into the 2018 compliance year it will be interesting to see what effect these restrictions have on the packaging recovery note market. In Plastic we have seen many large re-processors disappear from the UK market as they struggled to offer competitive prices for UK material when competing with exporters. Now that the export market may struggle to meet demand we may rue the day we failed to support the domestic re-processors.

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