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Insight | Time:Apr 19 2017 3:07PM
Recycled polyester fiber industry to face reshuffle
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In afternoon of Apr 18, the 34th conference of the Central Leading Group for Comprehensively Deepening Reforms, chaired by Xi Jinping, president of People's Republic of China passed a bill, forbidding the import of solid waste.

At the meeting, it is highlighted that all local governments should, on the basis of protecting the environment and security of the country and welfare of the people, upgrade the management system of solid waste import, make different schedules for the import prohibition of various industries and sharply cut down the volume and varieties of waste import by applying law, economic as well as administrative methods.

The core changes in the spirit of the meeting are as follows:
1, solid waste is identified as harmful to the environment and the health of the people.
2, a sharp cut-down of import volume and variety is taken as the core of the solid waste reform.

Thus till now it is fundamentally clear that solid waste import ban that has been in the air for two years is a thing of certainty. And the details about ban on the specific industry, variety and schedule will be confirmed as time passes by. Anyway, this policy will surely bring about profound change in the recycled polyester fiber industry. 

Tightening supply of feedstock

China re-PET import accounts for 40% of the total supply, basically equaling that of domestic recycling bottle flake.

And as around 87% re-PET is used for producing recycled polyester fiber, the import ban may also exert a great impact on the downstream market.

Narrowing virgin and recycled polyester fiber price spread

In recent ten years, China re-PET import averaged 2 million tons, meaning 40-50% import dependency rate of the market. If domestic recycling of PET enjoys no significant improvement when the import is totally banned, recycled polyester fiber plants will be badly needed for the feedstock, driving up re-PET price.

Re-PFY and close virgin PSF prices are closely associated with their respective virgin ones. The larger the price spread, the higher recycled polyester fiber is to gain profits. Once the re-PET import is forbidden, tightened feedstock supply will surely lead to price hike, thus downgrading their competitive edge with the virgin ones. Some plants with lower profit-taking ability may even be weeded out of the industry. HC re-PSF plants will also be negatively influenced despite of relatively lower relevance with HC PSF as hiking feedstock price is to narrow its already decreasing profits. 

Thus a reshuffle is likely to domestic recycled polyester fiber industry brought by the new policy. And the specific impact will surface with the come up of government measures. Yet every coin has two sides. For some large PET waste recycling plants, especially those using drawing wastes and used clothes, they may to some extent benefit from this change.
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