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Insight | Time:Jan 11 2018 10:44AM
Demand growth for virgin polyester from solid waste import ban
 
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Since April, the reform of China solid waste import policy has greatly impacted domestic and overseas industries, including re-PET industry. As China depended much on imported re-PET, this reform has attracted much attention of virgin as well as recycled polyester market players.

Brief review of policy adjustment
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.

On Jul 18, China informed WTO that it would ban plastic wastes from living sources by end-2017.

On Aug 17, related government departments published No.39 Announcement of Import waste Management List (2017): 4 classes, 24 kinds of solid wastes, including plastics waste from living sources (8 kinds), unsorted paper wastes (1 kind), waste textile materials (11 kinds) vanadium slag (4 kinds) are adjusted into the List of Solid Waste Banned from Import from the List of Solid Waste Applicable for Raw Materials Restricted from Importing. This Announcement is effective since Dec 31, 2017.

Impacts in 2017

Re-PET imports slumped since July and the volume totaled in Jan-Nov 2.1million tons compared with 2.53million tons in the whole year, of 2016 of which, 110kt was not imported under the HS Code of 39159010. Suppose an import volume of 70kt in December, the year-on-year imports fall in the whole of 2017 will be 470kt.

Since mid-June, in the midst of rising virgin polyester prices and clearer policies of solid waste import ban as well as the special inspection by the Ministry of Environmental Protection over solid waste import enterprise, an air of panic prevailed in re-PET industry over the unavailability of future import. Recycled polyester enterprises thus began to procure virgin PET chip in a large quantity and some spinners also shifted to use virgin PSF, driving up its demand and profits.

Thus benefits brought by the reform of import policy to virgin polyester industry mainly reflects in the procurement of virgin PET chip by recycled polyester fibers plants and higher demand transferred from recycled PSF to virgin PSF by downstream plants.

According to CCFGroup, demand increment in virgin polyester industry from these two areas in 2017 reached 100kt and 100-150kt respectively, totaling 200-250kt.

This volume is far lower than the 470kt slump of imports. For one part, price spread of virgin and recycled polyester products was the major concern of enterprises. Demand transfer from recycled to virgin products concentrated only in July-October when the spread was acceptable for these plants while later declined when it gradually widened. For another part, higher domestic recycling volume of re-PET and more PET parings and scraps from domestic polyester plants and more re-PET made from wasted clothes to some extent bridged the shortage of imports. What’s more, some properties of recycled polyester fibers, such as HC re-PSF can only be satisfied through the application of re-PET instead of virgin PET.

Impacts in 2018
According to the first batch of 2018 government approval for re-PET import(For more details of the approval, please visit: Policy signals from the first batch of government approval of re-PET ), the import volume of re-PET, which if all from industrial sources, is likely to plunge by 1.9million tons to 300kt in 2018. On the other hand, given the rising production of domestic virgin polyester products, more consumption of drinks and higher profits of PET recovery as well as improved recycled rate, domestic supply of re-PET in 2018 is expected to increase 500kt. What’s more, industrial changes due to the policy reform also counts. Some enterprises have invested overseas to build re-PET granular plants and then exported the product back to China. Its import volume, according to estimates, may gradually increase since the second quarter and may reach 400-500kt in 2018.

Suppose demand for re-PET sustain steady in 2018, then the shortage of re-PET will reach one millions tons, a gap to be bridged by virgin polyester. However, given the improved recycling profits and restrains from possible big price spread between recycled and virgin polyester as well as the sustained efforts of domestic enterprises and associations to apply for the import permission of clean flakes, this demand increment for virgin PET may fall to 800kt. And that is also why virgin PSF is to embrace a new round of capacity expansion.
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