In the last six months we have seen industry news dominated by the potential problems which may arise due to the banning of some recovered material imports into mainland China. For all the concerns voiced it is important to note that one of the main gauges of reprocessing activity has shown little downturn in volume. The volume of tonnage generated in Plastic via the packaging recovery note system this year has seen little effect on reducing supply. This has resulted in many buyers voicing frustration at the level of costs involved in securing recovery notes this year and rightly so but we must consider the effect the higher note value has had on supply. In Q2 we saw a strong increase in domestic reprocessing figures to alleviate the downturn in exports aided by the larger subsidy. As the recovery note price increased it has allowed traders to identify new outlets for the material. So when viewing the potential problems within the sphere of packaging compliance they appeared to have been addressed by the increased recovery note subsidy.
Of course it would be naïve to think that all solutions revolve around the prn system but the one thing which has been missing from the arguments put forward is where will China get the material to replace that which it shuns from overseas. The market developed due to the vast appetite for material to meet the massive growth in China’s manufacturing base. Do we believe that China is to reduce its manufacturing output or is it a case that its internal market has now started to produce a wealth of recovered material domestically? This is a question which has yet to be asked however many believe that this latest move is simply to try and increase the quality of the material. Heaven knows they have tried over the last few years to do that with the ‘Green Fence’ and National Sword protocols with not much success so there may be some true in this. Of course it could be that with the weaken oil price the production of virgin material is providing the perfect antidote to this problem. If this is the case we may fine the Chinese appetite for recovered material growing in line with any future oil price.