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Market sentiments of paper and plastics reprocessors in China

The principal destination for UK exports of recovered paper and plastics for recycling is China. In 2008, 55 percent of recovered paper and 80 percent of recovered plastics exported from the UK were destined for China. Knowledge about the Chinese market is therefore important to help understand these trade flows and their impact on UK recycling stakeholders. In order to further develop knowledge on the Chinese market, WRAP has commissioned a survey of market sentiment amongst paper and plastics reprocessors in China.

Paper recycling

The survey responses suggested that the UK recovered paper was used by respondents as feedstock, together with paper from other sources, predominantly to make packaging material. The key factors chosen by paper respondents as influencing sourcing decisions were price and quality.

When asked to rank the top perceived obstacles to purchasing from the UK, the majority of respondents (57 percent) thought that there were no obstacles – with respondents sourcing from the UK there is a positive bias. A further 33 percent ranked material properties as the top obstacle (UK recovered paper can have a higher recycled content and therefore shorter fibre length than the main supplier of recovered paper to China, the US).

The majority of respondents either did not anticipate sourcing increased quantities of recovered paper from the Chinese domestic market or were unwilling to speculate. Nevertheless, increased purchasing of Chinese domestic materials appeared to be a consideration for 45 percent of respondents (mostly as a substitute to, rather than in addition to, imported material). The majority of respondents expected a tightening of import regulations but did not anticipate it would lead to them purchasing less UK recovered paper.

Plastics recycling

The survey responses suggested that respondents used UK recovered plastics to make pellets which are then used for a variety of applications such as plastic films, textiles and electrical goods and toys. The key factors chosen by plastics respondents as influencing sourcing decisions were price and quality.

When asked to rank the top perceived obstacles to purchasing from the UK, nearly 30 percent of respondents deemed that there were no obstacles, while 32 percent of respondents ranked price as the top obstacle and a further 31 percent ranked quality as the top obstacle.

Reponses also reflected the current market conditions, with margins and demand reported down in the previous six months by the majority of respondents. There was some level of optimism on the sector’s outlook, with the majority of the respondents willing to speculate expecting demand, margins and capacity to either remain stable or increase in the medium term. The majority of respondents (64 percent) did not anticipate sourcing increased quantities of recovered plastic from the domestic market.

Opinion was divided over the likelihood of import regulations being tightened over the next year. The majority either thought they would not be tightened (36 percent) or were unwilling to speculate (35 percent). Of those who thought regulations may be tightened, the majority did not expect it to lead to purchasing less UK recovered plastics.

Conclusions

The survey has provided further evidence as well as new information on a number of aspects of the Chinese market for recovered paper and plastics. The survey results highlighted the negative impact of recent market conditions on demand and margins for respondents. As regards prospects over the next three years, the relatively high percentage of respondents unwilling to speculate, in particular in the paper sector, likely reflected the uncertainty created by the current wider economic conditions. Nevertheless, amongst those respondents that were willing to speculate, sentiment on demand and margins tended to be more positive than negative.

The full China Market Sentiment Survey can be downloaded.

Source: WRAP