China National Sword Issues & Responses Tue 6th Nov 2018 Presented by: Mike Ritchie WasteMINZ 2018 – Target 2050: China National Sword Date: Tue 6th Nov 2018 Time: 11:00 AM – 12:30 PM 20 minutes presentation Venue: Plenary Room

What is China’s National Sword policy? The goal: “Imports of solid waste that can be substituted by domestic resources will be phased out by the end of 2019” – State Council of China - it is NOT about contamination. It is about industry policy. Revoked licences Inspections at ports The actions: Feb 2017 ‘National Sword’ Suspended processing facilities July & Nov 0.5% contamination - paper & plastic Note – MRFs were never designed to achieve 0.5% Ban of paper & plastic scrap (24 waste categories) - WTO Revoked licences Inspections at ports Mar 2018 ‘Blue Sky’ Suspended processing facilities

Size of the Problem – NZ Fibre Plastic 485,000t recovered (120,000t domestic) Loss in value – Visy mixed paper $10.5M; OJI $6.4M Loss in value to Councils = 120,000t x $200/t = $24M Plastic 45,000t recovered (10,000t domestic) Assume all mixed plastic @ $100/t fall in price (assumes PET & HDPE maintains price) Loss of value to Councils = 10,000t x $100/t = $1M

Tonnages Fibre NZ Generation – 485,000t C&I MSW Export (275,000t) 155,000t 120,000t NZ use (210,000t) 150,000t 60,000t Plastic NZ Generation – 40,000t C&I MSW Export (~100%) 30,000t 10,000t NZ use

Some key points Contamination MRF contamination is not the same as export contamination MRF contamination 8% and CONSTANT It is not efficient to reduce the last 5% in MRF  Therefore it is exported with 5% contamination Reflected in the price

It is all about fibre (94% of the problem) – Australia

It is all about Fibre for MRFs as well Material input stream Percentage (%) Fibre - paper and cardboard 53 Glass 30 Plastic 6 Tin cans 2 Al cans 1 Contamination 8 TOTAL 100

The impacts on MRF’s MRF $225 Paper Mix $50 $250 Plastic Mix $50 ustr $72 Glass ($60) $100 Steel Processing costs ($100) Gate fee +$30-($40) $1,500 Aluminum Weighted Average loss = $100/input tonne MRFs are no longer profitable at new commodity prices and existing gate fees

Impacts on “mini” MRF gate fee BASE CURRENT DIFFERENCE Material category input % Historical average sale price ($/t) Jan18 average sale price ($/t) Drop in price ($/t output) Weighted loss in output value ($/t MRF input) Paper and paper products (mixed fibre) 55% $225 $50 $175 $96 Plastics (mixed plastics) 8% $250 $200 $16 Glass 30% $72 -$60 $132 $40 Ferrous material 2% N/A   Non-ferrous material 1% Other TOTAL 100% $152 National Sword National Sword Aust. Market Or $112 without glass…

The impacts on Councils and households Increased MRF costs – ~$100/t Rate increase to cover the increased MRF cost – ~$31/hh/year Approx 4% (NOT including on-shore costs or future falls) 1 Source: NSW Local Government WARR Data Report Average household generates 5.4 kg/wk1 or 280kg/yr

What is actually happening? Recyclables ARE still being exported, albeit at lower prices Recycling gate fees ARE increasing but they remain lower than landfill gate fees due to landfill levies

Mid term – Circular Economy - “on-shore” reprocessing Accept the lower sale price of exporting to other Asian countries Cost $100-150/t Only available if Asian markets are able to absorb Operate MRFs to 99.5% quality Up to $400/t On-shore secondary reprocessing value-add to product Plastic most likely Est $250/t Cost benefit has not been done – limited markets for plastic pellets. Unlikely fibre mill will be “on-shored”. OR OR

Recycling supply chain

Analysis Number of potential actions for NZ Current fall due to National Sword Further fall of $100 in mixed plastics & mixed paper  Results didn’t change

Actions reviewed 1 Short-term gate fee variations MRF 2 Model contract development 3 Contamination bands 4 Commodity price risk-sharing arrangements 5 Improve quality of MRF output 6 Develop database of domestic re-processors Reprocessor 7 Investigate growth of on-shore fibre processing 8 Investigate growth of on-shore plastic processing 9 National waste data recording system Government 10 Positive procurement policy

Actions reviewed 11 Education to reduce contamination Household 12 Stop collection of plastic grades 3-7 13 National facility licence limits MRF 14 Regulate recyclability of packaging Government 15 Regulate recycled content of packaging

Actions reviewed 16 Additional source separation at kerbside (especially glass) Household 17 Reduce compaction ratios of collection vehicles 18 Relaxation of stockpile limits MRF 19 Developing consistent facility license limits

Commercial Strategy Planning Auditing Education Modelling Engineering Due diligence