1. plastics industry TRENDS
GRC 26th Annual Conference
September 18, 2017
Zoeb Abdulla
Plus Materials

2. Agenda
Impact of Oil Prices China Impact Scrap Plastics Ban Industry Impact Economic Outlook and Trends Q/A

3. Statistics
As of 2016…
Approximately one-third of all plastic scrap from the United States was exported to be recycled, with China being the largest receiving market
1.42 million tons (3.1 billion pounds) of scrap plastics is exported out of the United States annually
$495 million worth of plastic scrap was exported from the United States to China
“Waste and Scrap” is a category that consists mainly of waste paper and plastic products
Waste and Scrap was Georgia’s 5th largest export to China at $145 million (2016), just behind agricultural products

4. Impact of Oil Prices on Plastics
Starting in late 2014, the price of oil dropped
Prices went from over $100 per barrel down to $25 per barrel (2016), before settle at current levels
The drop caused the market for recyclable materials to freeze, and prices to dramatically decrease
Results: the prices for scrap plastics have consistently trended downwards

5. Impact of China on the Market
China was the largest market for scrap materials outside of the United States
Green Fence of 2014 was an effort to improve the quality of scrap materials imported to China
Green Fence forced recyclers in the United States and other plastic waste surplus nations to clean up their scrap (reduce percentage of waste in each of the shipments)
While there are numerous other markets which recycle lower quality plastic materials, the impact of China is undeniable, due to their vast purchasing power and efficient border controls

6. China National Sword
National Sword of 2017 was implanted in February of 2017
Reduction of contaminates and moisture in all materials (paper, plastic, metal, and all other forms of scrap) was emphasized
National Sword requires that all shipments into China mainland are individually checked
Within 3 weeks of implementation (February 2017), over 20,000 tons of materials were seized, or rejected and returned to the origin
MOISTURE! FOOD! GREASE! OIL!

7. China National Sword

8. Why Ban Scrap Plastics?
Some of the main goals of China’s import crackdown:
Smuggling
Illicit activities involving recyclable and waste materials
Protect public health and environment by intercepting foreign waste at ports of entry
Heighten supervision of parts
Spread awareness about corruption
Increase penalties for smugglers
By cracking down on the importation of foreign waste, China hopes to provide a cleaner and safer environment to its citizens

9. Why ban scrap plastics?
The enforcement action, which has also been translated as “Sharp Sword at the Gates of the Country 2017,” was launched due to public pressure on the problems posed by illegal waste imports into China
Despite the strict enforcement, recycling is still being encouraged
Although the campaign will certainly increase costs for legitimate recycling companies, it will also benefit them by removing the unfair advantage gained by illegal operators
The future trend will be to restrict imports of solid waste but allow non-polluting scraps such as recycled regrinds and pellets which can be used directly for production

10. Further Actions
Green Fence and National Sword in China were initiatives to improve the quality of scrap being imported, but further action is expected
In mid-July, China informed the World Trade Organization (WTO) that several grades of post-consumer plastics would be permanently banned at the end of 2017
China’s WTO filing said the import ban on plastics would apply to products with HS codes , , , and
Post-Industrial and Post-Commercial scrap is not currently being considered for the ban, and will not be included in this going forward
Current market slowdown is a result of exporters being risk averse, rather than restrictions by the government

11. Impact to Industry
Materials moving to China (mainland) and Hong Kong have decreased significantly
Inventories are growing as prices drop and the market corrects to accommodate for reduced demand
While domestic outlets remain relatively unimpacted, materials which were being exported are either being shifted to alternate countries
Quality is the key factor which will determine if materials can be exported. Food, moisture and grease contamination in post-consumer material remain the largest obstacle in the recycling process.

12. Short Term Outlook
The market will be heavily impacted for the next 6-9 months, as China implements its ban on post-consumer plastics
Chinese buyers will continue to exercise caution, although some grades of post- industrial plastics will not be banned, and continue to be imported (production scrap)
Pricing for all plastic scrap grades has dropped significantly over the past months, and will remain low as market corrects for the reduced demand of post- consumer materials
This is a fluid situation and new details on the ban are being revealed as we approach the deadline of December 31, 2017
Post-industrial and post-commercial materials will have some impact on pricing, but should recover to some degree

13. Long Term Outlook
Post-Consumer collection and sorting facilities will have to improve the quality of their materials
Contaminates of food, grease, oil and excessive moisture will be red flags for most end-users
Post-consumer grade plastics will recover as processors of these materials relocate their facilities to countries with lax import regulations
Post-industrial and post-commercial materials are not technically restricted in China, or any other countries

14. Long Term Impact
Recyclers, collectors and municipal waste sorting facilities will have to improve the quality of their end products
Post-consumer grade plastics will recover as processors of these materials relocate their facilities to countries with more lenient customs requirements
This transition will take time (6 months – 2 years)
Pricing for post-industrial and post-commercial materials will recover relatively quickly, as China customs requirements become clear, and other markets develop for these materials (already happening)

15. CONTACT: Zoeb Abdulla Zoeb.Abdulla@PLUSMaterials.com
Questions
CONTACT:
Zoeb Abdulla