China has thrown down the gauntlet on an environmental聽trade war聽of sorts. Plastic is the latest shot fired across the West鈥檚 bough in an economic trade war. Scrap metal is expected to be next. Some industry experts say the Chinese aren鈥檛 looking for a fight with the United States, in spite of their rhetoric. The actual target is聽EU聽trash bundled around cardboard and exported to聽China as recycled commodities.
China鈥檚聽Green Waste Initiative聽has been in effect since 2013. It blocks what China calls 鈥渄irtier plastics,鈥� known in the #recycling聽industry as types No. 3 鈥� 7聽from import.
These include bags, some bottles, mixed fibers and some types of packaging. In addition, several commercial products fall into these categories. Now the largest recycling importer in the world in upping the ante with聽Operation National Sword 2017聽which forbids the import of four classes, 24 kinds of solid wastes.
U.S.-based聽solid waste聽company officials told investment analysts they were concerned about the proposed ban but expected to survive. They have seen it before and their聽recyclables聽are sorted and clean.
The 800-Pound Gorilla
However, paper and plastic聽recycling is big business and the Silk Road runs through China. More than $5.6 billion in聽scrap commodities聽were exported from the United States to China in 2016, according to ISRI, a recycling trade association. U.S. firms exported 13.2 million tons of聽scrap paper聽and 1.4 million tons of聽scrap plastic聽to China last year.
When聽Europe聽and聽Japan聽are added to the mix, the giant importer collected more than 7.3 million tons of plastic scrap. China imported 27 million tons of paper more than a quarter of which was mixed paper.
China controls the market price, according to U.S. executives. 鈥淭hey have driven the market from, I’m going to round, 90 to 100, up to now 190,鈥澛燱aste Connections CEO Ronald J. Mittelstaedt聽said. 鈥淭he history is it will move back down at some point probably in the latter part of the fourth quarter, not necessarily to 100, but it could move down to 150.
鈥淎nd it goes through these cycles,鈥� he added. 鈥淲e have always said to all investors, that’s why we would聽prefer that a low percentage of our business be based on commodities, because it is a commodity, and it is going to ebb and flow.鈥�
Recycling鈥檚 Bottom Line
The nation鈥檚 largest solid waste companies grow by building and buying聽collection routes,聽transfer stations聽and聽landfills. The transfer stations are important in areas lacking landfills.
Their municipal solid waste is stored before being mailed, shipped or trained to landfills. The owner of the transfer station sets the price. The same is true of landfills. If one company owns all three, they鈥檙e in the money.
In recent years the giant companies added on聽energy servicesand聽recycling聽commodity prices moved into the equation. Methane is a dirty聽greenhouse gas聽created as waste in landfills decompose. Landfill owners are responsible for the gas. Owners can either flare it or clean the gas and sell it as a renewable fuel for electricity or natural gas. Only four waste companies are traded publicly.
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