A Chinese ban on rubbish imports is shaking up the global junk trade

ON THE FIRST day of 2018, a huge shock hit the global recycling industry. China, which is the world’s biggest scrap importer, stopped accepting virtually any recycled plastic and unsorted scrap paper from abroad, and severely curbed imports of cardboard. The amount of recovered material that America, the world’s biggest exporter of scrap, sent to China was 3m tonnes less than in the first half of 2018 than a year earlier, a drop of 38%. China plans to phase in bans on most other rubbish, of which it imports $24bn-worth a year. At recycling plants across the Western world, bales of mixed paper and polymers now languish in forecourts awaiting offers.

China used to import a significant portion of the world’s scrap. Suddenly, revenues from selling mixed waste to China which waste-management companies used to cross-subsidise collection, dried up, hitting margins for American waste-management companies.

The Chinese ban removed the third leg of the “collect, sort, export” system on which the West had long relied. Improvements to automation could in time sort some of the surplus rubbish no longer sailing to China, but they have been incremental. High labour costs make hiring enough human sorters to deal with Western waste volumes prohibitively expensive. Because they, too, cannot rely on cheap labour, Western reprocessing firms need cleaner inputs than their Chinese counterparts, so shun a lot of what MRFs currently spit out. Even if they did not, their capacity is insufficient to deal with the glut. Incinerators and landfill will take some of the surplus waste. But the capacity of both is limited. Building a new incinerator costs upwards of $200m. Landfills are being gradually regulated out of existence, with many places, including California and the European Union, mandating cuts to the volume of waste being landfilled.

The prohibition is not the only way in which China is affecting the scrap trade. The trade spat provoked by American tariffs on imported steel and aluminium (which exempt scrap) has already prompted trading partners to impose retaliatory levies (including on recovered metals). If the current tiffs escalate into a full-blown trade war, scrap—$109bn of which crosses borders each year—would suffer along with many other products.

The ban is likely to prove more of a long-term headache than the trade spat. It is part of a broader clampdown on polluting industries championed by China’s all-powerful president, Xi Jinping. It aims to banish “solid waste with major environmental hazards” and thus prevent “intense public reaction”. That will deprive many countries of the destination of choice for their waste. But, though it has disrupted the whole global scrap trade, many experts are already seeing a silver lining. Activists and advocates of “circularity” say that it is forcing rich countries to rethink what they do with their waste now that a chunk of it can no longer be swept away overseas. It is in that way forcing longer-term change.

Slow boat or junk?

China came to dominate the global rubbish trade in much the same way it has come to dominate all areas of trade. It has an insatiable appetite for resources, including second-hand ones, to feed its booming economy. China’s $24bn-worth of recycled-materials imports are a quarter of the total traded globally, and up from $12bn a decade earlier. On the eve of the ban, more than half of the world’s used plastic, paper and cardboard—around 32m tonnes each year in all—sailed to China, chiefly from the rich world. Plenty of metal scrap went there too, especially copper to wire cities or manufacture electronics.

It was also helped by the nature of its trade flows. Bulky scrap shipments to Chinese ports were only affordable thanks to “backhauling”. Container vessels had crossed the Pacific laden with Chinese products for North American markets. Rather than let them sail back empty, shipping companies ferried scrap for the return leg at rock-bottom prices. Around half of all westbound trans-Pacific container traffic was rubbish for recycling.

Because of the ban, shipping companies, whose low margins were offset by massive volumes, now risk losing the backhaul trade. Drewry, a shipping consultancy, estimates that the ban could jeopardise 4m-5m containers sailing west across the Pacific annually. That is equivalent to 3% of worldwide container traffic. Port authorities from New York to California are rewriting their long-term strategies to take account of the disruption.

Even China is not immune from the impact. Its operation, dubbed “National Sword”, looks distinctly double-edged, striking at a thriving domestic reprocessing industry—and manufacturing more broadly. Western scrap-industry veterans express astonishment at the Chinese authorities’ willingness to sacrifice the needs of its industrial base, parts of which rely heavily on reprocessed materials. China recycled 85% of the 7m tonnes of plastic it imported in 2016 (the rest went to landfills or was incinerated). Many Chinese reprocessing firms are now fearful about the future.

Some also see the benefits. Liu Jianguo, an expert on waste management at Tsinghua University in Beijing, calls the ban “good news for domestic waste recycling”, for the same reason that it will help Western countries. It will force the Chinese industry to change, adapt and be less reliant on imported foreign trash (though there is a danger in the short run that some Chinese reprocessors, starved suddenly of imported inputs, could fold, resulting in the dumping or burning of even more rubbish than it does already).

The China ban has, however, given a boost to one group of Western entrepreneurs. In 2017 Rashad Abbasov co-founded Scrapo. It is an online marketplace that matches buyers and sellers of second-hand polymers in different countries. Since its inauguration in November, suppliers have posted offers to sell 1.5m tonnes of recovered plastic on Scrapo. It now has more than 10,000 users, 70% outside America. Just 6% are from traditional plastic-waste importers like China, Indonesia or Vietnam.

Other parts of the trade are also moving online. Scrap Monster, a platform for trading recovered metal, has 50,000 registered users. MerQbiz is a digital platform to streamline the $30bn annual reused-paper market. Another forum, the Materials Marketplace, allows American manufacturers to exchange factory by-products and leftovers more easily. State-level versions exist in Ohio and Tennessee. Two years ago the project spawned an offshoot in Turkey. Another is under development in Vietnam. Advocates of “circularity” welcome such initiatives, which aim to wring the most out of available resources. The Chinese ban has done them all a favour by enabling recovered materials to flow to the highest bidder—and so the highest-value use. But it has also exposed the shortcomings of the recycling industry.