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Western trash no longer China’s treasure

The number one waste importer in the world unexpectedly decided to ban “foreign garbage”. An upended global recycling industry has to think fast.

Thousands of containers congesting ports, and the plastic bottles they carry – carefully separated by households for recycling – incinerated along with tonnes of other waste. This is the scenario Europe could be facing in the coming months. Why? Because China has decided to refuse two dozen kinds of waste as of March 2018. It’s a real wake-up call for recyclers all over the world.

“We knew that China was going to pass new laws on the matter, but this ban announced all of a sudden to the WTO in July of 2017 took everyone by surprise,” says Simon Ellin, CEO of The Recycling Association. “This decision will have serious consequences for the UK and Europe. We are going to have a waste crisis.” This is also the case in the US, where China’s ban will have a “devastating impact” according to Robin Wiener, president of the Institute of Scrap Recycling Industries (ISRI).

For years, China has been buying waste in mass from the West in order to recycle it, thereby acquiring raw materials for its factories. The EU sold 8.2 million tonnes of cardboard and 2.6 million tonnes of plastic to the Middle Kingdom in 2015. “If China is no longer an option, tonnage is set to plummet,” highlights Pascal Genneviève, president of the paper recycling branch of FEDEREC, the French federation for recycling companies.

Manufacturers are desperate. Suez, for one, sells 50,000 tonnes of waste to China every year. Like its peers, the Paris-based company will have to find other solutions, but they certainly won’t be easy in the current climate. “Europe doesn’t have the recycling capacity to absorb the remaining amounts it won’t be able to export,” explains Genneviève. We are soliciting other foreign markets such as Turkey, India and Indonesia, but their infrastructure and needs cannot begin to offset China’s decision.”


“I think China’s decision is perfectly reasonable. European companies have had a bad habit of sending their poorly separated plastic to them for years”

Werner Annaert, director of Go4Circle


But what are the consequences? For reusable waste, prices are plummeting and quantities are piling up in the Western world without buyers. “The situation is critical,” says Simon Ellin. “Part of the waste will have to be incinerated to reduce the excessive stock,” he maintains. This may seem counter-intuitive in an era when recycling is believed to be a means of preserving the planet’s resources. “It’s a shame – we are taking a huge step backwards,” claims Genneviève. “By pulling out on waste imports, China is actually leaving behind significant quantities of waste that come mainly from the products it exports! In a way, it made sense to return these resources back to their origin for recycling.”

But now that China is worried about protecting its environment, it no longer wants to be the world’s dumping ground or the West’s answer for any and everything it doesn’t want. The reason China is banning foreign garbage is allegedly due to abuse by certain service providers. The government explained in its filing with the WTO “that large amounts of dirty wastes or even hazardous wastes are mixed” in the rubbish being shipped to China. Frankly, western recyclers are going to have to clean up their garbage if they want China to change its tune.

“I think China’s decision is perfectly reasonable. European companies have had a bad habit of sending their poorly separated plastic to them for years. I’ve always supported finding solutions here,” says Werner Annaert, director of Go4Circle, Belgian Federation of Enterprises of the Circular Economy. “We can look at China’s decision as a problem because it’s going to make things difficult for one or two years, but I prefer to see it as an opportunity to improve the European recycling channel. I think there are a lot of companies like Van Werven, Suez and Veolia that have understood the importance of expanding their recycling capacities here.”

Just three months after the notice from China, in October of 2017, Veolia CEO Antoine Frérot announced an ambitious programme. The company – number one worldwide in water and waste management – plans on boosting its plastic recycling revenue fivefold to €1 billion by 2025. The bulk of the initiative (worth €600 million) will take place in continental Europe, where Veolia will increase production capacity at its three pre-existing sites and open two new plants.


“The ban is history in the making. Europe will be impelled to increase their local processing capacities”

Simon Ellin, CEO of The Recycling Association


During the same period, the Suez Group announced in November that it has signed a joint-venture agreement with LyondellBasell to manufacture high-quality recycled plastics at the Sittard-Geleen site in the Netherlands.

According to Werner Annaert this is good news, but now the challenge will be to make the factories profitable. “The current demand for recycled plastic in Europe is too low. Companies that manufacture consumer goods prefer new packaging because the currently weak oil prices make it cheaper,” he points out.

But there are a few good initiatives out there; Renault’s new cars and Coca-Cola’s plastic bottles, for example, are made out of 36% and 34% recycled materials, respectively. “Some companies are making efforts, but it’s not enough,” Annaert argues. “We don’t have time to wait 50 years. Lawmakers need to intervene to increase the use of recycled materials by manufacturers. But things aren’t headed in that direction. Everyone’s talking about the circular economy, and the European Commission even set ambitious waste sorting goals in its most recent report, but it has no plans whatsoever to support the use of recycled materials.”

On the bright side, China’s brutal ban could whip Western governments into shape. Logically, it wouldn’t make sense to tell their citizens to make more effort to separate plastics and cardboard when these materials may end up being incinerated anyway for lack of viable recycling avenues. “In that respect, we see the ban as history in the making,” asserts Simon Ellin, CEO of The Recycling Association. “European recycling companies will be impelled to increase their local processing capacities, the sector will have to change the way it uses plastic and authorities will have to find a way to promote the use of recycled materials. If that happens, we will definitely see China’s decision as a good thing in 10 years.”


In 2015, China imported nearly 50 million tonnes of waste of all kinds, mainly from the US, Europe and Japan. But that figure is about to fall through the floor. In July 2017, the Chinese government announced to the World Trade Organization (WTO) that it planned to ban 24 types of recyclable waste which were regularly imported as of then. The problem is “primary recycling”. There are two stages in the recycling process. In the first stage, waste is separated and recovered or discarded. In the second stage, materials are washed and crushed. Additionally, plastics are melted down. China’s ban involves mostly waste materials that have only been through the first stage. The ban will enter into force on 1 March 2018, and will include eight kinds of plastic, such as PET and PVC, as well as cardboard and textiles like wool and cotton. For waste that has been through stage two, the Chinese government has set very strict rules: only batches of plastic, cardboard and papers with impurities weighing less than 0.5% of the total weight will be accepted, whereas the European standard for paper is 1.5%. “The thresholds China set were not as harsh as we feared,” the Bureau of International Recycling emphasises, “but they are a far cry from what industry players consider to be feasible or acceptable.”

A look at the key players in waste management


Leader of the pack

  • Headquarter: PARIS (FR)
  • Revenues: (2016) €24.39 BN
  • Effectives: 163'000

Veolia is the world leader in water and waste management and is looking to take advantage of growth in markets linked to recycling. The company processed 45 million tonnes of waste worldwide in 2016 (all categories combined) and wants to boost its revenue from recycled plastics fivefold by 2025. Veolia shares rose by over 35% in 2017. Analysts at Goldman Sachs lowered their recommendation mid- January from “buy” to “hold”, saying they felt that the stock’s value had reached its limit.


The other French giant

  • Headquarter: PARIS (FR)
  • Revenues: (2016) €15.32 BN
  • Effectives: 83'900

Suez is number two worldwide in water and waste management, behind Veolia. The company wants to up its processing of plastic waste to 600,000 tonnes by 2020, versus 400,000 currently. The key for Suez will be to take advantage of growing demand for recycled plastics. Each year, European countries produce roughly 50 million tonnes of plastic waste, only 25% of which is recycled in Europe. Suez is expanding its operations in metals recycling and announced in January that it will build a plant in Ghent’s port area (Belgium) for processing up to 12,000 tonnes of non-ferrous metals (aluminium, copper, lead, etc.). After falling in recent months, the stock could pick up again.


China’s rising star

  • Headquarter: SHENZHEN (CN)
  • Revenues: (2016) ¥7.782 BN
  • Effectives: 6'000

After launching in 2001, Gem Co is on its way to becoming a major player in the recycling industry. The company has invested more than ¥10 billion over the past decade to build 16 recycling plants where over three million tonnes of waste are processed each year. And Gem Co does not intend to stop there. It wants to become the biggest recycling company in China – and eventually the biggest in the world!


A leader in Europe

  • Headquarter: MILTON KEYNES (UK)
  • Revenues: (2017) £779 M
  • Effectives: 7'000

Renewi – unlike heavyweights such as Veolia – has focused its operations solely on recycling, and its business is mainly concentrated in Europe. The company recycled over 14 million tonnes of waste in 2017 (plastic, paper, glass, etc.), making it one of Europe’s leading recyclers. Analysts recommend holding on to the stock, as its valuation appears to be good.