China facing permanent demand destruction?

An interesting debate is emerging over the growth of the recycled polymer market in China. Sinodata, the Beijing-based consultancy, estimates that 5.8m tonnes of all types of recycled polymers were imported into China last year, an 800,000 tonnes increase over 2006. Five years ago, recycled imports totalled less than 500,000 tonnes.
With domestic recycling also estimated at 7-8m tonnes/year by Sinodata, this is creating a big dent in virgin resin demand. Demand growth for polyolefins is expected to be as low as 5% this year as against more than 10% in 2002-04.
If your glass is half full you can interpret the rise in recycling as a reflection of high virgin resin prices, meaning that once resin prices fall so will recycling.
But what about China’s perrenial push for resource efficiency, given further official backing by Premier Wen Jiabao in a speech this week?What about the margin pressure on the downstreamers?
And, if you’ve found a cheaper way of doing things, why go back to more expensive raw material?

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