Shutdowns hit China PE, PP downstream units amid ‘green’ drive

SINGAPORE (ICIS)–China has recently ordered the shutdowns of some plants that are direct downstream of the polyolefins industry, as part of the government’s nationwide campaign to promote environment-friendly or “green” manufacturing conditions.

There are concerns that demand for polyethylene (PE) and polypropylene (PP) will be hit, particularly the consumption of high density polyethylene (HDPE).

In Juxian County in China’s eastern province of Shandong, hundreds of downstream plants were shut in late July, dampening demand for polyolefins, according to east China-based traders.

Among the producers affected was Shandong Huachang New Materials Company, a leading plastics maker with more than 100 film blowing machines and buys up to 1,000 tonnes of HDPE films on a monthly basis.

China’s Ministry of Environmental Protection ordered the company on 21 July to halt operations as it was found to be illegally discharging wastes from production.

HDPE film is most vulnerable among polyolefins since it is combined with recycled materials to produce end-products such as garbage bags and shopping plastic bags; compared with low density PE (LDPE), linear low density PE (LLDPE) – which are used in food packaging and cast polypropylene (CPP).

China’s HDPE film industry is concentrated in the coastal regions – Juxian County in Zhirao, Weifang, Qingdao and Xiongxian county in Hebei are major production bases in the north; and in Jiangsu and Shanghai in the east.

The recent developments, however, have yet to affect domestic east China HDPE prices, which increased by an average of Chinese yuan (CNY) 50/tonne ($7/tonne) from last week to CNY9,600-10,000/tonne on 3 August.

The Chinese government’s environmental protection campaign has been sweeping the country since the Paris agreement on climate change took effect in November 2016.

China has launched strict inspections of its manufacturing facilities that were leading to either shutdowns or reduced production at factories across the country.

Paper making, packaging and printing enterprises are considered the major targets of the campaign.

But HDPE film products, as well as food packaging film and CPP, are mostly associated with colour printing, which is deemed as a major environment polluter.

Downstream plastics producers using recycled materials, which can easily generate volatile toxic gas are also the main targets of the ongoing inspections, industry sources said.

The Chinese authorities are now on the fourth round of inspections under the campaign, and will cover the provinces of Sichuan, Jilin, Zhejiang, Shandong, Hainan, Tibet, Qinghai and Xinjiang.

The third round of inspections covered the provinces of Tianjin, Shanxi ,Liaoning, Anhui, Fujian,Hunan and Guzhou; while the second round spanned Beijing ,Shanghai, Hubei , Guangdong ,Chongqing, Shanxi ,Gansu; and the first round was conducted in Inner Mongolia, Heilongjiang, Jiangsu, Jiangxi ,Henan, Guangxi, Yun nan and Ningxia.

The inspections are expected to be completed in March next year, industry sources said.

These series of checks are expected to weed out small-sized producers, which may not have means to make investments to make their production process more environment friendly, they said.

Companies will have to invest in a volatile organic compounds (VOCs) treatment device, the lack of which among most plastics processing plants caused large-scale shutdowns when the environmental inspections were carried out, a source at Chinese petrochemical giant Sinopec said.

VOCs are toxic chemicals released in the process of combining additives with plastics at high temperatures. The additives enhance the features of plastics products, like transparency, as well as provide them with anti-ageing, anti-static properties, among others.

Furthering its “green” campaign, China has formally informed the World Trade Organisation (WTO) in July of its plan to ban imports of waste plastics, possibly by the end of the year.

Industry sources said that in the long run, the whole plastic industry in China stands to benefit from the “green” drive as it pushes for a more integrated operations among producers, and any incremental production costs will be subsequently passed on to prices of finished products.

Focus article by Angie Li

($1 = CNY6.71)

Pictured above: Chimneys at factories in Lanzhou City in China. (Source: Imaginechina/REX/Shutterstock)

ICN