Malaysia, Thailand and Vietnam waste imports crackdown

As Malaysia, Thailand and Vietnam all move to crack down on waste imports, Australia and many global markets are now being faced with a need to look to their own domestic processing capabilities. 

China’s ban on 24 categories of solid waste dramatically changed the landscape for the western recycling market.

Countries such as the US, UK and Australia have all had to respond to the change in markets after being given notice in the middle of last year that the ban would take hold in 2018. It follows previous customs import inspections through China’s Green Fence Program – an initial crackdown on scrap loads. The ban on contaminants with 0.5 per cent or more took effect on 1 January 2018. 

But since then some pockets of the recycling commodities trading market have merely turned to other countries such as Malaysia, Vietnam and Korea. In the UK, data from HM Revenue and Customs, a non-ministerial department responsible for tax collection, showed that UK plastic waste exports to Malaysia tripled in the four months following the ban. 

But as recent months have shown, even many of the replacement countries are cracking down. Earlier this year in August, the Vietnamese Government issued a statement highlighting the need to “prevent waste from entering Vietnam to keep the country from becoming a dumping site”. 

The government announced it would stop issuing new licences for waste imports in a bid to tighten illegal shipments.

Malaysia also tightened its restrictions by revoking the import licences of 114 factories that process plastic waste as they were requested by the country’s Housing and Local Government Minister Zuraida Kamaruddin to lift their environmental standards. 

Thailand in June issued an order prohibiting imports of electronic and plastic waste, with seven companies authorised for e-waste imports and 26 allowed to import plastic waste prohibited from making further imports. Imported items stored at ports have also had to go through further inspections. Local media reports indicate that the Thai Government will ban imports of e-waste and plastic waste, with plastic waste imports to be banned over the next two years and no specific date set for e-waste.  

As at June, about 33,565 tonnes (37,000 tons) of e-waste had been imported to Thailand this year and an additional 108,862 tonnes (120,000 tons) of plastic waste. In the US, scrap plastic exports dropped by 94 per cent after the ban took hold, according to US Government export figures. 

In a sign the issue has escalated further, the Malaysian Government’s Science, Technology and Environment and Climate Change minister Yeo Bee Yin indicated in a Fairfax Media report in late October it would be taking further action to solve its waste problem. Minister Yin told Fairfax Media the country would do its “very best to ensure that Malaysia not be the plastic rubbish bin of developed countries”.

“I am calling out to these countries and other countries too, we have a problem. We have to solve our own waste [problems] in our own backyard. It’s a message we wish to convey internationally. [And] it is not only plastic waste, but also e-waste,” Minister Yin told Fairfax Media.

Prior to freezing the import on plastic waste, from January to June, Fairfax reported that Malaysia had received 195 million kilograms from the US, 104 million kilograms from Japan, 95 million kilograms from the UK and 34 million kilograms from Australia. 

Plastic Forests has seen the impact of various
government bans on the local plastics industry.

To get a sense of the impact on the waste industry, Waste Management Review in late October spoke to the Australian Council of Recycling (ACOR) and NSW recyclers Plastic Forests.

Peter Schmigel, Chief Executive Officer of the Australian Council of Recycling, tells Waste Management Review that sovereign risk in the international recycling market is increasing. 

“It appears that basically they’ve (Malaysia) gone from tightening up their local restrictions and expectations around their own kind of recycling plants to now looking at the supply to those plants and setting up new kinds of provisions and restrictions on that, including Australia,” Peter says.

“It comes at a tough time. We’re already being confronted with the reality of China. If some of the alternatives to China are harder and harder to access that places more and more pressure on kerbside recycling.”

Peter says that ACOR is looking into the matter and its impact on members. 

“The overall trend is those global markets are getting tougher to access. This is just another indication of that and another reason why we have to get serious about domestic capability.”

He says that a number of members in response to China’s ban were diversifying their brokerage and export arrangements into other parts of Asia.

“Based on existing supply chains and historical commercial relationships some of them were finding that easier and some were finding that harder. Some of these organisations are more integrated into East Asia and some less.

“Right across the membership and industry people are saying to themselves we need to do something and we need to look to our stakeholders to do something with us to ensure that our reliance isn’t on these global markets.” 

Peter notes the businesses had always been diversified but many of these sovereign risks had affected commodity prices. 

“There’s no doubt that some of these things are in the negative territory (commodity prices). I would estimate in the last financial year, NSW alone, the (recycling) industry has probably been $40 million in deficit when it comes to kerbside recycling commodities. 

“A lot of these companies are smart and have actually budgeted for losses because they anticipated this cycle. But there’s only so many years that you can budget for a loss before you start to say should you be in this business or not be in this part of the business?” 

He says that most of the material being exported in Australia is paper, noting that sufficient technological capacity exists onshore for such processing, with some additional investment required to clean the material to go into paper mills.

MRA Consulting’s discussion paper released in April this year China National Sword: The Role of Federal Government indicates that China had been the world’s largest importer of recycled paper and plastics. It shows Australia exports about 60 per cent of its recovered fibre and 20 per cent of its recovered plastic to China.

“While other markets in Asia still show some demand, the oversupply of American, European and Australian materials has meant that prices paid for Australia’s recovered recyclables have crashed,” the report says.

MRA’s modelling identified that if the government was to intervene in the paper reprocessing market, it would be more cost-effective to upscale existing mills than to build new facilities. MRA estimated that the upgrade cost for fibre would be about $300 a tonne in expanded pulping capacity, landfill disposal and manual handling subject to economies of scale. It noted further detailed advice is required from the relevant companies to determine the extent to which they could absorb fibre into their systems. 

At $300 a tonne, a capital contribution from government of $30 million would achieve the direct diversion of 100,000 tonnes a year, or 200,000 tonnes per year with a 50 per cent co-contribution from the private sector. It showed materials recovery facilities earn most of their revenue stream through selling paper to international markets. 

In terms of plastics to meet the 40,000 tonnes exported to China, Australia would need to build two facilities or invest $8 to $14 million, according to the modelling.

Peter says that some overseas countries have responded effectively to market risk.

“In the United States, in the last year and a half, you’ve seen 18 new plastics remanufacturing plants developed. About half of those cases have involved government support and in other cases ironically Chinese investment money,” Peter says. 

“So there’s a good example where they’ve responded quickly. In Australia, I am aware of three projects and I am not aware that any of them have significant government support.”

He notes that France has also introduced lower tax brackets for businesses in 2019 producing recycled plastic over virgin materials – a policy which will help support the domestic market.  

David Hodge, Managing Director of Plastic Forests, has seen the impact of the various government bans on the local plastics industry. He says that he’s had discussions in recent months with Chinese recyclers that had been processing up to 5000 tonnes of plastic per month, but now moved a number of their factories to the UK and Korea. He says that Chinese recyclers had noted anecdotally, months prior to the Malaysian Government’s import licence revocation, that the nation would be closing its doors. India, the ninth largest importer of the world’s plastic waste, has also not issued any plastic licenses over the last three years, according to media reports. 

In recent months a variety of other international nations aside from China have begun to restrict waste imports into their countries.

“You can’t export plastic film easily into China, which has resulted in a shortage of recycled resin now in China. 

“This ban has driven prices and demand for recycled resin up globally, but more importantly it’s driven demand for resin from South East Asia up enormously because there’s much lower energy and labour costs than in the western world,” David says. 

David says that when it comes to recycling plastic film, Vietnam and Korea emerged as options, but Vietnam was one of the first to shut down due to the overwhelming of its ports’ capacity. Malaysia, he says, has tighter controls, with import licences suspended. 

The Chinese import ban and its impact on global waste trade research paper published in the journal Science Advances earlier this year showed an estimated 111 million tonnes of plastic waste will be displaced with the new Chinese policy by 2030. East Asia and Pacific countries have accounted for 75 per cent of global plastic waste imports since 1988, according to the research. OECD members contribute to 64 per cent of all exports, with the research suggesting that the trade of plastic waste occurs largely between OECD and East Asia and Pacific countries. 

David says Plastic Forests had received numerous requests from Chinese and Hong Kong businesses seeking recycled resin.

He adds that he’s had a number of meetings in the past few months with major Australian waste management companies that were all looking at local processing. 

David notes that local markets for HDPE resin exist, as do recycled PET resin, which is in particular high demand. He says that demand for recycled LDPE and LLDPE resin is weak, due to a shortage of value-adding manufacturers.

One of the key issues for resin, David says, is price competitiveness on the international market. 

“The problem is that the resin price is so cheap that by the time you pay Australian wages, electricity and environmental standards, unless you’re super efficient, there’s only a couple of businesses in Australia with the scale to supply resin to China. 

“In Australia, it’s hard enough being a manufacturer – let alone being a manufacturer of a commodity item. Unless there’s going to be tax, power or employment breaks, we are going to have to look at how we seriously address the local end markets for the hundreds of thousands of tonnes of plastic that are now stranded here with nowhere to go.”

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