Synaptic Connections Newsletter 2019 Week#31
July 29, 2019 www.Synapticpackaging.com Image -Hawaii Mountains
Week#31 of 2019
Good morning! I hope you had a nice weekend. For those new to joining Synaptic Connections, this newsletter is intended to stimulate thought and dialogue on the topic of Sustainability, and to inspire competitive innovation to drive constructive change and economic growth. We are currently exploring the topic of ReThink Waste. This is the second part of our three-part Sustainability strategy that includes innovation with Natural/Renewable Materials, ReThink Waste, and Big Data Convergence.
Last week we took a look at contaminates and the challenges of making recycling economically sustainable. Today, we’re going to go a little deeper on the economics of recycling and the impacts of new global political policy. It is a sensitive topic, but very relevant and one that should continue to be in focus. We encourage fact based dialogue, and it is our belief that the solution to these challenges live in innovation.
The China National Sword -
Since the very beginning of the recycling movement, the largest buyer of the world’s recycled material has been China. This was anchored in constructive business practices to help the China economy grow in the absence of expensive capital investments to convert virgin materials. Initially, the recycle trade was old carton containers (paper), and over time grew to include plastics.
As we previously discussed, the materials collected in recycling get sorted into mono-material streams as much as possible. Those materials are then classified by quality standards based on the amount of contaminates. Those bales of material are then sold, typically $/lbs, based on the quality specifications of the lot. These business transactions are often handled through a rather complex network of brokers and dealers. As you can probably imagine, the process of buying/ selling recyclables has many gray zone for translation of what is trash and what is a valued commodity stream.
In 2017 the Chinese government put down a bright line called the China National Sword. In this policy the new rules laid out heavy restrictions (practically a full stop) to the import of recycled materials of specific quality grades and below. This restriction went into full effect in 2018. It is an understatement to say that the world was not properly prepared for this swift change. The economic trade of recycled materials became severely disrupted. The supply of collected recycled materials continued to flow from consumers - you still put your recycles to the curb. However, the demand and consumption of those recycled materials was suddenly, and drastically, reduced. With that, the economics of the recycling process became severely strained. As we learned supply and demand in college economics, when you have high supply and very low demand, the prices fall. The cost to collect and process curb-side recycling however continues to stayed flat. Everyone in the supply chain up-stream from the China buyers suddenly became economically distressed. That challenging economic situation continues to today.
The economic trade disruptions brought about by the 2018 China National Sword, resulted in the broker/ dealers then seeking markets in other developing economies. This redirecting of the recycled material flows became highly visible and raised global awareness. In May of 2019, 187 governments around the world joined together to make changes to the Basel Agreement to include plastic waste as a restricted substance for global trade. This sweeping legislation, along with the China National Sword has severely restricted the abilities for countries to divert waste, or recyclables, off-shore. Going forward - it increasingly looks like countries will need to be self-sufficient to process the waste and recyclables they produce. As the biggest consuming nation in the world, that puts a very acute challenge to our domestic industry for processing waste. Our Packaging industry is at the epicenter of this challenge.
It is a good day to be in the field of packaging. To address these challenges and build meaningful solutions, we need to think different. We need to innovate, and we need to change our behaviors as individuals. The strategy of ReThink Waste is very real and presents great business growth opportunities right now! How is your company responding? Talk with your colleagues and call us if you have questions or need help. Have a great week and enjoy the articles below!
The purpose of this newsletter is to stimulate innovative thoughts and constructive dialogue through the lens of sustainability. New subscribers can send an e-mail to the link below to sign-up.