Business philosophy – The outlook of the recycling Industry in Southeast Asia for 2024

Original by Dr. Steve Wong

January 8, 2024

Towards the end of 2023, I had conversations with several clients to discuss the market trends. They recycle general plastics, engineering plastics, high-performance engineering plastics and also do plastic compounding. We discussed the market prospects for recycled plastics, particularly the market situation in mainland China. These clients have manufacturing facilities in Southeast Asia to process waste plastics, and their leading sales destination is mainland China.

These experienced recyclers have weathered the industry’s challenges and transformations over the past few years, emerging as veteran players who have successfully survived. They possess some or all of the essential qualities to sustain their business until now. First and foremost, they have production technology and processes, unique sales channels, stable and competitive sources of raw materials, and efficient management with low production costs. In the country where they operate, they have access to local resources and channels for communication with the government and the necessary licenses for imports, environmental compliance, and other permits. These factors have enabled them to survive, but it does not guarantee their future sustainability.

Most of them sell their products to China and unanimously express that 2023 has been the worst year since their establishment. They all agree that the Chinese market is sluggish, with no demand, low prices, and a lack of market liquidity. One client, who produces modified nylon specifically for the construction industry, mentioned that they used to sell at 12,000 RMB per ton, but now it is only 6,500 RMB. Sales volume is only a few tons per transaction, unlike before when they could sell entire containers. Under the low selling prices, considering production costs and the purchase price of waste materials, each ton incurs a minimum loss of 3,000 RMB. The situation is even worse for general plastics; for example, our company produces recycled material from bottle caps, which used to sell for over 5,000 RMB per ton, but now we need help finding customers even if we offer at 3,000 to 4,000 RMB. We had considered year-end promotions to clear inventory; however, our customers have already disappeared, having closed businesses early for the Chinese New Year and will only reopen after the Lantern Festival two weeks after the Chinese New Year.

With over a month remaining until the Chinese New Year and another two weeks until the Lantern Festival, clients are not expecting any business during these two months. They unanimously believe that business may not necessarily improve after the holidays. The main challenge lies in China’s prime material production capacity exceeding two hundred million tons. On the other hand, India has a larger population than China, but it only has one-tenth of China’s plastic production capacity, barely reaching that of twenty million tons. This is a significant factor that negatively impacts the recycling industry.

For the industry to have hope, in addition to economic and other contributing factors, there needs to be widespread mandatory use of recycled materials. Secondly, the industry must explore other markets in Southeast Asia, Europe, and the Americas to alleviate the current challenges.

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