Concerns are growing that the coronavirus in China could disrupt markets for waste paper and plastics.
Waste paper sector experts have told letsrecycle.com that the market faces disruptions on a number of fronts including shipping, staffing difficulties at banks and in port administrations, as well as the virus posing an overall threat to the global economy.
London-based Capital Economics said today: “The extensive efforts to contain the coronavirus in China and Emerging Asia have set back a recovery in the global economy that seemed to be stirring at the start of this year. Global growth is now likely to slow further in the first quarter of this year, taking it to its weakest rate since the global financial crisis.”
The economics consultancy added: “Assuming the spread of the virus slows and containment measures are lifted, activity should rebound in Q2. But the recovery, when it does come, will be both slow and uneven. The US will lead the way, but the euro-zone and China will remain relatively weak.”
The staffing problems in China are having an impact on the ground, with some staff not in offices and others working from home. This is said to cause severe problems in terms of the paperwork needed to organise all aspects of the shipping and sales process, because Beijing has instituted a “stay at home” policy with an extension of the Lunar New Year holidays to 9 February.
While China is currently not buying huge amounts of waste paper from the UK – often preferring American used cardboard – disruption of the Chinese market is likely to see used cardboard and other grades from the US going into other markets, such as Indonesia and India, which are crucial to the UK.
China proposes to ban waste paper imports at the end of 2020 and is rapidly trying to recycled more domestic material. In the short term, one perverse consequence of the virus could be that domestic collections are reduced and that mills might even need more overseas tonnages, although this point remains open to debate.
Shipping experts Alphaliner said this week that the coronavirus could dampen growth in the container box market by at least 0.7% this year.
The full impact of the Chinese coronavirus outbreak on container volumes will not be fully measurable until ports announce their throughput numbers for the first quarter, but data collected on weekly container vessel calls at key Chinese ports already shows a reduction of more than 20% since 20 January.
Alphaliner reported: “On top of service reductions announced earlier, carriers reacted to the situation with additional void sailings in February, thus accounting for reduced cargo volumes. Since these extended void sailing programs on long haul services are slated to continue until mid-March, any cargo volume recovery could be negatively affected, even after the end of the holidays.”
Carriers are also facing disruption because of ships needing to have new scrubbers fitted to clean-up emissions under new shipping rules, but shipyards supposed to be doing the work are short of labour because of the coronavirus impact.
There are concerns that consequently the shipping of containers of waste paper and plastics might be disrupted to South East Asia, and, with fewer ships available, shipping companies are said to be trying to push up prices by as much as $400 per container.
Commenting on the potential impact of the virus, Simon Ellin, chief executive of the Recycling Association, said: “Coronavirus is adding to the huge uncertainty in the marketplace.
It looks inevitable that it will have a negative impact.”
“At the moment the recovered paper market is in such turmoil it is difficult to see the actual impact but it looks inevitable that it will have a negative impact which we don’t need at such a time of uncertainty.”
Dr Ellin added: “The situation also adds to what we have been shouting and screaming about, in that we need investment in UK reprocessing. We are so at the behest of world markets which are becoming so difficult, if we are going to deliver the aims of the Resources and Waste Strategy, recovering more plastics and paper, where is it all going to go? The whole thing becomes irrelevant if you don’t have markets for materials.”