Original by Dr. Steve Wong
December 5, 2023
Our factory in Hong Kong recently downsized its operations, moving to a smaller space with a rent rate of less than half. The workforce has been reduced from over ten employees to the current two, mainly focusing on the transloading of goods and providing logistic services. As for production operations, we have opted for outsourcing. Hong Kong needs more plastic waste to meet the feedstock requirements of recycling capacities. Firstly, Hong Kong needs a better waste treatment system for collecting and sorting plastics. If it relies on imports, the Hong Kong government restricts the importation of many types of plastic waste. Secondly, even if imports were possible, making it profitable is challenging, often resulting in losses. Over the past several years, our factory has been operating at a loss, hoping for a turnaround one day, as breaking the lease would incur compensation costs. We hope things improve, particularly as the factory’s production is part of the company’s profile. Consequently, we have been unable to decide on restructuring the factory to stem losses.
Based on my knowledge of industry peers, most have already closed down, and larger companies have closed even more rapidly. Some have transitioned from production to logistics, but due to the economic downturn, they couldn’t sustain and had to close eventually. Others have shifted from recycling general plastics to engineering plastics, with only one or two workers left, occasionally operating machines for processing. They mainly engage in the sorting of plastic waste.
The situation in Hong Kong is also found in Southeast Asia and is prevalent in Europe and the United States. I recently visited a small-scale plastic recycling plant in Europe that incurs an average monthly loss of two hundred thousand euros. Investors initially saw our industry as a circular economy with meaningful prospects, but all the capital was exhausted without seeing a future or a glimmer of hope. The primary issue is the high cost, reaching 600 euros per ton, to process locally collected household plastic waste into regrinds. The cost of making pelletized material is about 1000 euros per ton, while the selling price is only 60% to 70% of the cost. In the United States, the situation is similar, with many factories facing closure due to a lack of profitable plastic waste.
This situation is because prime materials are cheaper than recycled materials; hence, there is no incentive to use recycled materials. Many factories and brand owners purchase recycled pellets as part of their sustainable circular material branding but fail to materialize as promised. It is often just empty talk. Some argue that the economic downturn is one of the contributing factors. In conclusion, prime materials pose competition to the recycling industry, and the current low-priced prime materials are expected to remain for six years or more.