Many Japanese companies that produce materials recycled from used plastic bottles are on the verge of bankruptcy as more and more of their raw material ends up in China and may soon be finding their way to India as well.
One-third of firms using recycled plastic are believed to be in danger of going bust this year, due to the shortage of bottles, yet any significant contraction of the industry would threaten the development of environmentally friendly technologies in Japan, analysts say.
“We need more bottles,” said Eiichi Furusawa, president of Japantech Co., which recycles polyethylene terephthalate bottles for soft drinks as he points to a half-empty lot at the company’s main factory in Kanuma, Tochigi Prefecture.
Japantech is expected to secure only about 7,000 tons of plastic bottles for the business year that started in April, although its factory is capable of processing 20,000 tons. In the previous year, it collected about 17,000 tons.
Many of the 58 other licensed recyclers are seeing a dip in factory operation rates.
A major industry group of 41 recycling companies projects their average factory operation rate will sink to 36 percent in fiscal 2006 from 55 percent in fiscal 2005.
“If no measures are taken, about 20 recyclers could go bust later this year,” Furusawa said.
Kimiharu Kanakogi, who heads the industry group, said two of the 59 licensed firms have already filed for court protection from creditors and more may follow.
Kanakogi heads Nishi-Nippon PET-Bottle Recycle Co., a licensed recycler. These firms are permitted to reprocess plastic bottles under a special program designated in the Law for Promotion of Sorted Collection and Recycling of Containers and Packaging.
Under the program, municipalities collect used plastic bottles from households and deliver all or part of them to the Japan Containers and Packaging Recycling Association for free. The association gives the bottles to recyclers that have offered the highest bidding prices in a tender.
Recycling firms earn money by selling material made from the bottles to automakers and other manufacturers.
The program was launched in 1997 as a way to reprocess used plastic bottles domestically. Recyclers have since boosted reprocessing capacity, believing the number of bottles coming from municipalities would keep growing.
Until fiscal 2005, the association paid reprocessing fees to recyclers that received bottles. But now licensed recyclers are starting to pay the association to collect used bottles because demand exceeds supply.
In recent years, financially strapped municipalities have bypassed the association and sell used bottles to traders for cash.
Industry watchers point out that most of the bottles municipalities have sold outside the program are traded by other brokers and shipped to China, although no accurate figures are available.
The Council for PET Bottle Recycling of Japan estimates that 38 percent of discarded plastic bottles in Japan, about 195,000 tons, was exported to China, mostly through Hong Kong, in fiscal 2004.
Combined exports of used plastic bottles to China and Hong Kong are expected to continue to surge this year.
Exports of certain plastics, including those made from used bottles, marked a 31 percent year-on-year increase to 186,725 tons in the January-April period this year, according to World Trade Atlas of the United States.
Chinese manufacturers reprocess these bottles into various plastic products, including pellets for mattresses and stuffed animals, as well as low-priced sundry goods being shipped back to Japan.
Chinese demand for used bottles is likely to keep rising for the time being as using recycled materials to produce plastic goods is cheaper in light of soaring oil prices, said Atsushi Terazono, a section chief at the Research Center for Material Cycles and Waste Management under the National Institute for Environmental Studies in Tsukuba, Ibaraki Prefecture.
“China is scrambling to buy materials from all over the world to make industrial products,” Terazono said, adding its demand for Japanese plastic bottles is strong as their quality is good, while transport costs from Japan are low.
But he suggested China may turn to traders from other countries that offer used bottles at cheaper prices than Japanese traders.
Even if that happens, Japanese recyclers may not be able to recover, industry watchers say, because traders and brokers in Japan may find new buyers, possibly in India.
“India is hungry for materials amid its economic growth,” said Makoto Ando of environment think tank Eco Business Network in Tokyo.
Masayoshi Ishiwata, an industrial waste monitor at the Chiba Prefectural Government, said the Chinese market for used plastic bottles is nearing saturation and Indian businesses are trying to secure bottles from Japan. Ishiwata has written books about illegal dumping of industrial waste and recycling, including the used material trade in Asia.
In late May, the industry group of recycling firms asked the central government to take measures to ensure there was an adequate supply of used bottles in Japan.
But the government responded coolly to the request.
Yasuhiro Fujii, who heads the Environment Ministry’s Office of Recycling Promotion, said the government’s options are limited because the private sector heads the recycling process.
“We are not supposed to interfere in market activities by, for instance, controlling exports,” Fujii said.
But Ishiwata is concerned that businesses with outstanding recycling technologies will withdraw from the market if used plastic bottles continue to be in short supply.
Japanese recyclers are also calling on the central government to establish a system whereby municipalities provide them with more used plastic bottles.
Nearly half of all used bottles come from households and are collected by municipalities. In fiscal 2005, collection by cities and towns accounted for 48 percent of the total, amounting to 509,000 tons, according to the recycling association.
The municipalities provided 84 percent of the bottles they collected to recyclers in fiscal 2004, but the share fell to 73 percent the following year, the association said.
Terazono of the research center expects the trend to continue, saying, “Municipalities want to sell more bottles” to traders.
Ishiwata of Chiba wants the system changed so more traders are involved in domestic distribution, helping recyclers buy bottles at a steady rate.
“Currently, Japan’s recyclers directly bid in tenders invited by bottle providers. This is a very unstable system,” he said.
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