Metallurgy / Chemicals / Rubber & Plastics

According to Huacheng Import and Export Data Observation, recently, the Ministry of Ecology and Environment and five other departments jointly issued a notice on the implementation of the National VI Emission Standards for automobiles, which determines that from July 1, 2023, the 6B phase of the national VI emission standards will be fully implemented nationwide, and the production, import, and sale of vehicles that do not meet the 6B phase of the national VI emission standards will be prohibited. For some of the actual driving pollutant emission tests (i.e. RDE tests), the results of which are "only monitored" and other light vehicle models in China VI B, a six-month sales transition period will be granted, and sales will be allowed until December 31, 2023. The industry believes that there may be a certain range of price cuts in the car market in the future, but it is difficult to reach the level of price cuts in March.

How will the introduction of this policy affect the recycled plastic market in China?

According to Huacheng Import and Export Data Observation, from the production side, with the drive of carbon reduction policies, in order to meet new emission standards, automobile lightweight has become the mainstream of the industry, and the application of plastics in automobiles is also increasing, which means it will benefit the recycled plastic market.

From the cost side, the trend of price reduction in the car market will drive the increase of car sales, and the number of used cars and scrapped cars flowing into the second-hand market will increase. If second-hand cars want to be resold, they will inevitably replace some of the interior and components, and eliminate the original plastic products, which means that the amount of recycled plastic will increase. The increase in the supply of recycled plastics is equivalent to an increase in supply, and from this perspective, the cost support of recycled plastics may weaken.

From the perspective of the consumer side, the weak sustainability of user demand is currently the main reason restricting the negative trend of the plastic and recycled plastic market. The release of the announcement on the implementation of the sixth national standard for light vehicles will still focus on digesting existing inventory in the early stages of implementation, and the sales increase caused by price reductions will inevitably offset the demand for automobiles in the future for a certain period of time. Therefore, it is still difficult to see a positive outlook on demand.

Overall, driven by carbon reduction policies, the lightweight and reduced design of automobiles has gradually become a development trend. According to the observation report of Huacheng Import and Export Data, the proportion of plastics and recycled plastics in the materials used for newly launched vehicles may show an upward trend since July 1, 2023. With the improvement of plastic recycling, the recycling of waste automotive plastics can not only save oil resources, but also help solve the problem of environmental pollution, reported the observation report of Huacheng Import and Export Data.

However, in April 2023, after operating in an expanding range for three consecutive months, the Purchasing Managers' Index of China's manufacturing industry returned to below the boom and bust line. Under the negative constraints of the overall environment, as well as the dual pressure of declining exports and weak domestic demand, the market's resilience is unlikely to have a trend reversal in the short term.

Therefore, the release of the announcement on the implementation of the sixth national standard for light vehicles, although the future impact on the relevant plastic market is considerable, the driving force for market demand in the short term is still weak, and the mentality of the industry is difficult to be optimistic. It is expected that recycled plastic enterprises will still actively seek transactions to digest inventory, and the pressure on shipments in the second quarter will increase. Huacheng Import and Export Data Observation Report.