Dive Brief:

• China has launched a new campaign, loosely translated as "National Sword 2017," that has led to the confiscation of 22,000 tons of imported material so far, as reported by Resource Recycling. In addition to plastics, metals and electronics, this effort is also targeting drug and gun smuggling operations.
• This campaign aims to limit the amount of plastic and other material going to unregulated facilities without proper pollution controls within China. Some facilities have already been shut down and shipments have been sent back to their country of origin.
• According to the China Scrap Plastics Association (CSPA), the country's General Administration of Customs has made 90 arrests and shut down 15 smuggling operations in a coordinated effort that involved hundreds of police officers. 

Dive Insight:

The CSPA estimates that the new practice of inspecting all imports could potentially quadruple lead times and increase shipping costs for all involved. National Sword is expected to continue for a year, though some industry professionals believe that these standards could become the new baseline going forward.

While these moves may increase costs in the short-term, they are expected to help the Chinese companies that are abiding by regulations operate on a more level playing field. As more modern processing facilities begin to open in the region, China has an opportunity to improve its own domestic recycling markets by keeping out imports of material that don't meet specifications. This follows a multi-year shift, driven in part by a prior incarnation of this current campaign called Operation Green Fence.

Even though some forwarding agents have reportedly held back shipments from going to China in the wake of this new campaign, it's too early to say how U.S. markets will be affected. The U.S. recycling industry's big three companies all reported improvements in their commodity prices, but they've also taken steps to insulate themselves from future shifts indicating that significant improvements may not be expected in the near future.