China’s trash is IGE’s treasure as world grapples with rubbish overload
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China has long been the world’s biggest importer of waste.
But the Asian powerhouse — which processed 7.3 million tonnes of rubbish in 2016 (much of it imported from Australia) — is making changes which could be an opportunity for recently re-listed recycler IGE Solutions.
Earlier this year China banned imports of 24 types of solid waste, including certain plastics used in bottles, paper and textiles.
IGE this week signed a joint venture to establish a plastic-to-fuel plant in mainland China, following a similar plant under construction in Amsterdam.
In a $32 million deal with Hong Kong-listed Beautiful China Holdings, IGE company will go 50-50 in a waste plastics-to-fuel facility in Weifang, south of Beijing.
Initially, such a facility will be able to process 200 tonnes of waste plastic and turn it into 70 million litres of road ready fuel – at a margin of 30c per litre.
Once it ramps up, it could have the potential to process as much as 600 tonnes.
IGE believes it’s the perfect time to enter China, as it moves to clean up the problem of plastic waste.
“The problem of foreign garbage is loathed by everyone in China,” Chinese official Guo Jian said at the announcement of the garbage import bans in October.
“A few unscrupulous dealers at home and abroad illegally imported and carried foreign garbage for their own interest. It has caused serious environmental problems and should be treated strictly.”
IGE (ASX:IGE) fell 7.5 per cent to 37c on Wednesday.
But the stock is trading at an 85 per cent premium to its 20c issue price for a $6.5 million capital raise before re-listing.
In an earlier note to shareholders IGE said the margin of waste processing was expected to increase by up to $100 per tonne of plastic feedstock processed due to the Chinese waste ban.
It forecast annual earnings to increase between $2.3 million and $3.3 million – and said it had been welcomed by regulatory authorities from China, the EU and the US.