Industry Research | 2020 Market Forecast of Waste Value Chain

2019 marks a new milestone in China’sefforts in pushing for waste classification. Shanghai as a pilot city for mandatory waste sorting and classification brought more spotlight upon the entire value chain of waste collection, transportation, management, and treatment. In this report, we look at China’s progress in implementing waste classification regulations, a forecast of scale of the market, identify emerging and key players in the field and future challenges and areas for improvement.

1. Waste Classification in China

Lookingat the policies and regulations, the development of waste classification in China has undergone two stages: pilot exploration (2000 - 2015) and rapid development (2016 - present).

With the improvement in living standards and the deterioration of the environment, China has gradually realized the significance of waste management for environmental protection. In June 2000, the Ministry of Housing and Urban-Rural Development designated eight cities, including Beijing, Shanghai, Guangzhou, Shenzhen, as the first batch of domestic waste classification and collection pilot cities in the country, marking the beginning of waste classification inChina.

Since 2016, waste classification has entered a stage of rapid development. With the continuous introduction of related policies, waste classification has been gradually promoted from pilot cities to the whole country. In June 2019, the “Notice on Fully Carrying out Household Waste Classification in Cities at Prefecture Level and above in the Country” requires that by 2025, household waste classification and disposal systems will be basically established in cities at prefecture level and above in the country. On July 1, 2019, Shanghai became the first city in China to implement mandatory classification of household waste.

1.1 Key Policies

Implementation Plan of Household WasteClassification System (hereinafter referred to as “the Plan”)

The Plan proposes that the classification of household waste should be promoted , and the establishment of the waste management system should be accelerated. The system should be promoted by the government, participated by all people and is a coordinated urban and rural effort while tailoring measures to local conditions. By the end of 2020, the relevant laws, regulations, and standardized systems will be established to form a replicable and scalable household waste classification model. In cities where mandatory classification of household waste is implemented, the recycling rate of household waste will reach more than 35%.

The Plan provides specific planning for the collection, transportation, resource utilization and terminal disposal of household waste, gradually incorporating mandatory classification of household waste into the environmental credit system, and promote the construction of a number of enterprise-led technology innovation strategic alliances and technology research and development bases of the household waste recycling industry to improve the level of classification, collection and disposal. At the national level, it ensures the steady development of waste classification system in China.

Notice on Carrying out Household WasteClassification in Cities at Prefecture Level and above in China (hereinafter referred to as “the Notice”)

According to the Notice, by 2020, 46 key cities will establish household waste classification and disposal systems; other prefecture-level cities will achieve full coverage of household waste classification in public institutions, and at least one street will basically establish a demonstration area for household waste classification. By 2022, at least one district in each city will have full coverage of household waste classification; at least one street in other districts will basically establish a demonstration area for household waste classification. By 2025, household waste sorting and disposal systems will be basically established in cities at prefecture level and above.

The waste classification policies in recent years show that China has realized the urgency and necessity of waste classification. The Notice attaches great importance to waste classification, which will have a positive impact on solid waste industry value chains such as manufacturing, collection and transportation, and disposal.

2.Forecast of the Market Scale

Since 2014, the large amount of municipal waste generated in cities brought along problems such as environmental pollution, and excessive electricity consumption for waste incineration. According to the 2018 National Annual Report on Prevention and Control of Municipal Solid Waste Pollution in Large and Medium-sized Cities, in 2017, 202 large and medium-sized cities produced 201.944 million tons of household waste, with a disposal rate of 99.5%.

Fig : Municipal Waste Generated in Medium and Large Cities 2014 -2018

Source: Government websites

According to iMedia Research, in 2017,Beijing produced the largest amount of municipal waste (9.018 million tons), followed by Shanghai, Guangzhou, Shenzhen, with 8.995 million tons, 7.737million tons, 6.04 million tons, respectively. The total municipal waste produced by the top 10 cities was 56.858 million tons, accounting for 28.2% of the total amount produced by all the cities that have released relevant information.

Waste classification can drive the development of the entire waste value chain. Based on our estimations of the market sizes of waste classification, collection and transportation, treatment and disposal, the total potential market size of the entire waste value chain in 2020 will be 331.725 billion.

3.Emerging and Leading Companies in theWaste Management Value Chain

3.1 Waste Classification: Rise of AISorting and Classification Machines

Aobag

Profile: Establishing a circulation system between residents, communities and logistics

Encouraging residents to participate in waste classification through QR codes and name verification linked to Wechat and App, using innovative recycling bags and restructuring classification categories to connect residents, communities, logistics systems.

Established: 2017

Headquarter: Chengdu, Sichuan

Financing and Funding Stage: Angel Investment

Ai Fen Lei

Profile: A comprehensive managingplatform on waste classification

A high-tech enterprise integrating technology research, development, application and operation of information management system, dedicated to building the entire value chain on waste classification and intelligent recycling. A professional operator integrating waste classification and renewable resources networks, and also a service provider for comprehensive urban environmental governance and waste treatment.

Established: 2017

Headquarter: Beijing

Financing and Funding Stage: None

3.2 Waste Collection and Transportation

Huafu Municipal

Profile:Officially recognized for environmental sanitation services

Core business covers municipal road cleaning, waste transportation and management, public toilet cleaning and maintenance, property cleaning, control and prevention of diseases, control and management of illegal occupation of public spaces and illegal discharge of waste , and other service fields. It is a national first-class qualification enterprise in the cleaning industry, received an AAA Credit in Enterprise Credit Evaluation by Ministry of Commerce, and a Class A enterprise in Shenzhen environmental sanitation operations.

Established: August 1993

Headquarter: Shenzhen, Guangdong

Financing and Funding Stage: None

Zoomlion

Profile: A cleaner world and a better future

Continue to expand water and solid waste businesses, and actively seek market opportunities in other environmental protection fields, such as industrial wastewater treatment, desalination, sludge treatment and disposal.

Established: February 2012

Headquarter: Hunan, China Financing and Funding Stage: Strategic financing in Dec 2017. Acquired by Infore Environmental Technology in July 2018 with 15.25 billion RMB.

3.3 Waste Treatment and Recycling

Infore Enviro

Profile: Presence across the entire value chain

High-end equipment manufacturer of sanitation robots and comprehensiveenvironmental service provider, including environmental protection equipment, environmental monitoring, water treatment, gas treatment, solid waste treatment.

Established: November 1993

Headquarter: Zhejiang, China

Financing and Funding Stage: Received Series A+ round offinancing, listed on Shenzhen Stock Exchange on March 30, 2000. Acquired Dasheng Global Ltd. and Minghuan Co., Ltd with 548 million RMB in July 2016, and Zoomlion Environmental Industry Co., Ltd. in 2018with 15.25 billion RMB.

SUS Environment

Profile: the largest solid waste incinerator supplier and leading developer of integrated municipal solid waste management in China

Investing, constructing and operating the state-of-the-art municipal solid waste to energy, agricultural and forest biomass utilization, ecological remediation as well as Eco-Industrial Park projects across China and abroad.

Established: Dec 2008

Headquarter: Shanghai

4.Current Issues and Challenges

4.1 Current policy coverage is limited to single stakeholder

Waste classification and management should involve multiple stakeholders. Municipal waste is mainly generated by residents, therefore current policies tend to refer to them as the main bodies responsible for waste classification. However, the complexity of the waste value chain means that there are certain waste classification that should be implemented further downstream, instead of doing so at an early stage upstream.

The lack of a common basic waste classification standard across Chinese cities hinders efforts in promoting waste classification and the development of downstream value chain aswell. To promote it at a national level, common standards should be set across the country at an early stage for effective promotion.

4.2 Lack of awareness

The understanding and awareness of the importance of waste classification is currently still limited. There is still a lack of knowledge in classification as well. Such mindset hinders community-level efforts in promoting waste classification, as many still consider this as not important, proving to be a challenge to the promotion and standardization.

4.3 Products do not address key issues

There is a wide range of technology-oriented products targeting waste classification in China. The first batch of AI waste classification and recycling machines entered neighborhoods in Beijing in September 2019. It allows users to dispose their waste by scanning a QR code on the machine’s screen, thereby accumulating points. Such machines are limited to collecting recyclable wastes, such as waste paper, plastic bottles, cardboard boxes and clothes, and as such, makes no difference (interms of waste classification) when compared to other neighborhoods that do not have such machines.