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Waste treatment

The power of rubbish: Korean firms make big money from garbage

As exporting garbage becomes costlier, Korean firms stand to benefit from the treatment of locally produced waste

By Jul 15, 2021 (Gmt+09:00)

Waste treatment center
Waste treatment center

There is money to be made in garbage. Such is the growing consensus among investors as well as waste treatment companies amid tighter environmental regulations.

KG Eco Technology Services Co. (KG ETS), a South Korean garbage treatment firm, saw its shares on Kosdaq soar in recent months as industrial and household waste steadily mounts in the wake of the COVID-19 breakout.

The company’s shares have risen more than 210% this year as investors snapped up the shares believing that people will have to pay more for what they throw out, given the limited waste disposal facilities in the country.

With China’s expanded ban on solid waste imports, it is becoming harder and costlier for Korea to send waste overseas, providing an opportunity for local waste treatment companies like KG ETS to make decent money.

Just over the past couple of months, KG ETS’s stock has doubled to close at 21,150 won on Thursday.

Analysts said the domestic waste disposal and treatment market will grow to 23.7 trillion won ($20.7 billion) by 2025 from 19.4 trillion won this year.

Rising waste volumes and higher garbage disposal prices underpin the robust outlook for waste management companies in coming years, according to analysts.

Further, high entry barriers to the regulated industry mean a limited supply of treatment facilities.

TY Holdings Co., which owns Korea’s leading sewage and wastewater treatment company, TSK Corp., saw its shares rise about 12% this month alone as investors bought into the rosy outlook for the waste treatment industry.

Some 80% of the parent company’s profit derives from TSK’s environment-related businesses.

TSK is Korea’s top solid waste treatment player and the second-largest sewage wastewater treatment company.

Waste treatment center
Waste treatment center

PLASTIC INDEX

As governments, international agencies and companies pour investment capital into eco-friendly companies and green projects, environment-related indexes have emerged to help investors decide where to spend their money.

In February, German financial firm Solactive, ISS ESG, the investment arm of Institutional Shareholder Services Inc. and Morgan Stanley jointly launched the Solactive ISS ESG Future of Plastic Index.

It is a publicly listed index consisting of global companies with leading performance in innovation and implementation of plastic waste solutions and efficient material use, and offers a benchmark for investors as plastic waste becomes a growing investment theme.

The index avoids companies with low liquidity and major environmental, social, or governance (ESG) risk, and companies with ties to products contributing to marine ecosystem degradation, such as microbeads or significant single-use plastic packaging.

S&P Global has also developed a system to include waste treatment and environmental pollution in its ESG evaluation for companies.

Waste treatment company
Waste treatment company

CHINA’S CIRCULAR ECONOMY

Industry watchers said global companies may benefit from China’s adoption of a circular economy aimed at achieving carbon neutrality by 2060, a move expected to create a recycling market worth 5 trillion yuan, or 886.5 trillion won.

NH Investment & Securities forecasts that about 60 million tons of discarded paper, 320 million tons of scrap steel and 20 million tons of non-ferrous metals will be recycled under the Chinese initiative.

Among Chinese waste treatment companies that stand to benefit from the Chinese policy are Beijing GeoEnviron Engineering & Technology lnc., Zhefu Holding Group Co. and Grandblue Environment Co., according to NH Investment.

Write to Jae-Won Park at wonderful@hankyung.com

In-Soo Nam edited this article.

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