In my previous Mirror update of mid-February, I talked about the tensions between Russia and Ukraine as well as the consequences of a possible conflict between the two countries. Those negative consequences are now becoming visible: prices for oil, gas and electricity have continued to increase and inflation is on the rise. The general expectation is that global economic growth will weaken owing to the conflict and high inflation.
The so-called terms of trade are deteriorating and consumers are losing confidence owing to the high inflation rates in Europe which, in some cases, have reached almost 12%. Companies are becoming more cautious with their investments and, if they do want to invest, they have to deal with delivery times of up to 18 months.
How these developments will affect our recycling industry remains difficult to say. As a result of the higher electricity prices, the recycling industry’s production costs have risen further and recyclers are trying to pass on these extra costs to their customers.
In addition to these increases, prices for waste have also headed higher in the past few months. Supply is fairly constant but demand for recycled material is still very high. As a result, recyclers are paying high premiums for the waste in order to cover their production needs. This applies to many types of material, including HDPE, PP, HIPS, ABS, LDPE and PET. For now, it seems that the market is still accepting these price increases. The big question is whether this will remain the case or whether our industry will also have to deal with declining demand.
The COVID outbreak in China is currently causing many problems for shipping lines. The Chinese government has taken a rigorous approach and has once again announced lockdown measures in large parts of the country. As a result, many port activities have come to a standstill with, for example, ships off the coast of Shanghai which cannot be unloaded. This will undoubtedly have an inflationary effect on container transport prices as well as on scrap values.
At least, that is, for the materials that can still be shipped. Owing to the introduction of stricter regulations regarding exports of waste, we see that a number of shipping companies no longer want to transport plastic waste in their containers. Earlier this year, the French container shipping company CMA CGM announced that it would stop shipping waste from June 1, having previously carried around 50,000 containers of plastic waste annually.
These measures have resulted in the plastic waste trade shifting towards a more regional model. Flows that were mainly exported to China until 2018 have found new outlets in the region, and this downward trend is continuing - driven, of course, by new legislation and by rising shipping costs, but also because the plastic industry is very serious about the circular economy. Closing value chains in which all parties in that chain work together is essential, and experience to date shows that these parties are developing this approach regionally. If this trend continues, it could very well be that, in the long term, plastic waste recycling will occur only at the regional level.