Amid the generally low demand for recycled plastics, prices are coming under heavy pressure with little hope of a quick recovery. So long as we have high inflation, uncertainty in the financial markets and interest rate rises, consumers will remain reluctant to consume and current market conditions will remain the same. More than ever, regulation is essential to promote use of recycled content.
At present, demand for recycled raw materials is falling rapidly. The manufacturers’ experience is that consumers are consuming less and less, with the result that many businesses are facing production stoppages. All of this is the result of high inflation, uncertainty in the financial markets and interest rate rises introduced by central banks. Even though these rate increases have curbed inflation to some extent, it is still high and continues to hover around 7% in some European countries. This is no longer the result of high energy costs as these have actually dropped significantly of late; rather, the reason is the enormous wage increases we have seen.
This gives a different look to the markets and the favourable economic climate of recent years has now changed. Economists are already talking about the next “perfect storm” where we are faced with continued high inflation, stagflation, recession and a potential debt crisis.
The developments outlined above, together with producers’ high stocks, are leading to high supply but low demand for raw materials, thus putting prices in Europe under pressure. PP in particular is the big loser but HDPE and LDPE are also taking a hit. PP regranulate black is available for below Euro 900 per tonne in some situations, which is substantially lower than a year ago. HDPE has also taken a knock, with its price at around Euro 950 per tonne. LDPE has not escaped the lower prices either, as LDPE regranulate black is now being offered at around Euro 750 per tonne. There is still a reasonable demand for HIPS and ABS regranulate, with their prices ranging between Euro 1100 and Euro 1250 per tonne.
The prices presented above are not expected to recover in the short term; in fact, they may drop even lower. While there is uncertainty in the market and consumers are not consuming, we will remain in the same situation.
Prices for prime material have also fallen substantially. As a result, many companies are deciding to use prime material again rather than recycled, thus making the sale of recycled material much more difficult at present. Calls are becoming louder for regulation to make use of recycled material compulsory; this is the only way to create stability in supply and demand, as well as stability in terms of price. Without regulation, strong price fluctuations will continue and the industry will not be able to develop. Another negative effect of volatility in the market is that it will hamper the growth of the circular economy.