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Report for China & South East Asia

The following table shows recent prime prices taken from China’s major virgin polymer websites, quoted in Renminbi (RMB) which has an exchange rate of 6.9184 to the US dollar at the time of writing:

 Picture1 Steve Wong May23

New York oil prices closed at 76.78 per barrel on April 28 for a second successive weekly decline on disappointing economic data, interest rate hikes in the USA and concerns about China’s lower-than-expected fuel demand.

Prime prices in China continue to weaken amid oversupply and high stock levels. Apart from PET and polyethylene, millions of tons of new capacity have come online this year, with 8 million tons reportedly added for polypropylene. Saudi Arabia and the USA have offered reduced-price cargoes to China and other Asian countries.

The latest manufacturing PMI contractions, the property market downturn and global financial uncertainty have raised doubts over the strength of China’s recovery. Nearly all prime resins slid in China before early May’s Labour Day holiday, not least because of the approach of traditionally low seasonal demand from May until mid-August. There are reports of PET, ABS, PS, PE, PP, nylon, POM and polycarbonate exports to Europe, Africa, America and other Asian countries owing to price competitiveness. Shipping costs have fallen sharply and cheap cargoes have also impacted the global markets. There is a need to limit the building of new plants in order to bring oversupply under control. Prime prices lower than those for recycled materials will eventually lead to less plastic waste being recycled, resulting in more ending up in the environment. 

Recycled materials are selling at lower levels following the reductions in prime material prices, with the exception of post-consumer recycled (PCR) natural HDPE pellets from production selling at US$ 800 per ton whereas PCR milk bottles are at US$ 2750-3100 per ton; natural PET flake and pellets are fetching US$ 600-700 per ton whereas FDA-approved PCR PET sells at US$ 1650-2000; and PP injection black is selling at US$ 650-680 per ton whereas PCR PP black commands US$ 1550-2000. PP and LDPE black pellets are selling for only US$ 650 per ton while PP/PE labels and caps are at less than US$ 600. Most recyclers are selling non-PCR materials at prices that do not even cover production costs. More recycled materials are being offered for sale on various websites and media platforms. Meanwhile, low-cost prime material imports are impacting US, European, Turkish and Latin American recycled materials.

Low prime and recycled pellet prices are badly affecting scrap plastics. More offers are available but recyclers are quite pessimistic, with their stocks at maximum levels. Some sorted mixed rigid plastics, agricultural plastics and printed post-industry film have seen sales at zero FOB. With the USA still having the most expensive shipping rates to Asia, all these plastics scrap netback prices are over US$ 200 per ton, which is too expensive if their pellet selling price is only US$ 600 per ton. The threat to the recycled materials market of over 10 million tons of new prime material capacity definitely cannot be ignored. It is critical for brand owners to increase their use of recycled content to balance out the competition from low prime prices.

The current capacity and economic challenges are making it difficult to see a clear recovery path for the recycling industry.