Chairman's Report

The market for recycled plastic has remained under severe pressure and recyclers are facing some serious issues. Calls for legislation to underpin the use of recycled content are becoming ever stronger amid low prices for all plastics.

The European market for recycled plastic remains under severe pressure. In recent months, prices have dropped further to levels not seen for a while. Demand for raw materials is extremely low and this is resulting in massive stocks. Despite the fact that we are not yet in a major recession, all sides are feeling the pain.

The deteriorating market situation is caused mainly by uncertainty in the economy. Inflation in Europe remains high and consequently the European Central Bank continues to apply interest rate increases which are not creating the best investment climate. This has also led to a substantial drop in consumers’ purchasing power, driving their confidence to extremely low levels.

The market is unlikely to improve any time soon while sentiment remains negative. French recycling association Federec has expressed its deep concern about the rapidly deteriorating market, with Federec Plastiques publishing a statement saying that the outlook for the second half of this year remains downbeat. To some extent, this is due to the fact that it is cheaper for brand owners to purchase prime material, particularly in the PET processing industry. Despite the packaging industry’s commitment to use recycled material, it has still decided to limit its incorporation, according to Federec.

This trend can be felt by all recycling companies across Europe and the industry has been hit hard. Some recyclers have had to cut production while the current malaise has forced others to stop their lines altogether. In recent years, many recyclers have invested heavily in production capacity and this puts enormous pressure on their operations.

With the poor outlook for the second half of this year, this creates a worrying situation: on the one hand, production capacity could disappear permanently because businesses are ceasing activities; and on the other, this will have a negative impact on the transition to a circular economy. Therefore, the calls for regulations regarding the use of recycled content are becoming stronger by the day. Ultimately, regulation will be required to ensure that the demand for recycled material stabilizes and that the fluctuations in supply/demand and in price are consigned to the past.

The current situation has produced substantial drops in prices for LDPE, HDPE, PP and HIPS regranulate. LDPE regranulate is currently on offer at between Euro 650 and 675 per tonne, while HDPE regranulate is available at between Euro 750 and 800. PP is also in a corner taking hits; prices for this material are covering a massive range, with some as low as Euro 685 per tonne. These prices are being offered mainly by companies that are forced to sell because of their massive stock positions whereas the regular price for this material is between Euro 850 and 1050 per tonne, depending on the quality. The drop for HIPS regranulate has been less severe because reasonable demand persists for this material, with prices currently around Euro 1050 per tonne.

Massive supplies mean that prices can vary enormously for all materials. It has forced some recyclers to market their material at huge discounts. On the upside, and despite the poor outlook, expectations are that we have bottomed out.