Chairman's Report

High prices for crude oil have fanned fears of global inflation. At the same time, weak demand for raw materials has tempered expectations of a large-scale recovery for a European plastics recycling market characterized by continuing low prices and elevated stocks.

Despite rates continuing to fall in Europe over recent months, fears of a return to higher levels of inflation have been fuelled by OPEC countries continuing to cut production of crude oil, sending prices for Brent soaring to over US$ 95 per barrel in the last month. This could mean that inflation, which had been expected to continue its declining trend into 2024, may now take a different turn after all. As a result, central banks are sticking with increases in interest rates which will now remain high for a longer period. This could propel Europe deeper into crisis and demand for raw materials could drop further.

Demand for raw materials was already substantially lower during the past period. According to a report from the European Chemical Industry Council (Cefic), production by the chemical sector was 12.3% down on last year. In Germany and the Netherlands, production fell by more than 15% over the same period.

High energy prices remain problematic for industry in Europe. Electricity and gas costs are below the record levels of 2022, according to Cefic, but the price of gas in Europe is four times higher than in the USA. A speedy recovery cannot be expected and global demand will stay low, it adds.

The challenges for the recycling industry remain significant. Every recycler is looking for glimmers of hope - generally, against their better and experienced judgement. Many had hoped the market situation would improve a little after the summer period but, as far as we can see at present, the conditions seen since before the holiday season will not change much prior to the end of the year. Prices are low and stocks are still high, forcing some recyclers to offer large batches of recycled material at extremely reduced levels. At present, these batches are being bought up by major producers at dumping prices and put into stock, thereby applying even more pressure to the market for now and beyond by guaranteeing that prices will remain low and that future sales channels will be blocked because end producers built up massive stocks.

Right now, it is difficult to make any sense of current price developments. PP regranulate continues to be a challenge with dumping prices below Euro 625 per tonne when the regular market price would be between Euro 780 and 850, depending on quality. Over the past month, LDPE made a tiny recovery: demand grew slightly in countries such as Germany and Belgium but the picture was unchanged in Italy and Poland.

HDPE remained stable with prices unchanged and yet large batches of HDPE bales and washed grindings are overhanging the market and could produce more price pressure. For example, coloured HDPE bottles are trading in bales at around Euro 250 per tonne and washed grindings at Euro 450. The current price for HDPE regranulate is between Euro 750 and 850 per tonne, HIPS regranulate remains stable and black regranulate is currently selling at approximately Euro 1050 with outliers at Euro 1100.