Caution required as market enters new phase

The approach of the summer holidays in many parts of the world is usually a quieter time when trading activity is more muted. This year, however, the immediate pre-holiday period has witnessed a major development with the renewal of US strikes on Iran.

After several months of geopolitical uncertainty, tensions in the Middle East had appeared to be easing following the announcement of a 60-day ceasefire. But with the USA renewing its strikes on Iran several days ago, the recent substantial fall in crude oil prices has been reversed and virgin polymer prices have also started to climb again. This evolving situation could have massive repercussions for our market going forward.

This major development has come at a time of softening demand. As is typical for this time of year, the approaching summer holiday season has been leading many plastics processors to reduce production levels. In addition, many buyers built up significant inventories during March, April and May as a precaution against potential supply disruptions arising from the conflict in the Middle East. Those inventories have not yet been fully consumed.

Many buyers are keeping their order forms in their drawers for the time being. Trading activity has slowed, while competitively-priced imported materials continue to exert pressure on the European market.

For recyclers, this has resulted in a quieter market environment. Fortunately, many companies are still benefiting from the strong demand experienced over the past few months, during which order books were healthy and production facilities operated at high utilisation rates. Those earlier orders are helping many recyclers navigate what is traditionally a slower summer period.

The key questions now are what direction the Iran conflict will take and how the market will develop after the holiday season. If inventories continue to decline throughout August and industrial activity resumes as expected after the summer break, demand could recover during September. However, the direction of virgin polymer prices and the broader economic outlook will continue to influence purchasing behaviour in the short term.

For now, caution remains the prevailing sentiment across the market. Both buyers and sellers are closely monitoring developments while waiting for clearer market signals. Nevertheless, the long-term outlook for plastics recycling remains positive: European legislation, mandatory recycled content requirements and the growing recognition of recycled materials as strategically important resources continue to provide strong structural support for the industry, despite the current short-term slowdown.