BIR World Mirror on Plastics – Quarterly Report October 2022: Capacity usage nosedives as energy costs tighten their stranglehold
A concise summary of the BIR World Mirror on Plastics – Quarterly Report October 2022. Full version with detailed market reports available in the Members Only section of the BIR website.
Much of the progress towards achieving a circular economy for plastics could be undone unless Europe’s recycling industry is compensated for the high energy costs that are currently threatening its operations, it is insisted in the latest World Mirror on Plastics publication from the BIR global recycling association.
Costs are already so high that some companies have been forced to stop recycling because economic realities mean it is better for them to send the material to landfill or for incineration. If these conditions persist, further short-time working, lay-offs and even business insolvencies can be expected, it is warned.
Uncertainty over the future pricing and availability of energy is also negatively impacting investment in the recycling sector - again to the detriment of longer-term environmental goals, it is added.
Suffocating energy cost increases are proving virtually impossible to pass on and so many operators have no alternative but to cut capacity utilization: in some European countries, capacity usage has fallen by as much as 40%. This is leading to surpluses and to downward pressure on feedstock prices, with declines greater than 35% in some cases. Hardest hit is polypropylene, followed by HDPE, LDPE, HIPS and ABS.
In China, which is still upholding its zero-COVID policy at the time of writing, manufacturers have been unable to achieve average production levels and so many customers have diverted their orders to other South East Asian countries. Demand for recycled materials is slow both in China and among other Asian nations.
The brighter news from Asia surrounds support for rPET in Indonesia owing to upcoming food-grade plants spearheaded by, for example, Indorama, Dynapak-Coke and Alba. Another factor is Malaysia, which is importing rPET bales and flakes from Indonesia at premium prices, thereby competing with domestic recyclers for this highly-desired feedstock. Meanwhile, Singapore has launched a public consultation on a deposit refund scheme for PET bottles, to be launched by 2024.
In the USA, the second half of 2022 has brought major drops in prices for all recycled plastics. This decline has attracted competitive export buyers from, among others, Europe, Asia and, to a lesser extent, Mexico. PET market demand remains strong despite an almost-50% price correction from the levels seen at the start of the year, leading to difficulties for domestic PET reclaimers in selling their end-product at a profit. Natural HDPE prices have also suffered a major correction from the inflated levels of last year but demand remains stable. Meanwhile, there has been a renewed interest in mixed rigid bales (HDPE/PP/LDPE) from both domestic and export buyers, notably from South East Asia and Mexico.
In other developments, a recent report commissioned by Zero Waste Europe (ZWE) has concluded that chemical recycling emits up to nine times more CO2 than mechanical recycling. According to the document, mechanical recycling should be prioritized over chemical recycling where possible and more effort should be put into “design for recycling”. ZWE is urging the European Commission to consider the report’s findings in the next review of the Packaging Waste Directive.