BIR World Mirror on Plastics: Low virgin prices undermine recyclate sales prospects
A concise summary of the BIR World Mirror on Plastics – Issue February 2023. Full version with detailed market reports available in the Members Only section of the BIR website.
Following a steep drop towards the end of 2022, the early weeks of 2023 have produced a slight but welcome increase in demand for raw materials, it is noted in the latest World Mirror on Plastics publication from the BIR global recycling organization. But despite a dip in energy bills and inflation rates, recyclers in many parts of the world are still facing a number of challenges, including the impact of low virgin prices, a shortage of skilled workers, rising wage costs, inflationary pressures, and the destabilizing effects of the Ukraine conflict as well as wider geopolitical tensions.
Trade has been helped by a return to pre-COVID freight rates for Asia-bound cargoes from Europe and the USA, as well as for most of the Asian cargo heading in the opposite direction. At the same time, however, the EU Parliament has approved the EU Waste Shipment Regulation revision favouring a ban on plastic scrap exports to non-OECD countries, likely to come into effect three years after the revised regulation enters force. If in future the EU’s plastic scrap exports are limited to OECD countries, the USA and Japan would become the only remaining sources of quality scrap for the few remaining countries in Asia which allow such imports.
According to feedback from China, virgin prices are so low that the economic benefits of using them have outweighed the momentum for recycled content. Some factories have either stopped buying or are closing temporarily until markets improve, while several conglomerate-run recyclers are out of the business following poor financial results. These issues can be seen not only in Asia but also in developed countries, it is also claimed. For example, reports from Europe indicate that some plastics recyclers reduced capacity towards the end of 2022 owing to the very good supply of cheap virgin grades.
In the USA, there is some hope of a market improvement as inflation appears to be easing and the anticipated recession has not materialized. PET market demand remains stable and reclaimers are purchasing at consistent levels; major refurbishment of several facilities in California will provide greater volume for bottle-to-bottle production to help meet the state’s ambitious content mandates.
For polypropylene, meanwhile, a major US East Coast buyer has increased its purchases and has returned to buying on the nation’s West Coast, providing some relief and even buoyancy to the market. Likewise, export buyers of PP are competing and are able to match the prices offered by domestic purchasers, although levels are down 50% compared to this time last year.
In other developments, chemical recycling projects are progressing throughout Asia. For example, Plastic Energy - a global leader in chemical recycling technology - has signed multiple Memorandums of Understanding in the past few months with South Korea and at the G20 in Indonesia for a combined 200,000 tonnes of annual capacity.
Meanwhile, CE Delft in the Netherlands has become the latest research body to calculate that use of mechanically-recycled plastic generates significant climate gains, thereby further underpinning the case for recycled content mandates and for making use of recyclate compulsory.