The COVID outbreak in China is causing further disruption to global logistics at a time when world trade in plastics is declining, said Henk Alssema, VITA Plastics (NLD) and Chairman of the BIR Plastics Committee, in his “BIR World Mirror’ quarterly report.

Drawing attention to the increase in cost of plastic waste for the past few months, he said, “As a result, recyclers are paying high premiums for the waste in order to cover their production needs.”

He noted that prices for LDPE are stable and demand is still satisfactory. But HDPE is under pressure, albeit to a lesser extent than PP. Availability of these materials has improved significantly, but that automatically produces price pressure. For the moment, HIPS and ABS are not affected and prices for these materials are still fairly level. Despite recent price drops, plastics recyclers can look back on an extremely good first six months of the year, he said.

“In addition to price drops and a more negative outlook for the second half of this year, our industry is still facing enormously high energy costs that are increasingly difficult to pass on in sales prices, while personnel shortages are leading to substantial increases in salary costs. These two factors are putting margins under pressure and companies are expected to be less profitable over the coming period,” he added.

Commenting on the China and Southeast Asia market, Dr Steve Wong Fukutomi Co Ltd (CHN), Executive President of the China Scrap Plastics Association, Board Member of the BIR Plastics Committee, said, “China has been one of the worst markets for prime material resin in recent years. Owing to the pandemicrelated lockdowns, tight liquidity and disappointing seasonal factors, China is still under immense pressure in terms of demand for manufactured goods. As a result, prices for most materials have been on a downtrend for the past two months.”

Polycarbonate has slid to US$ 2200 per tonne as a result of the Bisphenol A price decline, while Nylon 66 prices have dropped to US$ 3500 per tonne owing to the start-up of production of PA 66 in China. With China’s relatively low level of economic activity, demand for all recycled materials is declining every day. Asian recyclers will have to face increasing difficulties. With the widening plastics price gap between China and the Western World (primarily the USA and Europe), scrap materials are becoming more challenging to buy, Dr. Wong said.

On the Asia and Eastern Europe markets, Max Craipeau, Greencore Resources Limited (CHN), Board Member of the BIR Plastics Committee, said, “After over 12 months of continuous price increases, the party seems to be over for polymers. And the trend also applies to recycled resins, with the possible exception of rPET which continues to be supported by minimum recycled content mandates and brand owners’ commitments in Europe as well as in Asia.”

He pointed out that last year’s price rally and more legislation in favour of recycled content led to massive investments in recycling capacity across the globe, but we are reaching the point where recycling capacity exceeds the volumes of waste feedstock being collected. PET bottles in Europe have notched up a 58 per cent collection rate compared to 26 per cent across South East Asia, the lowest rate in the world.

In the U.S., post-consumer plastics markets began the year strongly, with high prices for some. In the last month, however, there has been a gradual drop as summer volumes and recessionary fears cool the market, said Sally Houghton, The Plastic Recycling Corporation of California (USA), Board Member of the BIR Plastics Committee.

“PET Grade A scrap prices appear to have hit a plateau and are expected to gradually decline as summer volumes ease demand pressures. The same is predicted for Grade B scrap despite the steep rise in prices over the previous quarter; indeed, the price became so inflated by East Coast buyer competition for bales that B and BwTF (B with thermoforms) were at the same level over several bid cycles,” she said. This dynamic is slowing as the traditional fibre market on the East Coast has restricted sales in anticipation of reduced demand for carpet owing to an economic slowdown and a cooling housing market. Together with summer volumes, this has resulted in an increase in the East’s bale inventories which has driven a downward correction in the Grade B market.

She attributed the slowdown in export to shipping delays, container shortages and increased fees. “Several companies and recyclers are avoiding overseas sales,” she said.

On European market scenario

Looking to the long term, Europe has ambitious regulations for which compliance is required by the year 2030. These regulations imply a promising future for the recycled plastic industry, with studies projecting annual growth of around 6 per cent. This has encouraged the purchasing of related machinery. For the current year, the forecast is for a demand increase of between 5 and 10 per cent.

Predicting the immediate future, Natalia Cruz Cayuela, Ferromolins, SL (ESP), Board member of the BIR Plastics Committee, said, “In the short term, however, several factors may slow growth prospects.” On the one hand, high energy costs are restricting profits in the industry at a time when it needs funds to make investments in its bid to meet Circular Economy goals. Many projects in the construction sector have been postponed owing to the diversion of funds towards defence while the lack of microchips in the automotive sector has led to a drop in vehicle production that is affecting suppliers of plastic components, she added.

In general, industry is slowing owing to uncertainty and fears of global stagflation. But at the same time, long-term growth prospects are positive.

Stephanie Kötter-Gribbe, Best Plastic Management GmbH (DEU), Board Member of the BIR Plastics Committee, said, “The Ukraine/ Russia crisis means energy supply in many European countries is in danger. The German plastics industry would be severely affected by an embargo because imported gas is an important component in the manufacture of plastics precursors. Supply of power is very strained at present and, following the announcement of an emergency plan by Minister for Economic Affairs Robert Habeck, companies have been trying to prepare for worst-case scenarios.”

Regarding the procurement of materials in the plastics industry, Kötter-Gribbe said, “The supply situation has continued to ease, although further delivery bottlenecks are expected until the spring of 2023. The market remains unperturbed by recessionary fears: only the summer break has slowed the price increase in August and demand for recycling materials continues unabated, such that regranulators can usually raise their prices and pass on almost all of the increases in energy and raw material costs.”

Citing a study by the OECD, she said, the amount of plastic waste produced worldwide could almost triple by 2060 but, at present, half of it goes to landfill and less than a fifth is recycled.