Plastic Recycling Market Witnessing Upward Trend, But Challenges Remain

“China and other Asian countries have begun the year on a bearish note with regard to demand and prices. Most prime virgin material prices, including those for engineering grades, are edging lower despite the new oil highs.”


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February 20 2022
 
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Demand for recycled material remains at exceptionally high levels. “Although this is an extremely positive development for our industry, all that glitters is not gold. Recyclers are struggling to obtain input material and, if available at all, it comes at an extremely high cost,” said Henk Alssema of VITA Plastics (NLD), Chairman of the BIR Plastics Committee, in the Bureau of International Recycling (BIR) Plastics Report released in February. Furthermore, he said, energy prices have surged to exorbitant levels and there is an enormous shortage of personnel.

 These are among a number of problems facing the recycling industry at the moment, yet it looks as though recyclers are able to incorporate cost increases into their sales prices and to keep their margins intact, he noted. The enormous demand for recycled materials means prices are at record highs. Final processors are paying exorbitant prices for PP regranulate, with prices for black and natural at around Euro 1150 and Euro 1650 per tonne, respectively. Prices of HDPE extrusion regranulate are at some Euro 1250 per tonne for light grey and Euro 1500 for natural. LDPE regranulate is a little lower, with mixed granulate at around Euro 750 per tonne and translucent at approximately Euro 1200, according to the report.

Prices are not expected to drop in the short term if demand stays as high as it is, but whether it will, is another matter. “Many economists are worried about the spectre of inflation which is currently high in Europe, with the European Central Bank preparing the market for interest rate increases in order to rein it in. Yet it is also concerned that those interest rate rises will cool the economy to such an extent that a recession sets in, leading to reduced consumption, a drop in demand for raw materials and corresponding price drops,” commented Alssema.

Chemical recycling is taking off right now, with a number of factories mushrooming. Many chemical companies including ExxonMobil, BASF and Sabic have invested or are about to invest in this growing recycling method. Most notably, it was announced in January that Eastman Chemical Co. is to invest US$ 1 billion in building the world’s largest chemical recycling factory in France.

 This recycling route is quickly gaining in popularity and the chemical industry is excited by its potential. “But is chemical recycling a wholly positive development? Personally, I believe it can be a valuable addition to mechanical recycling, but let us not make the mistake of favouring chemical recycling over mechanical recycling. It detracts from green awareness in consuming more energy and seemingly placing a heavier burden on the environment,” he cautioned.

Commenting on the China and Southeast Asia market, Dr. Steve Wong, Founder and CEO of Fukutomi Co Ltd (CHN), Executive President of the China Scrap Plastics Association, and Board Member of the BIR Plastics Committee, said with the Chinese New Year holidays now over, the recycled plastic market is buoyant again. Factories in China, including those closed temporarily during the Winter Olympics, have resumed production. Nevertheless, most recyclers still face the problem of dwindling raw material supplies, he stated.

New York oil prices hit a sevenyear high of US$ 95 per barrel mid-February on supply disruption fuelled by geopolitical developments impacting producers.

 “China and other Asian countries have begun 2022 on a bearish note with regard to demand and prices. Most prime virgin material prices, including those for engineering grades, are edging lower despite the new oil highs,” noted Dr. Wong, adding that with surging Covid cases in China, the government has imposed stringent rules to contain the spread of the virus, including lockdowns and travel restrictions.

Price gaps between the Far East and the USA/Europe have widened owing to different attitudes towards Covid. Many Western countries are relaxing their restrictions despite high infection numbers, thus supporting prices and demand for plastic materials in general. In contrast, China and some other Asian countries will probably look to reduce virus numbers to zero before reopening their borders.

 Given the current conditions, most recyclers are now seeking alternative markets to China in order to achieve better prices, said Dr. Wong. For example, he said, recycled natural LDPE pellets from film are selling for over US$ 1150 per ton in Southeast Asia and India, whereas China can pay only US$ 950 delivered main ports. For PET and PP, Vietnam, India, Indonesia and Malaysia are continuing to offer better prices. Plastic scrap supply is tight as the tonnages collected since year-end have been much lower than expected. PE film scrap is selling at over US$ 550 per ton ex-works in the UK and mainland Europe.

Recyclers who rely on imports for their feedstocks will face a new challenge as CMA has announced that its group will no longer carry plastic waste on its ships from June 1, 2022, he highlighted. “This decision will have a significant impact on the shipping of wastes from country to country. As a result, we can foresee that recycling will become a localised industry.”

 On the Asia and Eastern Europe markets, Max Craipeau, Greencore Resources Limited (CHN), Board Member of the BIR Plastics Committee, said, “As we get ever closer to the 2025 deadline to incorporate a minimum 25 per cent recycled content in PET bottles across the EU (Single-Use Plastics Directive) and beyond (Ellen MacArthur Foundation signatories/ FMCG brands’ global commitments), there is growing pressure on major global brands to secure sufficient feedstock to comply with their obligations.”

 In Eastern Europe, the market is becoming increasingly organised, with Slovakia recently launching its deposit return scheme to boost collection and recycling rates. More investment and acquisitions are taking place in the region, often in the form of joint ventures between FMCG brands and local recyclers. In Asia, these brand pledges are helping to boost collections of PET bottles; in some countries, such as Indonesia, collected-for-recycling rates are now comparable with those in France despite 97 per cent of the bottles being collected by the informal sector, the report revealed.

The decoupling of virgin PET and food-grade rPET prices is now strongly established, with continuous demand for the latter serving to drive up rPET values everywhere in the world. Container prices from Asia to Europe remain around US$ 15,000 per 40-foot high cube, and up to US$ 20,000 to the USA. This situation is greatly restricting EU- and US-bound cargoes from Asia that would otherwise help to bridge the demand gap in these regions, commented Craipeau.

“For other resins such as LDPE, interest from global brands is continuing to grow and to support recyclers in Eastern Europe where an increasing number of Western companies are investing in collection and recycling capacities in order to tap into local feedstock availability and to take advantage of lower wages,” he stated.

The US post-consumer plastic markets are strong and demand is high for certain materials, but some others have seen a decline. “PET undoubtedly fits into the former category: bale supply is tight amid high demand, with capacity increases putting a further strain on the requirement for feedstock. Simultaneously, there have been cost increases impacting both inland and ocean freight, while port congestion and driver shortages are providing another source of stress,” reported Sally Houghton, The Plastic Recycling Corporation of California (USA), Board Member of the BIR Plastics Committee. Recycling facilities are also said to be contending with staff shortages owing to Covid infections. All of this has been occurring against the backdrop of an anticipated price increase for virgin PET, she said.

Meanwhile, the US Plastics Pact, which brings together businesses, government agencies, NGOs, research institutions and other stakeholders, has set sustainable targets for the removal of problematic and unnecessary materials, identifying 11 packagingrelated products and materials that are “not currently reusable, recyclable or compostable at scale” in the USA.

“In the natural HDPE market, there is evidence of buyers returning to virgin resin because of high inventories as well as elevated prices for the recycled alternative; however, demand has remained strong and steady,” said Houghton. For coloured HDPE, the Covidrelated contraction in the automotive industry led to a price drop but, more recently, demand from the pipe sector has resulted in an increase.

LDPE is witnessing a consistently strong market for higher-quality material, not least due to an increased requirement from the construction industry. In contrast, lower-grade and coloured LDPE are struggling to find markets amid only intermittent interest from export buyers, as per the report.

Polypropylene is seeing continued growth as a post-consumer resin for which infrastructure and capacity are slowly growing, especially on the US West Coast. The report also indicates the market for expanded polystyrene is stable both domestically and for export, whereas the market share for rigid polystyrene is shrinking as more producers switch to PET. Overall, the US plastics recycling industry has seen growth and new investment as a result of the combination of mandates and strengthened brand commitments. Collection rather than capacity remains a key issue, especially for PET, the report highlighted.

The past year got off to a promising start with the economy recovering faster than some forecasters had predicted and there was something like an upswing in the air, said Stephanie KötterGribbe, Best Plastic Management GmbH (DEU), Board Member of the BIR Plastics Committee. But then there were countless force majeure reports, with plant stoppages and production downtime completely derailing supply chains; delivery bottlenecks and skyrocketing prices in all sectors; and materials becoming so scarce that there were hardly any exports. “Amid this tense situation, many companies were sold or broken up last year. The public hype brought the industry to the close attention of investors and set the market in motion,” said Kötter-Gribbe.

The ambitious European climate change targets also made their contribution. Once again, the topic of sustainability and resource conservation through efficient recycling management has been at the top of the German plastics industry’s to-do list since the environmental summit in Glasgow late in 2021. The industry is being driven by the entry into force of the disposable plastic regulation and the development of a new waste and disposal law aimed at higher recyclate quotas, the report stated. “But the use of recyclates often fails owing to image or price, not least because the processing of post-consumer waste is very complex. Customers are put off when products become more expensive. For this reason, the acceptance and image of recyclates must be promoted. The bad image of plastics is unjustified because recyclates have to meet the same requirements and standards as virgin materials.”

Acceptance can only be achieved through constant delivery of a consistent quality, Kötter-Gribbe observed. “Society must give plastics a value again and the plastics industry must do everything in its power to ensure that the often false and unrealistic statements made by politicians about a world without plastics become a thing of the past. People talk about disposable plastic and bans but they forget that, for example, the CO2 balance would be worse without plastics. It is yet more composite materials that are difficult or impossible to recycle, which should be prevented from coming on to the market.”

 This year began with even more scepticism and no sign of optimism. The devastating supply situation is continuing to have a massive impact on a world economy that was not at all prepared for such a situation, she emphasised. In addition, there is the worrying crisis between NATO and Russia; concern surrounding rising inflation in the German economy; and the exorbitant increases in energy charges which are driving spiralling material costs, the report stated.

 An important goal for 2022 should be to promote positive communication on the subject of plastic; society must be shown what plastic can do and can contribute, said Kötter-Gribbe. “Even the pandemic has highlighted that we can’t dispense with plastics; in medical applications, for example, how else are we supposed to preserve blood? This year, further CO2 reduction targets must be set and practicable material cycles must be implemented, said KötterGribbe, adding that the EU’s goals are high and can only be achieved through a clear legal framework and the promotion of efficient recycling structures.

Every year, countries in the Gulf Cooperation Council (GCC) produce around 10 million tons of plastic waste but, on average, reuse or recycle only some 10 per cent. The key factor influencing the recycled plastics market is the increased demand for food packaging and construction applications. Recycled plastics demand achieved record online sales within the UAE’s food and beverage market in surging 255 per cent year on year in 2020 to reach US$ 412 million, according to a Dubai Chamber analysis.

The UAE’s rigid plastic packaging landscape was not significantly affected owing to the increased consumption of essential consumer goods. Demand rose for packaging used with dietary supplements, such as vitamins usually packaged in plastic enclosures, said Mahmoud Al Sharif, Sharif Metals Group DMCC (ARE), Board Member of the BIR Plastics Committee. On January 18 this year, the UAE announced the creation of a quality-assured trading platform for plastics feedstock aimed at facilitating global trade in recycled plastics. The Rebound Plastic Exchange (www. reboundplasticexchange.com) is scheduled to open for trading in mid-2022.

2021 was marked by higher raw material prices owing to changed buying habits and supply chain issues, said Natalia Cruz Cayuela. “The pandemic made us spend more time at home and, consequently, consume more plastic, thereby increasing demand at a time of resin shortages. These two factors led to an historic rise in recycled plastic prices.”

Experts are predicting a continuation of these high price levels for the first half of 2022. A slight drop in raw material prices can be expected on the one hand whereas, on the other, the market will continue to face the elevated freight costs triggered by reduced vessel capacity limiting the ability to return containers to Asia and price increases for 40-foot containers.

The question is whether the recycled plastic price rise will last. Some experts say that the imbalance between supply and demand will keep prices high. Europe wants to secure its raw materials supply and ensure competitiveness through circular materials; also, producers are increasingly marketing “circular” raw materials produced from the chemical recycling of plastics waste, or those based on renewable resources. Food packaging, medical equipment, electrical appliances and suitcases can now be produced using recycled plastic.

However, other experts believe that there is still a lot to do with regard to plastics recycling, and that inability to cope with demand could lead to replacement by virgin plastic resins or by other materials suitable for the same applications. Natalia said, “Plastic’s poor image among the general public is not helping. Plastics recycling cannot be sustained by rules and regulations alone. That’s why the emergence on to the market of any new recycling technology is a big opportunity for us all.”