BIR Global eForum – Plastics Committee

Three of the developments most keenly affecting the global plastics recycling community – namely prices disconnecting from those of virgin material, rising energy costs and transportation problems – provided the focus for expert analysis at the latest BIR Plastics Committee webinar, hosted by its Chairman Henk Alssema of Netherlands-based Vita Plastics on November 8.

Across the material spectrum, virgin values are “no longer acting as a price cap” on recycled prices, confirmed guest speaker Mark Victory, Senior Editor Recycling at UK-based market intelligence provider ICIS. Pointing to the example of colourless PET flake prices trading above virgin over the last two years, he said this demonstrated the strength of demand for recycled materials and “the willingness of companies to pay above virgin values to meet sustainability targets because of the pressure that is on them from both the regulatory and the consumer point of view”.

Recycled material prices “are not really reacting to virgin” but, instead, are reflecting supply/demand factors in their own markets, according to Mr Victory. In Europe, rPE and rPP prices have achieved “record heights”, he noted, “because of the imbalance between supply and demand, particularly from the packaging and fast-moving goods markets”.

On the issue of insufficient supply, Mr Victory calculated that rPET collection volumes will need to expand by a third to satisfy the EU’s 2025 single-use plastic targets, while a 60% increase will be required to achieve the 2029 goals; average annual growth in collections over recent years has been nearer 2%. The shortfalls in rPE and rPP are even more pronounced, the speaker indicated.

“Prices have now reached levels we never expected in the past,” observed Mr Alssema. “There is a growing shift from using prime materials to recycled materials, driven by an increasing number of companies switching to circular business models. The question is whether we, as the recycling industry, can continue to supply sufficient recycled material to the plastics industry as more companies move to the use of recycled materials.”

Sally Houghton of the Plastic Recycling Corporation of California spoke of the “great appetite” to become involved in the post-consumer resin (PCR) market in order to achieve mandated recycled contents. However, she also highlighted the possibility that recycled material procurement problems may persuade some companies to pay the taxes on virgin use rather than engage in the PCR market.

Moderating the discussion on price developments, Max Craipeau of China-based Greencore Resources Ltd pointed out that the larger brands are signing recycled material supply contracts for the next two years, thus making it difficult for smaller players to enter the market. Mr Victory agreed that some businesses are likely to struggle to obtain the supplies needed to meet their own sustainability targets.

Regarding the energy crisis, the Chinese government’s order to curb electricity usage in many parts of the country has led to higher costs and shorter operating hours for a significant proportion of plants. When also considering the impact of rising logistics costs and environmental pressures, Executive President of the China Sustainable Plastics Association Dr Steve Wong of Fukutomi Recycling Ltd anticipated that recycled material prices will “go higher and higher”.

Logistics expert Theo van Ravesteyn, Non-Executive Chairman of MSC Nederland, acknowledged the “unprecedented” disruption to supply chains. Freight movement issues are particularly acute at ports where the time gap between anchoring vessels and unloading containers can be up to 12 days, not least because of worker and truck driver shortages. Two out of three ships worldwide are now suffering delays to their schedules.

Asked by Mr Alssema about potential freight rate developments, the guest speaker predicted a return to more normal differentials between contract and spot rates in 2022, with the latter likely to ease.

Source: BIR (Brussels, November 09, 2021)