Price link between prime and secondary uncoupled

Brands’ commitment to using recycled content in packaging boosts demand while investors are increasingly attracted to chemical recycling.

The plastics recycling industry has been catching the attention of private investors, several of whom have recently come into the market and taken over existing collection and recycling companies, either by purchasing equity or injecting fresh capital as a partner for the expansion of recycling capacity.

Many petrochemical companies and waste management companies had already put their feet into the sector but this new interest anticipates a substantial growth in the recycling sector in the coming decade.

Most attention today is on chemical recycling, where huge investments are lined up. Those across the value chain in the plastics recycling are looking at this development to evaluate how they can contribute and the issues they face. For example, securing the required raw materials is a big challenge while certain plastics cannot be part of the feedstock for a chemical facility.

Availability of material is low and it will take more investment in sorting capacity to secure suitable material and scale it up to the needs of a chemical recycling plant. With so many new chemical recycling projects on the horizon, this bottleneck has to be resolved and the challenge is to make it cost effective at a commercial level when compared to the traditional mechanical recycling.

Plastic scrap prices have increased over recent months. In May, prices for LDPE natural film in bales were around EUR 570-580 per tonne and reached 600-620 in June. There is good demand for sorted natural film from European recyclers who are not getting the required quantity due to low availability.

On other hand, Asian recyclers who were dependent on European raw materials cannot compete on price so the higher cost of raw materials is keeping them away from the market.

Granule demand

Demand for recycled granules from mechanical recycling is also growing rapidly. Recyclers have full order books to deliver granules but, with limited capacity and workforces, are often not able to satisfy their customers’ needs. High demand and low supply are keeping the prices of recycled granules high. Asian markets are not able to keep up with this surge.

Many Asian recyclers have reduced their capacity due to low availability and – for them – unviable prices of raw material from European markets. They are looking for a sustainable alternative to European scrap.

Prime plastic prices in Europe have lost ground over the past two months. End users and convertors of plastic are not buying in big quantities, citing low demand for the final product. High inflation in European economies is giving them a tough time. Higher conversion and distribution costs are forcing them to slow production.

Lower demand for prime plastic has put pressure on prices which have fallen around 20% for prime PE and PP in recent months. Imports of Asian and Middle East prime plastics are more competitive currently and this is putting pressure on prime producers in Europe to reduce prices.

Correlation severed

This is the first time the correlation between prime and recycled material has been severed. Previously, recycled material always followed the price trend of prime plastics but now demand and prices remain firm while prime plastics are declining. This is happening because of an increasing commitment from brand owners to use recycled content in their packaging materials which they must then honour.

Availability and costs of sea freight have become such a crucial factor that it often dictates when business can be done and what is viable. There are so many frequent changes in global sea freight that a trade may be viable at the time a deal is a made but loss-making by the time it takes place.

Low availability of containers and fewer connections are delaying shipments and this has increased transit times. Every shipper has these issues without any solutions in hand.