Prime prices undermine plastic scrap market

The European plastic scrap industry moves with many uncertainties following the implementation in May of the new EU-wide Waste Shipment Regulation which bans the export of plastic scrap to non-OECD countries.

As a result, many collectors and exporters of the potential raw material are concerned about future business lane and assessing the stability of their market. Without any doubt, Asian recyclers are dependent on Europe for supplying such waste to run their factories.

Without adequate availability, the scale of their operations cannot be profitable. Low availability of recyclable waste in Asian countries limits new investments in recycling capacities on that continent. It is too soon to assess how profound the change will be.

However, in the absence of waste from Europe, it will be a challenge for Asian recyclers to find sufficient feedstock. Vice versa, European exporters unable to move their waste to non-OECD countries face the repercussions of oversupply. They are trying to source recyclers within Europe to absorb their unwanted, additional material.

Steep fall

Plastic scrap prices in Europe moved down in July and August after good stability in June. One reason has been low demand from Asian recyclers due to slow economic conditions in their countries. Another was European recyclers not demanding feedstock due to the holiday period.

Prices of LDPE natural film scrap fell almost 10% during the two months. At the start of July, prices were around EUR 400-410 per tonne but by the end of August had dropped to EUR 360-370 per tonne. On other hand, prices of large polypropylene (PP) bags fell steeply.

The product was trading at level EUR 270-280 per tonne at the end of June but by the end of August was down to EUR 225-235 per tonne. This slump was attributed to unstable global markets and concerns over the slowdown of economies.

Prime slump

Prices of prime plastics around the world, meanwhile, remain low with weak demand. The low consumption of this virgin plastic kept supply pressures high.

Crude oil prices also play a significant role in deciding market sentiment and they fluctuated significantly in the two months under review. From around US$ 83 per bbl at the beginning of July, crude oil had a big fall of over 12% during the month.

Prices were down to US$ 73 per bbl by the end of August. However, they did climb back at one point to US$ 80 at one point during the month. This steep decline raised major concerns in the plastic industry.

Such rollercoaster movements in the price of crude oil keep the prime plastic market in an unstable position.