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Low prime prices knock embattled secondary markets

Recyclers searching for new markets because of Asian import restrictions are buffeted by a fall in virgin plastics.

Written by Surendra Borad Patawari of Gemini Corp / Reading time: 3 min

The European plastic scrap market in August remained largely unchanged with a general stability across prices. Demand from overseas recyclers was limited, owing to the increasing restrictions on the import of plastic scrap imposed by various Asian countries. As a result, a large portion of collected plastic scrap is increasingly being recycled within the European region. Many suppliers, who used to export plastic waste, have started selling their material to different European recyclers.

It means the recycling of LDPE film in the European market will almost increase this year in comparison to last year. 

In Europe, however, the availability of sorted plastic scrap for recycling is falling month by month. It’s not very clear to waste management companies why they now have less to collect and offer to recyclers. Most waste managers believe that lower consumption and the general gloomy economic conditions are the main reasons for unavailability in this market.

During August, recyclers around Europe were facing issues around their sales of recycled granules. One of the reasons for this low demand was the holiday period in Europe. With many industries idle, recyclers were waiting for buyers to come back in September. On the other hand, recyclers were not able to move their recycled granules to China, with low prime plastics prices there said to be the reason.

The trade war between USA and China continues to directly affect many manufacturing units in China. Faced with increasingly difficulty in selling finish products and articles in the USA market, Chinese manufacturers were forced to reduce their production output and that reduced the Chinese demand for granules.

On the other hand, high availability of prime plastics in the USA, which could not be sent to China because of the reciprocal hike in duty, had to be offered to other Asian countries at very low prices. Many prime polymer prices were as low as they were during the crisis period in 2008.

The sharp fall in prime prices reduced the opportunity for selling recycled granules from Europe into the Asian market. Previously, recycled granules were going from Europe to Asian countries and especially China, because the high quality recycled granules were available at competitive prices.

After China’s ban, plastic scrap prices in Europe fell to almost half of their pre-ban prices, which made the recycled granules from the European region competitive for the Asian market. But low prices of prime caused problems for European recyclers and they currently remain uncompetitive in the market.   

In September, when European recyclers had hoped to boost sales of their recycled granules, did not start on a positive note. Demand for recycled granules remains sluggish owing to low prime plastic prices. Recyclers were able to move very small quantities in comparison to their stock.

To keep business healthy and secure working capital, many opted to reduce their recycling operations and cut output capacity to less than half of their operating capacity. This action is a precautionary step to make sure they are not short of cash and potentially big problems. The stock of recycled granules was piling up so they were forced to take this decision.

The anticipated low demand for raw materials from European recyclers will pose big questions about prices for plastic waste. Without being able to export such scrap, traders are expecting prices to be soft in the coming weeks unless there is a positive change in market conditions and the global trade situation.

This plastics market analysis can be found in the latest issue of Recycling International.

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