Uncertainty continues to dog the secondary plastics sector because of fears of recession and other factors, reports BIR, but the New Year began with a slight improvement in demand following a steep drop in 2022.
Henk Alssema of Vita Plastics and chairman of the BIR Plastics Committee writes in the latest quarterly report from the world recycling organisation that it is difficult to assess which way recession-threatened markets are going. ‘Uncertainty is being fanned by the Ukraine conflict as well as by tensions between the USA and China. Even so, many economists are predicting the recession will be mild, if there is one at all,’ he says.
Alssema notes progress within the EU on an imminent ban on plastic waste exports to non-OECD countries. According to the European Parliament, the export ban to non-OECD countries is to come into force as soon as possible, which is likely to be three years after the EU Waste Shipment Regulation review becomes effective.
‘Opinions on amendments to the regulation are strongly divided,’ he writes. ‘European players in the market see it as a game-changer as it creates a massive impetus to design plastics that can be recycled and reused better and to increase the recycling capacity within the EU in the short term. Global players, meanwhile, view it as a serious restriction owing to the anticipated red tape it will bring; they see recycling as a global trade that should not be hampered by national or regional boundaries.’
Lower energy prices
A significant drop in energy prices has helped the secondary sector, Allsema says, although inflation continues to be an issue despite a downward trend.
‘The higher wage costs confronting the recycling industry are fuelling fears of a wage spiral … with higher prices leading to higher wage demands. It means inflation would remain elevated and would lead to central banks raising interest rates to cool the economy.’
Fellow board member Steve Wong of Fukutomi and executive president of the China Scrap Plastics Association, notes that during the pandemic, there was a price disconnect between East and West.
‘Now the price gap has narrowed as a result of reduced shipping rates and production overcapacity associated with poor demand,’ he says. ‘Market players expect these conditions to persist for a while until China’s economy recovers, inflation is controlled and the recession is over.’
But he also points out that, within the USA and Europe, scrap plastics are in abundant supply – at lower prices – as domestic markets suffer from low prices and demand. ’As prices are so low, even developed countries’ recyclers cannot maintain their operations from the financial perspective. Overcapacity is now an issue not only in Asia but also in developed countries.’