No relief from higher production costs

Bigger energy bills and a surge in inflation continue to hit the value chain while prices for recycled materials have fallen significantly.

The European recycling industry remains highly affected by high inflation and energy costs across the continent. The cost of production has increased significantly and that does much to undermine recycling goals. Many recyclers have reduced their capacities and some are on the verge of closing their facilities.

Due to high inflation across Europe, consumption has declined and this has had a knock-on effect on the demand for packaging materials. Lower demand is forcing converters to reduce production levels and that means demand for recycled granules is also falling. Higher labour and transportation cost are also adding to the overall cost pressure and recycled granules are increasingly uncompetitive versus prime products.

FALLING PRICES

Plastic scrap prices would be under pressure even if there was a shortage of scrap. Lower consumption has negatively affected waste generation and, at the same time, higher labour costs are affecting the availability of sorted plastic waste for the recycling industry. Low demand from recyclers has kept prices under pressure.

Prices of LDPE natural film were around EUR 450-470 per tonne in August, falling close to EUR 420 per tonne in September. By October, they lost ground further and went below EUR 400 per tonne. Recyclers have high stocks of granules so they have reduced their buying of plastics scrap.

K Fair 2022, took place in Germany in late October attracted participants from across the plastic industry’s value chain to share insights in reducing plastic waste, boosting the collection of scrap, increasing the recycling rate, and the greater use of recycled granules in new packaging.

Although everyone appears committed, the fact remains that the prices of recycled materials are compared to prime material and recycled granules are usually only seen as an alternative feedstock if there is a price advantage over prime. This needs to be changed and there must be premiums for recycled granules over prime plastics to boost both collection and recycling rates.

Meanwhile, sea freight is improving around the world. Low cargo movements have put pressure on the shipping lines and freight rates have started falling. These are the first declines after the disturbance to world trade caused by Covid-19. Access to lower prices in a more competitive freight market will help in the global movement of waste and recycled products.

UN’S PLASTIC FOCUS

In March, the United Nations Environment Assembly agreed to negotiate a legally binding global instrument on plastic pollution by the end of 2024. With a fast-tracked negotiation planned, the next two years provide an unprecedented opportunity for the world to solve the plastic pollution crisis.

For this treaty to be successful, it is essential that all stakeholders, including business and financial institutions, come together to bring their expertise to the process. As a result of this initiative, the ‘Global Plastic Treaty – High Ambition Business Coalition’ was established with Norway and Rwanda as co-chairs.

It is committed to ‘to develop an ambitious international legally binding instrument based on a comprehensive and circular approach that ensures urgent action and effective interventions along the full lifecycle of plastics’.

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