Plastics sector at crossroads

Price stability in the secondary market is fragile as weakened economies, prime plastic rates and global reaction to US tariffs all hang over the industry.

The position of the plastic waste recycling industry in Europe is becoming critical. On the one hand, the poor economic situation is driving lower consumption, which means weaker plastic demand from the packaging, building and construction, and automobile industries.

On the other hand, lower prices for prime plastic are adding to pressure on European plastic recyclers as the use of recycled material in new products is less cost-effective compared to prime.

STABLE PRICES

In March, prices of plastic scrap stabilised. Demand from the export market has been good so the material has been moving consistently. The supply shortage in the European market continues due to the weak position of the member state economies. Most collectors complain about low tonnages available. HDPE is in good demand and most waste management companies segregate the plastic before moving it to Europe for recycling.

European recyclers are already struggling to keep their businesses running. Many are sitting on high stocks of material but, due to low demand, recycled goods are not moving as much as they would like. Some plants failed and filed for bankruptcy last year while others have struggled to maintain production and cash flow.

Inadequate working capital is putting them out of the market and forcing them to reduce costs. If the situation does not improve, more recycling plants could go.

PRIME PRESSURE

Prime plastic prices in Europe applied pressure in April. Monomer prices have fallen recently by over 50 Euro per tonne due to low crude oil prices. Some producers have announced price increases despite the lower monomer prices. It is yet to be seen whether such an increase would be accepted. In general, demand is very low and plastic converters are not keen on keep high stocks of raw materials.

Shipping freight from Europe to the Far East has been stable since the beginning of this year. Looking at the current situation, the US-Houthi escalation could impact Red Sea shipping once again. If the issue escalates, shipping routes will be further disrupted, affecting commodity trading.

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