Plastic scrap gains as prime prices rise

Larger converters still have to realise the value of using plastic scrap.

2021 started with uncertainty in the trading of plastic waste worldwide because many countries did not adopt the new Basel Convention rules when they came into force on 1 January. There was an absence of information from importing nations about how localised legislation was being updated. They appeared to be unable to respond to the queries sent by countries looking to export plastics scrap about how to secure consent to trade between their two countries.

There was enormous concern from those in the European market that this movement of plastic might have to end because the rules were unclear. In 2019, Europe exported over 1.85 million tonnes of recyclable plastic scrap and this volume was at stake due to this uncertainty.

EU GUIDANCE

The European Commission published guidelines about how green-listed waste could be traded within Europe under the new Basel Code EU3011 and within OECD countries under the new code B3011. The guidance also mentioned WSR 1418/2007 by which shipments to non-OECD countries are subject to a notification process. The Commission is expected to update the WSR shortly to establish rules and regulations under which traders in member states can export plastic scrap to non-OECD countries.

Most European countries resolved to stop the export of plastic scrap to non-OECD countries, increasing fears that the trade would slow down substantially, resulting in lower prices for plastic scrap.  On the other hand, the prime plastic market worldwide enjoyed high demand as national economies recovered well during January.

Converters secured good orders but they kept their stock levels to the minimum possible due to continuing uncertainty about the prevalence of Covid-19 everywhere. Vaccines were now being delivered, which moved the market onto the positive side, and convertors were relaxed because they were securing prime plastic when they needed it.

The situation turned around quickly when several petrochemical plants were shut down with some claiming force majeure. This resulted in a shortage of prime material in the market.

Prime prices

Oil prices have also played a vital role here. At the beginning of January, NYMEX listed WTI crude oil trading at US4 48.50 per bbl. The price jumped by 10% and reached US$ 53.50 per bbl in the middle of the month, allowing prime plastic producers to raise their prices.

In February, more petrochemical plants went offline for scheduled maintenance, so a shortage of material became a concern for all converters. Crude oil price kept on its upward track and bids jumped over 18% in February. In the second half of the month, NYMEX listed WTI crude oil prices at US$ 60.50 per bbl, a big jump that affected the price of prime plastics.

Prime polyolefin jumped by more than 25% with low availability. Storms in Texas, the US petrochemical hub, added more momentum to this shift and prices soared by another 25% because no prime plastic was being shipped from the USA. In the first two months of 2021, prices for prime polyolefin plastic were up more than 50%.

Scrap benefit

The plastic scrap market received considerable support due to this significant rise in prime plastic prices worldwide. Lower availabilities of prime plastic supported the use of recycled pellets across the world. This sudden change lifted the plastic scrap market from its pessimistic mood. High demand for recycled pellets supported an increase in the prices for plastic scrap.

LDPE natural film scrap, which in January was trading at EUR 245 per tonne, jumped by 20% and reached EUR 300 per tonne by the end of February. Recycled plastic prices overall jumped 10% during these two months with good demand from traditional converters. A large quantity of plastic scrap is still moving to the Asian market.

If we compare the prices and demand for prime and recycled material, a big gap was visible. Prime prices jumped by 50% amid concern that no material would be available. Prices for recycled material increased by around 10% in the same period. This shows that significant potential remains for an increased use of recycled material.

Most recycled granules are sought by small converters/manufacturers because they are cheaper but they are not yet commonly used by big converters/manufacturers instead of prime plastic.