Slump and low oil prices batter sector

Economic impact of coronavirus worldwide strangles demand for scrap with few signs of a relief. 

No industry has been spared the consequences of Covid-19 — and that includes the plastics market which has been profoundly affected by the spread of virus. However, some respite has been granted with major economies such as the US recognising the vital role of recycling in the national fabric.

As a result, the industries have been exempted from some of the most draconian restrictions. China has been the major importer and user of plastic granules but demand has been supressed due to the closure of many industries in this crucial time.

Its economy at the standstill led to the piling up of a large number of containers at Chinese ports awaiting clearance for import and, elsewhere, a build-up of finished products awaiting export. Suppressed demand for recycled granules has affected the trading of plastic scrap from Europe to all global destinations.

Lower demand for recycled plastic granules also put pressure on plastic scrap prices. At the beginning of March, Asian recyclers were still buying some quantities of plastic scrap from Europe but prices reduced substantially in just two weeks due to the lower demand. LDPE natural film prices at the end of February were around EUR 210 per tonne level but, at the time of writing, were down to EUR 170-180 per tonne.  At the same time, prices of PP were down by almost 20%.

On the other hand, the price of virgin plastic also fell in March, because of lower crude oil prices. Nymex quoted crude oil at US$ 45 per barrel at the end of February and was as low as US$ 20 in mid-March.

Low prime prices pushed down the recycled granules market further. Most customers decided not to buy recycled granules in anticipation of high availability of prime plastics at deficient levels. Prime plastic prices also fell by over US$ 100 per tonne in just two weeks.

The full market analysis will be published in the upcoming issue of Recycling International.