2020 will be a critical year for the plastics processing industry. The pandemic created a number of challenges just as the industry began to prepare to meet rapidly growing demand.
Restrictions around the world have hit the supply of raw materials, while falling prices for crude oil and primary polymer have hit demand and the economy, raising questions about the future of the entire value chain.
At the recent ICIS webinar on COVID-19 and Recycling Markets – What’s Ahead? Most of the participants cited the sharp decline in primary polymer prices and the global recession as the most serious challenges facing the recycling industry.
Challenges in the plastics processing sector?
Primary polymer prices declined by an average of 20% in the first half of 2020. And although prices have risen slightly over the past few months, they are still well below the 2018 and 2019 averages.
Recycled polymer markets are under pressure as flake producers find it difficult to compete with virgin polymers. Take, for example, the European PET market, where sheet makers are returning to virgin PET whenever possible. Prices for colorless flakes have dropped about 10% since March, and a similar pattern is observed for mixed colored flakes.
However, these drops were not enough to keep cereal prices competitive with those of raw materials. Post-consumer bale (PCB) prices were also hit by lower demand from the cereal sector. But even though prices for colorless PCBs have dropped 5% since April, and prices for mixed color PCBs have fallen by almost 30% since June, this decline was not enough to improve the profitability of flake manufacturers.
Recycled polymer markets are under pressure as flake producers find it difficult to compete with virgin polymers.
Percentage change in prices for primary polymer and crude oil
Recycled polymer prices are down 21% this year across India, Indonesia, Thailand, the Philippines, and Vietnam
So how does the current crisis compare to previous crashes in crude oil and primary polymer prices, as they did in 2008 and 2014?
Speaking at the webinar, Helen McGeough, Senior Plastic Recycling Analyst at ICIS, cited declining demand across many industries as one of the key differences. “It’s not just that secondary polymers are becoming uncompetitive compared to primary polymers. But demand across the board has declined. Take PET for example, where there was no regular summer demand as more people stayed at home. ”
In a recent GA Circular study of the state of the recycling industry, Tam Nguyen, Chief of Operations for GA Circular, indicated that recycled polymer prices in India, Indonesia, Thailand, the Philippines and Vietnam have dropped 21% this year. while the trade volume for those processors who managed to continue working fell by 50-65%. Given that much of the value chain is underfunded and prospects are weak, supporting the recycling sector will require policy measures such as procurement agreements and low-interest loans.
Commitment from brands, governments and consumers is critical to ensure the long-term survival and growth of the recycling sector