Processors seeking new markets because of restrictions on imports from Asia are holding back a fall in Virgin Plastics.
Posted by Surendra Borad Patavari of Gemini Corp
The European plastics scrap market in August remained largely unchanged with overall stability at all prices. Demand from foreign processors was limited due to growing restrictions on the import of plastic scrap imposed by various Asian countries. As a result of this, a significant part of the collected plastic scrap is increasingly being processed in the European Region. Many suppliers who used to export plastic waste began selling their material to various European recyclers.
This means that LDPE film processing in the European market will almost increase this year compared to last year.
In Europe, however, the availability of sorted plastic scrap for recycling is declining every month. The waste management company is not very clear why they now have to collect and offer less to processors. Most waste managers believe that reduced consumption and overall gloomy economic conditions are the main reasons for the inaccessibility of this market.
During August, recyclers across Europe faced questions around their sale of recycled pellets. One of the reasons for such a low level was in demand in Europe. With many non-performing industries, recyclers were waiting for buyers to return in September. On the other hand, recyclers were not able to move their recycled pellets to China, with low primary plastics prices there are said to be the reason.
The trade war between the United States and China continues to have a direct impact on many manufacturing units in China. Faced with increasing difficulties in the sale of finished products and products in the US market, Chinese manufacturers were forced to reduce their production volumes, which led to a decrease in Chinese demand for granules.
On the other hand, the high availability of primary plastics in the United States, which could not be shipped to China due to the mutual increase in duties, should have been offered to other Asian countries at very low prices. Many prices for primary polymers were as low as in the crisis period of 2008.
A sharp drop in raw material prices has reduced the possibility of selling recycled pellets from Europe to the Asian market. Previously processed pellets were shipped from Europe to Asian countries and especially to China, since high-quality processed pellets were available at competitive prices.
After China’s ban, plastic scrap prices in Europe fell to nearly half of their pre-bankruptcy prices, making recycled pellets from the European Region competitive for the Asian market. But low prime prices have caused problems for European processors, and currently they remain uncompetitive in the market.
In September, when European processors hoped to increase sales of their recycled pellets, they did not start on a positive note. Demand for recycled granules remains sluggish due to low prices for primary plastics. Processors were able to move very small quantities compared to their stock.
To maintain a healthy and reliable working capital, many enterprises have decided to reduce their recycling operations and reduce production capacity to less than half of their production capacity. This action is a precautionary step to ensure that they are not experiencing cash shortages or potentially major problems. The stock of recycled granules accumulated, so they were forced to make this decision.
The expected low demand for raw materials from European processors will create big questions about the prices of plastic waste. Unable to export such scrap metal, traders expect prices to be soft in the coming weeks unless there is a positive change in market conditions and the global trading situation.