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An industry analyst recently noted that the low price of virgin resin poses challenges in ensuring that end users choose to use recycled plastic. The | Batuhan taskinkaya / Shutterstock
The coronavirus pandemic has added to the ongoing fight in the plastics recycling market to cause price fluctuations and create uncertainty about how end users will meet their sustainability commitments.
Recycling markets for almost all materials have been challenged in recent years due to changes in demand abroad. Additional pressure has come from tariffs on recycled materials and other goods, as well as constant fighting in the cargo market.
Now, the coronavirus pandemic has added health and safety concerns, job shortages, and a general slowdown in manufacturing.
“I think it’s every possible challenge you can imagine,” said Joe Pickard, chief economist at the Scrap Metal Recycling Industries Institute (ISRI), at a webinar organized by various recycling stakeholder groups last week. He said the current situation may represent the most difficult time that many recycling companies have faced.
For plastics, the impact of the coronavirus has caused historic drops in oil prices, meaning virgin plastic could be significantly cheaper than recycled resin for the foreseeable future.
“We will really see a test of sustainability for some of the brand owners and their goals,” said Joel Morales, senior director of Polyolefins Americas for market research firm IHS Markit.
Experts presented the current market and its projections for the future at last week’s webinar, conducted by the National Recycling Coalition, the US EPA. USA And the RRS industry consultant.
PET plastic feels the heat
Plastics recycling companies are experiencing pressures similar to those in other sectors: They are adjusting safety procedures in the workplace to prevent the spread of COVID-19, displacing operations in response to changes in supply and demand. , and looking for federal financial assistance programs.
But they face an additional hurdle, a free fall in crude oil prices, to the point where some oil futures contracts had certain ratings with negative values last month, “making the oil of the United States not only not have value but also be a liability, “according to OilPrice. com.
The drop in oil prices is the result of a decrease in world oil demand due to the coronavirus, as well as an increase in production after disagreements between the main oil-producing countries. Although the main oil producers reached an agreement on production cuts last month, excess supply continued until the end of April. In the past few days, the market has seen a slight rebound.
Virgin plastics prices tend to follow oil and natural gas because petrochemicals are important raw materials for plastic production. And the price of recycled plastic follows virgin trends.
“The premium price we have to be willing to pay for recycled PET will be significant and higher than we previously expected,” said Tison Keel, director of PET derivatives, PTA and EO for IHS Markit, at the webinar.
The low virgin price poses challenges in ensuring end users choose to use recycled plastic, particularly PET, Keel explained.
“It will be difficult,” he said. “You have too much raw material, too much product. You have very low-cost crude oil that will further depress prices.”
According to IHS Markit, the recycled plastics markets will be pressured by preferential prices for at least the next two years. During that time, “even in the most optimistic case, the price of crude oil we forecast will not return to where it has been for the past few years,” Keel said.
Also, the price of recycled plastic cannot fluctuate as easily as the virgin price. Whether virgin prices are high or low, the cost of producing high-quality recycled granules remains largely the same, Keel explained.
Sustainability measures can be put on hold
The PET situation is similar to that faced by the PE and PP markets, with virgin prices falling to levels they have not reached in over a decade, but the cost to produce recycled resin remains constant.
“We thought the conditions were challenging before all of this; conditions for waste pickers are now even more challenging, ”said Morales of IHS Markit.
Before the coronavirus impacts, there was a large increase in the production capacity of virgin PE and PP that was brought online. But now “the global impact in the world is much less demand than we expected” for both PP and PE, Morales said. That means resin producers will be challenged with their margins, he said.
However, in some markets, the coronavirus is increasing the demand for resin producers.
Morales noted that bag bans are delayed or suspended in numerous communities across the country, explaining that this is another unexpected change in the plastics markets. Markets that are expected to drop between 5% and 8% due to stock market bans are now “booming” due to stock market law suspensions, Morales said.
“The single-use plastic definitely received an injection in the short term,” Morales said. “We are trying to determine how long that will last.”
IHS predicts that sustainability measures will come back into play in the future, but it is unclear if that will start again later this year, or if priorities change until long after the impact of COVID-19.
Inhibiting progress in infrastructure expansion
The plastics recycling sector was already struggling on the supply side, and experts say not enough PET is collected to meet projected demand. Efforts are underway to improve collection, with more emphasis on this area seen in the past 12 months, Keel said.
But that momentum has slowed, and in some cases, pickup is backing up through sidewalk program suspensions and container depot swaps.
“COVID-19 has really thrown a spanner in the works, so to speak,” Keel said.
As a result, more PET is being introduced into the landfill, Keel said, and he anticipates that it will be difficult enough for PET collection to return to its previous rate any time soon, let alone to grow to new heights.
Recycling stakeholders will need to push even more for the public to focus on the importance of recycling plastics as a way to reduce plastic litter and marine litter, Keel said.
Beyond harvesting, there is also a shortage of resilience compared to virgin production. Nina Butler, CEO of More Recycling, highlighted new figures showing that post-consumer polyolefin reclaimers have the ability to recycle only 5% of the amount of material produced by the 10 largest producers of virgin polyolefin each year.
That indicates a clear need for greater resilience, Butler said. But that’s hard to sell in today’s environment: With lower harvesting, fewer markets, and an oversupply of virgin material, the value proposition is “really evaporating,” Butler said.
Butler said the entire recycling system, from collection to end-market demand, feels crushed. But he suggested that the current fight is an opportunity for committed stakeholders to duplicate themselves in addressing those issues.
“This is the moment that I think will define sustainability leaders,” Butler said. “From policy makers to producers and consumers, we all play an important role.”
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