company news about Plastic Reclaimers Optimism Looking Forward

In recent years, some observers have pointed to lingering high prices for some post-consumer resin (PCR) at times when virgin prices are low as evidence of market decoupling caused by brand owner PCR goals and minimum-recycled-content mandates. But at the Resource Recycling Conference, Bassetti of ICIS refuted the idea that recycled and virgin PET markets have decoupled. She showed a pricing chart demonstrating that RPET pellet prices roughly followed virgin over the past five years.

“This just means that we have to keep an eye on what the virgin prices are and keep following those, because that’s going to deeply affect where the recycled prices go,” Bassetti said. RPET tends to be more expensive than virgin, but buyers have been willing to pay extra – to an extent. “Often the buyers are willing to pay the 10%-20% premium on the recycled plastics. That’s what we’ve seen,” she said. “But when it starts getting past that 20% is where we start having that cost sensitivity substitution. So if you look where we are now, the price difference is about 30%.” That’s an issue Greg Janson has seen firsthand. “We have seen orders literally disappear.”– Greg Janson, President and CEO of Granite Peak Plastics. Janson, who is president and CEO of St. Louis-based reclaimer Granite Peak Plastics, pointed to wide-spec virgin plastic pricing as luring converters away from recycled resin. His company specializes in polyethylene and polypropylene.

“Many molders have decided to replace recycle with wide spec. When this happens, liquidity is sucked out of the market and many small reclaimers cannot survive,” said Janson, who wrote about the wide-spec issue in March. “We have seen orders literally disappear.”

The next issue is the actual price. If reclaimers can get orders, converters are offering to pay a price that’s below the reclaimers’ feedstock costs and operating expenditures, he noted. “It is my opinion that this is why many molders are reluctant to sign contracts for recycle,” Janson said. “Even though the average cost of many recycled grades will beat the average cost of wide-spec and prime grades over time, molders don’t want to lose the option of switching back and forth from wide spec to recycle solely on price.” As a result of the tough markets, Granite Peak Plastics has reduced operations and is focusing on producing the resin grades that are going to customers who are committed to using recycled plastic, Janson said. Overall, he added, what’s needed are contracts for recycled resin that are pegged to indicators that float with the market, with hard pricing floors and soft ceilings.

The complications aren’t just affecting reclaimers who produce mechanically recycled PCR. They’re also impacting negotiations with large chemical recycling operations. Executives at chemical company Eastman noted during their recent earnings call that demand for the company’s chemically recycled PET remains strong globally, but low pricing for virgin and recycled PET is slowing the signing of offtake agreements with brand owners. “They’re very complicated contracts. And the current market conditions, I would say, are sort of slowing those discussions down a little bit,” CEO Mark Costa said during a July 28 conference call with investors. “So, if you’re looking at the PET market, whether it’s VPET or RPET, those market prices have come off in a pretty significant way.”

Industry players expressed optimism that markets would improve, with some pointing to minimum-recycled-content mandates as driving brand owner demand for PCR over the longer term. Bassetti pointed to legislation being implemented in California, New Jersey, Washington state, Maine and Connecticut as helping to drive brand owner demand. The laws in those states require varying levels of PCR in PET beverage containers, with some requiring PCR in other products, as well. California’s mandate requires 15% PCR in bottles covered by the state’s beverage container redemption program starting in 2022, with enforcement starting this year. The requirement rises to 25% in 2025.

“The demand is going to start moving slowly but surely back up and those prices are going to come back up.”– Andrea Bassetti, Senior Analyst at ICIS. Bassetti predicted such requirements would impact demand over the short term, defined as the next six months to a year.
“The demand is going to start moving slowly but surely back up and those prices are going to come back up,” she said. “So we really see all of these legislations that have already been passed having a really big impact on the market in the near term.” Keller of Republic Services said he isn’t seeing a nosedive in polyolefin pellet pricing. His company recently signed an agreement with plastics producer Ravago to build and operate four polyolefins recycling plants around the U.S. in coming years.

The companies are setting up a joint venture called Blue Polymers. At the same time, Republic is boosting its ability to sort scrap and produce RPET pellets with the planned opening of several Republic Polymer Centers around the country. “From a trend line perspective, we feel good about pellet pricing,” Keller told Resource Recycling. He said off-spec virgin has historically been a factor affecting PCR markets to some degree, but he predicts a decoupling of virgin and recycled resin markets. “It’s less of a concern over time as we see brands stepping up to their voluntary goals and we see more minimum-content standards in legislation,” Keller said. WM, which has also taken steps to vertically integrate in plastics recycling, sees stable longer-term demand from consumer product brand owners.

“We think long term, if you think about what’s happening with brands, they all have commitments to buy recycled content, and we think that will come back, they are going to come back into the market to buy to meet their commitments,” Hemmer said. “It’s one of the reasons why we’re excited about some of our investments that we’ve made in plastics recycling and advancing those,” she added. With over three decades of experience in plastics recycling, Moucachen of Merlin Plastics pointed to the longer-term fluctuations in commodity prices, with an inevitable rise.“What I see is that this is just the same cyclical pattern that we have seen repeated over and over again these past 30 years,” he said. “It will again correct itself at some point and we just have to weather the storm as best we can.”

Bassetti said she and her analysts see reason for optimism among recycling companies. “I know we’re rock bottom, but I do want to finish on a positive note in saying that we really see that there’s going to be a lot of space and a lot of growth that needs to happen in this near term,” she said, “and so we’re hoping and we’re predicting that that demand is going to drive back up.