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Demanding Times

Industrial plastics recyclers say there is big demand and don’t predict conditions changing any time soon.

Kristin Smith December 28, 2010

As 2010 comes to a close, industrial plastics recyclers say they are optimistic that the level of activity they are currently experiencing will spill over into the New Year. Recyclers of industrial plastics are all reporting high demand for their materials, and they don’t think that is going to change any time in the near future.

“Demand for industrial plastics is high,” reports Jose Boza, purchasing director of Houston-based Avangard Innovative. “If you have good product, it can easily be sold.”

The strong demand he is referring to is occurring domestically and overseas.

Zach Durant, sales manager, InterGroup International Ltd., Euclid, Ohio, also says demand is high for industrial plastics and it has been that way for the past year.

“I know there is a recession, I just don’t see it,” he remarks.

When the uptick in business first began, Durant says he thought it was merely because companies were restocking their inventories. Now he says it may be a combination of restocking coupled with the automotive industry making a comeback.

“That brings a lot of raw material demand,” Durant says of the automotive industry.

David Kaplan of Maine Plastics, North Chicago, Ill., is experiencing the same demand situation. He says the high demand plastics recyclers are experiencing bodes well for the economy as a whole. “We always consider ourselves sort of an indicator of what the economy is doing.

“If manufacturing is strong, we are getting scrap,” he explains.

The company, in turn, also is able to sell material, which is another indicator that the economy is improving.

“Demand is steady and strong,” Kaplan states. “Supply is also strong, depending on the sector.”

At present, plastics used in food and pharmaceutical packaging are strong for Maine Plastics and, depending on the manufacturer, Kaplan says automotive demand is steady. He says the automotive industry is still not back to where it once was but is better than in late 2008.

As for engineering grades, Kaplan says, “They are all in demand. There are markets for everything.”

Kaplan says this level of demand is not typical. “This is more than the usual seasonal increase that you see.” He adds that the increased demand is also indicative of price increases for recycled plastics.

This time of year typically sees increases in styrene demand because certain consuming markets are gearing up to make their products for later in the year, says Kaplan. He adds that he is able to get better pricing for high-impact polystyrene (HIPS) because of that seasonality compared with nylon and polycarbonate, which are not as affected by this seasonal cycle. However, he says, styrenes are firming up even beyond any kind of seasonal fluctuation.

VARYING SUPPLY

Scott Melton, president of ACI (American Commodities Inc.) Plastics, Flint, Mich., says supply is tighter for acrylonitrile butadiene styrene (ABS) and polycarbonate/acrylonitrile butadiene styrene (PC/ABS). Those two grades, he says, are in demand but very difficult and expensive to obtain. Polypropylene (PP) and high-density polyethylene (HDPE), on the other hand, are still readily available.

Melton predicts that within the next three months, prices for PP and thermoplastic olefin (TPO) are on their way down and prices for ABS and PC/ABS are on their way up.

“The lack of virgin ABS is affecting the supply of post-industrial ABS availability and, therefore, the price of the scrap,” says Melton.

In terms of supply, Durant says InterGroup is always scouting for additional material. “We can never get enough. We are always looking for more.”

Durant adds, “It’s not as hard to sell it as it is to buy it.”

A strong business segment for Intergroup is polypropylene (PP) films, which the company turns into pellets and regrinds. InterGroup also moves a lot of polyethylene (PE) and polyvinyl chloride (PVC), according to Durant.

The PVC market, Durant says, “died” in 2008 and 2009 but has been making a comeback since the summer. “It doesn’t look like it is slowing down this fall,” he observes.

Durant attributes the demand for PVC to home-improvement projects.

Supply is tight for Avangard Innovative, according to Boza. He says there is a lot of competition for available material. Generation is lower, he says, in light of market conditions.

“Overall volume is down since people are producing less, but what is available can be moved,” he notes.

’TIS THE SEASON

Pricing has remained steady across all grades of plastic, according to Durant. He notes that prices spiked in the spring but have come back down to the levels they were at prior to that spike.

Most commodity pricing has dropped down “a couple of pennies” during the last couple of months and will continue to do so over the holidays, Durant predicts. Prices will probably start to increase in January, he adds. Boza says he sees there being a small softening as is customary over the holiday period. “A lot of plants have shutdowns and produce less.” He says the market may be back up in late January.

FOREIGN INFLUENCE

Maine Plastics is experiencing polyethylene terephthalate (PET) pricing and demand going up, driven by demand in China, according to Kaplan.

Nylon and PC prices are higher this year than at this time in 2009, he says.

Demand from Chinese consumers also is greater this year than in 2009. “We are hearing from people we haven’t heard from in a while,” Kaplan says. Boza says he is also seeing the same trend for PET. “PET is in high demand right now,” he says.

Boza points to a shortage of cotton in China, which drove fiber prices up and increased demand for PET.

China is not the only country that is affecting the PET supply and demand situation in the U.S. Boza says a law passed recently prevents “dirty PET” from coming into the U.S. from Mexico. This, in turn, has caused PET supply to dwindle while demand has stayed the same, thus, increasing prices.

In fact, the U.S. Department of Agriculture has stopped the import of some types of plastic scrap into the U.S.

Post-consumer PET scrap from Mexico that would normally be brought into the U.S. is now going to China instead, Boza says.

FREIGHT FACTORS

Another factor that Boza says is affecting shipments is that there was a $300 increase in container prices in November.

“Freight is always a challenge,” admits Kaplan. He explains that when freight companies announce a price increase, it has an impact on how aggressive Maine Plastics will be in a particular month.

About 60 percent of Maine Plastics’ business is in overseas shipments. Kaplan says he expects things to remain strong domestically until the end of the first quarter or beginning of the second quarter of 2011, minus the lull around the holidays, which he doesn’t think will last.

“Typically, right after the first of the year, the domestic market will come back,” Kaplan says.

While Kaplan says he has been told overseas demand will remain strong, he points out that exports will shut down in China for the Chinese New Year. The demand won’t come back until two weeks after it is over, he predicts.

Only a small part of InterGroup’s business is in export, but Durant says he has noticed that there seems to be fewer ships in commission, which is making containers hard to come by. He also says the price of shipping overseas to India and China has doubled since the ocean freight rate trough of 2009.

“It’s pushed a lot of material back into the domestic market,” Durant notes.

In addition, over-the-road freight costs have gone up domestically 15 to 30 percent in the last year, according to Durant. It has also been hard to find trucks, a situation he says he hasn’t encountered since the summer of 2008.

However, Boza says over-the-road trucking has been steady.

POSITIVE PERSPECTIVE

Durant says he thinks that the high demand industrial plastics have experienced in 2010 will continue. “We feel like this is a new economic cycle. We see it rising over the next couple of years.”

He predicts that business is going to kick into high gear in January and February 2011. “All the signs are pointing that way,” Durant says, noting that the stock market is improving and the automotive industry is strengthening.

Durant says he sees plastics recycling as being strong and says it will only get stronger as time goes on. “More and more companies want to see the full life cycle of recycling where they can actually see their product coming back to them in one way or another.”

 The author is assistant editor of Recycling Today and can be reached at ksmith@gie.net

ABS SCRAP AT A GLANCE


PRODUCER PRICE INDEX HISTORY*

MAJOR END MARKETS

FLOW PATTERNS

SUPPLY & DEMAND FACTORS
Oct. 2010: 257.7
April 2010: 263.9
Oct. 2009: 233.4
April 2009: 218.4
Acrylonitrile butadiene styrene (ABS) is used in interior automotive trim and consumer electronics. It is the most widely used engineering thermoplastic. A report by Research in China indicates that China is the largest ABS consumer in the world and has held this position since as early as 2002. Demand for ABS is tied to the auto and appliance sectors. Scrap generation is reliant upon manufacturing production and recovery of obsolete autos and electronics.

*Courtesy of the U.S. Bureau of Labor Statistics; index is based on December 1980 average prices as 100

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