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A Cloudy Sky

Features - Commodity Focus

Despite considerable growth in global plastic scrap markets in the past decade, traders can still contend with uncertainty from month to month.

Brian Taylor November 15, 2012

Reflecting the turbulent business atmosphere that has characterised 2012, markets for plastic scrap continue to bounce along from month to month, with traders uncertain exactly what might occur next.

By no means is it all gloom and doom. There are competitive, global markets for many types of plastic scrap (such as polyethylene terephthalate [PET] bottles), though for other types of plastic any such intensity of demand can vary from month to month.

In trying to look at plastic scrap markets from a historic perspective, the clouds in the sky currently seem less intimidating to some observers than they may have 10 or 20 years ago, thanks largely to a wide range of end markets that seem much more firmly entrenched than they were in earlier decades.


Ups and Downs
A review of Recycling Today Global Edition plastic scrap market reports from throughout 2012 shows a pattern of optimism and pessimism vying as the leading sentiment amongst recyclers and traders.

In May of 2012, at the Bureau of International Recycling (BIR) World Recycling Convention in Rome, speakers at the Plastics Division meeting referred to some falloff in plastic scrap demand and pricing in the first several months of the year.

Plastics Division Chair Surendra Borad of Belgium-based Gemini Corp. N.V., reading from the report of Netherlands-based recycler Peter Daalder of Daly Plastics, noted, “Many re-processors inside Europe suffer from a more difficult sale of their granules.”

Borad indicated that export markets are not necessarily better, commenting that “demand from India is very low.” Factors causing the weak Indian demand at that time, according to Borad, were the depreciation of the Indian rupee by 10% in one month and freight rates from Europe to India that had increased by 150%.

Reporting on behalf of Gemini’s U.S. office, Borad said, “The export of PET from the United States has come to almost a standstill as export prices have dropped by around $150 to $200 per tonne.” He continued, “Still, the domestic U.S. market for PET is stable and, hence, most materials are going to domestic destinations.”

By late summer and early fall of 2012, Recycling Today Global Edition Senior Editor Dan Sandoval was finding improved sentiment among plastic scrap traders.

In early September, several European recyclers indicated that plastics markets were turning toward the positive. One Western European recycler reported that Chinese buyers were starting to come into the market asking for slightly larger volumes.

This was seemingly occurring after the summer holiday season in Europe, which typically reduces the flow of plastic scrap in August. A European exporter said that starting in early August there was fairly good demand for plastic scrap from Asian buyers. “This follows a mood that was fairly bleak in June and even July,” said the exporter.

As 2012 draws to a close, however, plastic scrap recyclers and traders seem to have retreated back into a mood of concern and negativity.

In the interviews conducted for this issue’s Plastics department (see p. 11), sources contacted expressed renewed concerns about the short-term outlook for plastic scrap markets.

Ongoing uncertainty about Europe’s economy has continued to stifle the generation of plastic scrap in that region. Despite less material being available, several processors in Europe say prices also have been turning downward, creating an unwelcome double whammy of less material and lower prices.


Shipping Lanes
Providing additional challenges for global traders of plastic scrap has been the two-headed hydra of quality issues and severe changes to customs or inspection processes in different parts of the world.

Throughout 2012, customs officers in China have been paying a great deal more attention to containers carrying plastic scrap. This scrutiny, according to sources, is tied into new appointments to the customs bureau in South China, which also ties in to the leadership transition taking place in China. Regional inspectors, say sources, do not want to be accused of negligence in their jobs and thus have spent much of 2012 trying hard not to be the customs officer who lets a contaminated shipment through the inspection process.

In late summer of 2012, one exporter commented to Recycling Today Global Edition about customs agents in Hong Kong: “Over the last two months they have been opening up all the containers.” As a result, the time to move material from its inbound port to its final destination was often doubled.

Thus, Hong Kong also became a more expensive area to ship material into in 2012. “The duty is so high there that it is almost impossible to ship into [China] from there,” said one broker.

In late August, according to a press release from the newly formed China Scrap Plastics Association, the Beijing-based group was created “to [promote] scrap plastics [as] harmless resources, produce a harmonious environment for the development of scrap plastics and resolve the key issues of restricting the development of [the] scrap plastics industry.”

Addressing Customs clearance issues in the South China port of Guangzhou was specifically stated as one of the association’s goals, as was the wider goal of “promot[ing] communication and [information] exchange between industry and government.”

The China Scrap Plastics Association, “co-founded by more than 50 industrial enterprises,” says it will hold an inaugural ceremony in conjunction with the Eighth China Plastics Recycling Exhibition & Conference, 6-7 Nov., 2012, in Beijing.

As noted earlier, currency volatility was one of the reasons India was an on-again, off-again export destination for European and American plastic scrap exporters throughout 2012.

Within Europe itself, trade patterns were temporarily disrupted by a piece of protectionist legislation emanating from Italy.

At the BIR Convention in May, guest speaker Stefano Fiore with Italy-based Logistics Group S.r.l. said current EU legislation on trans-boundary movements of waste “is interpreted and applied in Italy differently from the other member countries.”

In May of 2012, Italy repealed an export restriction law it had recently enacted after strong objections from the BIR and other groups. Even after the repeal, “many other problems remain,” said Fiore. “Until the difference between waste for disposal and waste for recovery is clarified within the Italian mindset, there is very little possibility that this sector will come into line with the operations of other member countries.”

Fellow guest speaker Alessandro Danesi, managing director of Stena Technoworld in Italy, also pointed to frequent changes in regulations as a feature of the Italian recycling market. “They are very difficult for us to follow,” he said of Italian regulations.


The Bigger Picture

Current economic and fiscal challenges in Europe, the unpredictability of the presidential election in the U.S., and the potential adjustment to slower economic growth in China have all played into the up-and-down plastic scrap markets of 2012.

In contrast to these business cycle factors, however, several long-term trends have the potential to create the type of stability in plastic scrap markets that has not previously existed.

At the same BIR Spring Convention where short-term stressors were noted, Gemini Corp.’s Borad and others pointed to these encouraging trends.

Borad noted that Saudi Arabia-based petrochemical giant Sabic has embarked upon the “business of reprocessed plastics in a rather big way.” Borad said, “Market forces and market sentiments have compelled the leading petrochemical producers to think of reprocessed materials as complementary to existing business. This is very positive news.”

And while the supply of industrially generated plastic scrap may be in a down cycle in Europe, Borad pointed to an alternative source. “The availability of plastics from waste electrical and electronics equipment (WEEE) will increase five-fold during the next seven years,” he stated. “This means there will be 10 million metric tons of WEEE scrap compared to the existing target of 2 million metric tons.”

Another factor in favor of plastics recycling in the long-term has been the widespread tie-in of plastics recycling to the corporate sustainability goals of global manufacturing firms, as reflected to some extent in the Sabic initiative.

General Motors (GM), which is based in the U.S. but has production facilities around the world, has recently been touting its dedication to its zero-landfill policy. This effort has included a sustained effort to ensure that plastic scrap is recycled and potentially put to use by GM itself or its components suppliers.

Around the world and in virtually every manufacturing or consumer products sector, evolutionary changes in business practices such as those occurring at GM are providing a solid base for the future of plastic recycling markets.

 

The author is editorial director and associate publisher of the Recycling Today Media Group and can be contacted at btaylor@gie.net.

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