LDPE film demand increases on the West Coast
Photo courtesy of PreZero US Inc.

LDPE film demand increases on the West Coast

The tight trucking market also is affecting movement.

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January 19, 2021

Plastic film scrap has seen strong demand heading into 2021, and the availability of polyethylene terephthalate (PET) bottle scrap has tightened. Regardless of which material contacts are sourcing, all of them point to transportation issues that are making movement of material more difficult and expensive.

“Scrap availability for postconsumer A Grade film is very tight,” says Charlotte Fischer, senior commodities manager for PreZero US Inc.’s Jurupa Valley, California, plant. She attributes that in part to more aggressive buying by consumers in Indonesia, Malaysia and India, the latter of which she describes as actively buying off the West and East coasts. Additionally, she says, “Some LDPE (low-density polyethylene) mills in Taiwan are coming into the market to buy film.”

Fischer says new domestic consumers also have emerged in California and are buying trial loads of film as they ramp up their reclamation operations.

“The market is getting tighter and tighter,” she says. “It’s going to be an interesting year.”

As one would expect, pricing for film scrap has increased along with demand.

“I am looking for 2021 to be a better year than 2020. I don’t think it can be anything but better, but you just never know.” -- a PET reclaimer based in the Midwest

Fischer says A Grade LDPE film bales were selling for 10 to 11 cents per pound in the summer of 2020. By the fall, the material was selling in the 13 to 14 cent range. As of mid-January, it is selling for 16 to 17 cents per pound delivered to domestic consumers or FAS (free alongside ship) to the Port of Long Beach, she says.

When it comes to PreZero’s recycled pellets, Fischer says, “Demand is definitely up. We have been selling out every month,” though she adds that operations are still ramping up at the company’s Jurupa Valley plant after it experienced COVID-19-related delays with its startup last year.

Virgin LDPE pricing also has increased recently. “Last spring, virgin pricing was way below where PCR (postconsumer resin) was,” Fischer says. “It’s now way above where PCR is at.”

However, she adds, PreZero is more focused on selling to consumers that are committed to using recycled content rather than to those that are solely motivated by pricing.

Fischer says her colleague who is buying for the company’s South Carolina facility, which is currently reclaiming mixed rigid plastics (MRP), has had no issues securing material. “In the fall, MRP can get pretty tight. He didn’t have that issue this fall going into the winter. There is more than enough MRP to go around.”

By August of this year, Fischer says, PreZero also should be processing MRP in California, while the South Carolina location should be processing film in March and will be ramping up its buying of this material to correspond with the startup of that line.

A PET bottle reclaimer based in the Midwest says scrap material was readily available over the last three to five months following some tightness early in the pandemic related to changes to municipal recycling collections and reduced staffing at material recovery facilities in line with social distancing measures. However, she says, bottle bale supplies began to tighten in January, with a corresponding increase in pricing, though modest.

She says her company is seeing increased demand for its recycled PET (rPET) from new customers and from existing customers that want to increase the recycled content in their packaging.  

That interest has not served to boost the price of PET bottle bales significantly, however, in her region. She says pricing is “phenomenally low,” adding that it would normally increase over the winter as supply wanes.

Paul Bahou, president of PET reclaimer Global Plastics Recycling Inc. in Perris, California, says of scrap availability, “When the weather gets colder, supply is tighter and so pricing goes up.” In California, that tightness has been exacerbated by increased buying out of Mexico, he says, as is the case for LDPE scrap. “Part of that has to do with changes in the relative value of the currency,” he says.

However, Mexico’s peso lost value in early January, while the U.S. dollar increased in value.

Bahou adds that California’s AB 793, which is designed to bolster the market for rPET in the state, is poised to change the market dynamics in the region. Manufacturers must meet a number of deadlines for recycled content, achieving 15 percent by 2022, 25 percent by 2025 and 50 percent by 2030.

Grade A PET bottle bales in California are selling for 16 cents per pound as of mid-January, he adds, though transportation costs are adding considerably more to the cost of bringing in material.

Bahou jokes that securing a truck costs “a full semester of college tuition.” He adds that transportation rates are “more regional than they used to be,” with long-haul prices having increased significantly. For example, the rate to ship via truck to Texas from California has tripled, he says.

Fischer says she’s seen rates double for long-distance hauls and often increase at the last minute. Availability also is tight.

The PET reprocessor in the Midwest also is having issues with long-distance trucking, which has caused her company to plan further ahead in this area. “We are trying to look two and three days ahead and try not to wait until the last minute.”

She also has seen increases in rates at the last minute, though she adds that tends to be on hauls to more remote areas where it’s more difficult for the trucker to get a back-haul.

Despite this issue, the reprocessor says, “I am looking for 2021 to be a better year than 2020. I don’t think it can be anything but better, but you just never know.”