A Head Start

The mild winter in the Midwest and East has helped to buoy markets for secondary plastics.

The mild winter in the Midwest and East has helped to buoy markets for secondary plastics. Generation of post-consumer material remained strong throughout the season, and demand for HDPE (high-density polyethylene) and PP (polypropylene) for use in pipe manufacturing was strong as a number of construction projects were able to go ahead in light of the mild weather, sources say.

As a result, a reprocessor based on the West Coast says demand for recycled plastics used in construction applications started sooner than in typical years. “From January onward, demand was similar to what we saw in May and June of last year,” he says of PP and HDPE. The reprocessor characterizes demand for these secondary materials as “huge.”

“PET (polyethylene terephthalate), HDPE, LDPE (low-density polyethylene) [and] PP grades are strong due to demand and increases in virgin polymer pricing,” a MRF operator based in the Upper Midwest adds.

Virgin pricing for these materials has increased because ethylene production capacity went offline earlier this year. According to a report by ICIS, with U.S. offices in New York and Houston, U.S. ethylene for April traded at a record 75.13 cents per pound April 4 in response to tight supply and news of another cracker outage in the U.S. Gulf. ICIS says this is the highest price seen for an ethylene spot transaction on its database dating back to 1986.

The MRF operator says generation of post-consumer grades is up slightly, adding “winter weather was a nonevent mostly and did not reduce volumes as is typical for the winter.”

Post-industrial generation can be characterized as up slightly as the U.S. economy continues to strengthen, he says.

Domestic prices for secondary plastics are at record highs, according to the West Coast-based reprocessor. He says East Coast buyers are offering prices in the mid-30-cents-per-pound range for PET, while the price is a bit softer on the West Coast at 30 cents per pound. “The Midwest and East have overtaken in terms of demand,” he says. “More supply has to come on stream, or prices are going to go higher.”

Export pricing for secondary plastics is somewhat soft compared with domestic demand, according to sources.

Despite the softer pricing, the MRF operator based in the Upper Midwest reports “there is more movement of mixed or combination loads to China, as exporters have learned to work with Chinese customs on load acceptability.”

The West Coast-based reprocessor says reading the intentions of Chinese consumers is difficult, as they enter and exit the market unexpectedly. “I know when end users here will slow down and pick up,” he says of consumers in the U.S., “but it’s hard to predict what will happen in the export market looking six months out.”

Rising fuel prices are reflected in trucking costs, sources say. In response, the reprocessor’s company has been trying to use rail for long-haul trips whenever possible. “The average cost ends up being a big relief compared to trucking,” he says. For example, a 1,600-mile trip that would have cost $2,800 by truck cost $2,000 by rail.


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