Plastic scrap grades have seen fairly significant price erosion over the past several months. There are a myriad of reasons for the decline, although most plastics recyclers say the steep drop in oil prices is one of the biggest factors.
The slide in oil prices has had a direct impact on resin and plastics prices, including those for plastic scrap. It also has been magnified by the general economic slowdown through most of the world, including China, a significant end market for plastic scrap from Europe.
With China and Asia overall playing a major role in the plastic market, both as consumers of scrap and producers of finished product, the slump in that region has pushed—or kept—more of the material back on to the European continent, creating a more challenging market for European plastics recyclers and flooding plastic scrap consumers there.
According to a recent report by Worldwatch Institute, the Asian market, including China, makes up about 87% of the total plastic scrap export market from Europe. The report also says close to half of the world’s plastic is produced in Asia.
As for China, the dominant player in Asia’s plastic market, changes in that country’s buying strategy have significantly affected markets in Europe as well as North America. The implementation of the “Green Fence” program several years ago drove down prices throughout Europe. Additionally, China’s efforts to prevent the dumping of low-value, contaminated scrap also forced many European plastic scrap dealers to clean up their shipments.
The “Green Fence” policy appears to be less of an issue at the present time. Many sources say the policy has resulted in fewer questionable loads being shipped to the country. One grade in particular that seemed to be targeted by inspectors, mixed plastics, has remained a less frequently shipped commodity to China.
For exporters, while China has been the biggest end market for plastic scrap, some exporters have been shifting loads to other countries in Southeast Asia.
One region that is starting to generate more interest has been India. A recent report by the Indian organization Plastindia Foundation notes that the country could be a significant consumer of recycled plastics from Europe. The report notes that while India consumes far less plastics than other countries, its appetite is expected to grow by 10% per year through 2018.
Still, plastic scrap prices for the first part of 2015 look to be continuing on a downward trend.
For many European recyclers the decline has been extremely damaging, with a number of companies throughout the continent having been driven out of business on account of the difficult markets of late 2014.
One of the most high-profile cases was that of ECO Plastics, a U.K-based plastics recycler that, at its peak, was able to sort and process around 150,000 tonnes of PET bottles per year.
Because of difficult markets, the company was forced into administration and has since been acquired by the German private equity firm Aurelius. Other plastics recyclers are running into similar challenges.
Along with economic concerns, the plastics recycling industry was dealt a possible legislative setback late in 2014 when the European Union decided to table its highly anticipated Circular Economy package. The package was designed to increase recycling levels for EU countries as well as to tighten rules on incineration and landfills.
In deciding to table the package, EU ministers claimed that they are planning on introducing an improved program later in 2015 designed to be more effective in boosting recycling efforts throughout Europe.
Although short-term markets are challenging, there are some positives. The German plastics recycling company MTM Plastics has invested close to ¤8.8 million to expand production facilities in Niedergebra, Germany. U.K.-based Jayplas has installed new equipment, including an LDPE wash plant. And in the Netherlands, QCP has broken ground on a polymer recycling plant.