APPLYING THE BRAKES
According to sources, it appears as if markets for secondary plastics may be experiencing some softening as the first quarter of 2010 comes to a close. A broker based in Ontario claims that prices may be poised to drop mid-April, adding that as of late March there were rumors that Asian buyers would be backing off. In any case, he says, he believes markets will settle out sideways for a time.
The broker adds that the secondary plastics market heated up pretty quickly this year, which he says is dangerous. “When things go that high that fast, someone goes bankrupt.”
He adds, “PET (polyethylene terephthalate) was rising almost weekly for a while. That was a little scary.” However, in March, buyers seemed somewhat less eager, he says.
The broker also expresses concern about the developments in the North American market, saying he believes there is 40 percent more plastics recycling capacity in the region than available supply.
In light of this, domestic demand remains “good and strong,” according to the broker.
He attributes the softening in export demand in part to rising container and shipping line rates.
A reprocessor based in the Midwest says some steamship lines have been holding on to containers in order to get more for them when rates increase April 1.
A broker based in the Southeast also says container availability is tightening, as does a processor who is also based in that region.
When moving material domestically, trucking rates domestically remain favorable. “I’ve been getting the same rates for almost a year on 99 percent of locations,” the broker based in Ontario says.
However, the Southeast-based broker says he’s experienced some tightening in trucking availability at the end of the first quarter, with some drivers being lured to lanes that are paying higher rates.
“Supply is tight with manufacturing increasing and consumption going up,” the reprocessor based in the Midwest says of secondary plastics demand in general.
“Generation is still not where it needs to be,” he says of post-industrial and post-consumer material. “Prices have gone up, but volume has not gone up.”
This broker also foresees a decline in export demand and pricing, though, he says, it remains strong as of the third week of March, even for HDPE (high-density polyethylene), which normally remains in the domestic market.
Buyers in Northern China are seeking more lower-end secondary plastics than those in the Southern part of that country, according to the Midwestern reprocessor. Chinese buyers had shied away from lower-end material during much of 2009.
Pricing for HDPE has picked up since the start of the year, with the Southeastern broker noting that pricing is higher than it has been in several months. He also notes that the differential between the price of natural HDPE and the colored material has narrowed to the 3- to 5-cent range. He says that this can lead to less sorting of the material, as it provides little advantage to processors. He adds that the differential between natural and colored HDPE is normally in the 10-cent range.
The processor based in the Southeast says her company has benefitted from increased business in the first quarter. “More businesses are looking at their landfill costs and making more conscious efforts to divert recyclables out of their Dumpsters,” she says. “Also, our share of gain in the market is due to others dropping out of the industry due to the recession.”
She notes increasing demand and higher pricing for HDPE, HMW (high molecular weight HDPE), PET and PP (polypropylene) as molders ramp up their orders.
(More information about secondary plastics is available at www.RecyclingToday.com.)