A continued drop in the price of oil is fuelling concerns among plastics recyclers over the demand for recyclate and recovered plastic polymers.
This concerns come after warnings to local authorities that the price paid for waste materials such as plastic bottles is likely to decline (see letsrecycle.com story).
The price of Brent Crude Oil has today (January 7) fallen to its lowest level since 2009, trading at around $50.65 per barrel, down from around $106 twelve months ago.
A source within the oil industry told letsrecycle.com that oil prices have fallen ‘quite dramatically across the board’ and it is currently not known when the trend will reverse.
In the plastics sector, the dropping oil price is seeing the cost of virgin polymers fall, which in turn puts downward pressure on the value of recycled plastics.
Some manufacturers opt to use recycled polymers in their products due to its competitive cost compared to virgin polymers while others use it for environmental reasons. But with virgin polymer prices falling, there is less, if any, cost advantage for recycled materials. This reduced demand is affecting plastic scrap, with demand for material from households and businesses such as PET bottles and plastic films said to be low.
Chris Dow, chief executive at Dagenham-based plastic bottle reprocessor Closed Loop Recycling called for manufacturers to ‘stand behind’ the recycling industry in the coming weeks. The company is one of the largest recyclers of HDPE milk bottles in Europe.
Mr Dow said: “The message from me is that industry needs to stand behind recycled material and see us through this period. This is very much a cyclical event and there are some powerful external forces impacting on the recycling industry, we have got to ride it out.
“We have already seen one recycler hit pretty hard, but we have the support of the dairy industry who say that they want to continue to use recycled content.”
Roger Baynham, chair of the Recycling Group of the plastics industry trade body the British Plastics Federation (BPF), added that the full effect of falling oil prices may be yet to be felt.
He said: “As far as oil prices, we haven’t seen the full impact on polymer prices yet.
“There are two possible scenarios going, one is that reduced prices could create difficult trading circumstances as recyclers will essentially have less head room and less operating margins. We might also see a reduced demand from export markets.”
Speaking to letsrecycle.com, one UK based plastics trader claimed that the situation for exports was ‘even worse’ than at the start of China’s Green Fence in early 2013, which caused volatility in the market due to restrictions on waste imports by Chinese authorities (see letsrecycle.com story).
The trader said: “Even at the start of Green Fence you could still move some material, but now the Chinese are not even putting bids in.”