3 May 2016 by Will Date

Plastics prices rise but export concerns remain

Plastics scrap prices have rebounded in the face of renewed demand for material from overseas markets, but traders have warned that major action could be on the horizon which would have implications for scrap demand.

Recyclers and exporters of secondary plastics have claimed that demand for material has risen following a subdued period of trading at the start of the year, with scrap prices rising by as much as £30 per-tonne for some high quality grades as a result – in particular PET bottles and 98:2 films.

Plastics exporters fear that the potential for a clampdown on material quality in China could have serious effects for the sector

Plastics exporters fear that the potential for a clampdown on material quality in China could have serious effects for the sector

However, much talk within the sector in recent weeks has centred on the potential for a second tranche of action by the Chinese government to follow on from its 2013 ‘Operation Green Fence’, which sought to restrict the import of poor quality plastic scrap into the country.

Speaking to letsrecycle.com one trader with links to the Far East said that officials in China had indicated that action on imports of plastics scrap is at least ‘60% likely’ in the final quarter of 2016.

Export

Early indications suggest that this could limit exports purely to material that has gone through a treatment process such as flaking, regrind or pelletising, with the transport of untreated baled material likely to be blocked.

Some traders have claimed that recent rises in demand for material are likely to have been triggered in part by Chinese importers seeking to build up stocks of material to keep plants running whilst manufacturers come to terms with the implications of any such action.

Plastics export markets

Figures from WRAP’s Plastics Market Situation Report, Spring 2016 (tonnes 000’s).

Any future efforts to clamp down on imports of plastics scrap to China are likely to have significant implications for UK exporters, with the country a major export destination for UK scrap.

According to WRAP’s ‘Market Situation Report’ on the plastics sector, published last month (April), China is the “dominant destination” for UK recovered plastic, accounting for around two-thirds of the UK’s plastics exports.

Demand

However, WRAP also noted that the UK currently supplies around 7% of the recovered plastic that is sent to the Asian country from overseas, adding that the potential for Chinese buyers to switch to other sources of material based on price and quality criteria remains a concern for the sector.

In its report, the resources charity warned: “China’s focus on moving towards a more consumer driven economy and away from manufacturing, the formalisation of its recycling sector and the introduction of circular economy policies and targets may mean that in future there is a growing availability of high quality, domestically available recovered plastic, reducing the demand for imports. Indeed, the growth in Chinese imports of recovered plastic appears to have slowed.”

Commenting on current market conditions, Amie Stringer, European trading director at International Forest Products, said that competition amongst buyers has helped to push up prices, but warned that there is still a need for ‘stability’ in pricing.

She said: “I don’t think it resonates as a stable market and I think we need to look for stability this year. We also need to be more pragmatic with our pricing and not over-inflate prices too much because that will inevitably lead to massive price drops at some point.”

“China’s focus on moving towards a more consumer driven economy and away from manufacturing, the formalisation of its recycling sector and the introduction of circular economy policies and targets may mean that in future there is a growing availability of high quality, domestically available recovered plastic, reducing the demand for imports.”


Plastics Market Situation Report
WRAP

Elsewhere, the Polymers for Europe Alliance, an organisation set up by the European Plastics Converters association (EuPC) today warned that plastics processors face ‘serious difficulties’ due to fluctuating prices for virgin material. The group claims that in the last 12 months, European-based plastics converters have declared Force Majeure on 66 occasions.

The organisation noted: “This has exacerbated an already tense situation for the EU polyethylene and polypropylene markets and has driven polymer prices to levels not seen in the past decade. From March 2015 to May 2015, EU polymer prices increased by over 40% whilst oil prices remained at a record low.”

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