Recyclers see downturn in plastics and paper markets

Both the recovered paper sector and plastics recyclers are seeing a downturn in the value of material for recycling.

Prices for recovered paper have weakened

In the recovered or waste paper sector, prices for mixed papers have fallen significantly over the past month and look set to be at even lower levels in October.

The reduction will hit local authorities in particular as prices have been high over the past year as mills sought to used mixed paper in cardboard production and others sought newspapers from the stream. The value of used cardboard is also reducing, although the grade is not being hit quite as hard as mixed paper and sellers are trying to maintain price levels or avoid large falls.

Plastics

In the plastics market, prices have started heading south quite considerably with falls for certain grades such as mixed bottles – not helped by the reported closure of one major facility. Demand for raw material has fallen and virgin polymer prices have dropped, although the plastics PRN remains ‘very healthy’ at around £300.

It is expected that high energy prices and lower demand for finished products driven by the cost of living crisis will continue to put downward pressure on prices for recycled plastics. HDPE natural is the only grade which is holding up relatively well.

While the plastic packaging tax is boosting demand for recycled plastic content, the energy bill for the industry is causing problems. The trade organisation Plastics Recyclers Europe has warned that as the energy crisis deepens on the Continent, the repercussion on electricity prices is impacting on the operations of plastic recycling facilities and putting at risk the transition towards circularity (see letsrecycle.com story)

Recovered paper

Export markets are critical for UK recovered paper as more than half the collected 7.5 million tonnes goes overseas as there is insufficient domestic demand. Prices for recovered paper are down because of several factors but as is often the case, the Chinese economy tops the list.

China, whose paper mills and packaging users are the main driver of activity in the market, is seeing reduced overseas orders for new products and weak domestic demand. Inside China retail sales have been low all year, even if there was a slight rise in August. Experts say that not even the Golden Week national holiday in October will boost demand as there is increasing nervousness around China’s property sector and ongoing Covid lockdowns.

An upturn inside China would boost the paper market. It would see stocks of finished product used up and help increased demand for finished product from south east Asia and Indian mills who supply Chinese buyers. But, with a weak economy in China, this is causing a reduction in the value of any material used, with the market also seeing cheaper material entering from the United States.

One expert said: “There are poor orders currently from India and south east Asia and there has been no sign of recovery this month. The question has to be whether the world is drifting into a global recession so buyers are not ordering extra finished product.”

Mixed paper

The mixed market has been hit partly because mixed from the United States has been moving to markets such as India. It is seen as better than UK household mixed with a lower contamination rate – UK exporters of mixed are also becoming more cautious in terms of contamination because the Environment Agency has acted over some containers of mixed earlier this summer.

Closer to home,  with the energy costs of paper production soaring on the continent, especially in Germany, German mills are taking downtime and so demand for recovered paper – which has been important to UK exporters – has softened. German mills had been buying mixed paper from the UK in substantial volumes but these orders have now fallen away.

Most mills in Germany and Italy use gas and with high prices and government demands to reduce consumption of gas, short term closures are said to be common. On the other hand finished product demand is not strong and there is no end date in site for a rebound in markets, one commentator noted.

Directional change

One market expert said there is now a “directional change seen for the first time in the mixed market” with OCC and newspapers likely to be removed with little value left in the lower quality residue, especially as the PRN – packaging waste recovery note – will help keep the value of cardboard higher. They added that such a move could give more emphasis to the separate collection of waste paper from households although this would be at extra cost. PRN values reached £35 per tonne for paper in recent weeks although these have now fallen back to £20 or lower, so reducing support for the cardboard price. Nevertheless, they have become of more significance in the UK cardboard market.

UK mills sources point to machine shuts not just in Europe but also in the UK to carry out maintenance and to save on energy as a factor in reducing demand.

Recycling Association

Dr Ellin emphasised the importance of recovered fibre to European mills

Simon Ellin, chief executive of the Recycling Association, offered some reassurances over the markets, saying he did not see this as a ‘market crash’. He explained that while there is a softening, demand would still be there for material as most of Europe’s mills use recycled fibre.

Dr Ellin said: “There has been huge demand for packaging. Mills have been – and you can see why –trying to get the price of raw material down. What we are seeing is this general softening in south east Asian demand which has dropped off and so given mills in Europe reason to drop their prices.”

He added: “There are still pockets of demand there in Europe and it has to be remembered that with 85% of Europe’s mills running on recycled fibre and generation significantly dropping, they still need fibre. We do often see reductions at this time of the year.”

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