The reports explain that recovered plastics have an intrinsic link to the price of virgin polymer, which is in turn influenced by feedstock prices, while paper prices are subject to fluctuations based on global demand and pulp prices.
The documents were discussed last Thursday (October 23) at the WRAP conference on navigating the economic slowdown by Erik Britton, from London-based Fathom Consulting (see letsrecycle.com story).
Plastics
The research on determinants for plastic pricing – which was carried out by Fathom Consulting – explains that virgin plastics are a globally traded commodity and, therefore, ultimately determined by their production costs.
Using virgin and recovered PET and HDPE price in the US and Europe as indicators, as well as PET and HDPE prices in UK, the report claimed that the price of feedstock, such as crude oil, is key in production costs, and that the price of recovered plastics is determined by the price of virgin plastic.
The research found that companies attempt to buy recovered material to replace expensive virgin plastics when the price of oil rises, and use less when the price of oil is lower to manufacture virgin material. The report states that this is not how an efficient market should operate, with recovered plastics ultimately being tied to the cost of raw materials.
The document notes: “The markets for recovered plastics are still immature and small relative to the size of the market for virgin plastics. As a result, recovered plastics prices are not determined by production costs as one would expect in an efficient market. Instead, recovered plastics prices are pegged to the price of virgin plastics in the long run.”
Overall, the WRAP commissioned document insinuates that the outlook for UK recovered plastics is determined by four factors: crude oil prices, the global economy's impact on demand for virgin plastics; the Chinese economy and the growth of industries intensively using plastics in goods; and regulation.
Paper
For paper, the report found that the prices of recovered material reflected the availability of virgin pulp, as it was a substitute for virgin material, with the price of pulp in turn dependent on timber prices.
However, the report states that, at the moment, there is “uncertainty in the near term outlook for recovered paper prices”, which has been categorised by the sharp decline in paper prices over the last couple of weeks (see letsrecycle.com story).
Having developed a number of baseline scenarios – again carried out by Fathom Consulting – the research founds that old newspaper (ONP) prices will be in the range 65 to 120 €/tonne and OCC prices are likely to be in the range 60 to 130 €/ tonne over the forecast horizon beyond 2012.
Regulation
WRAP's report on regulation, which was undertaken by recycling firm and producer responsibility scheme Valpak in partnership with independent consultancy firm Optimat, summarised that the export of materials is subject to a “range of different levels of control”, which ranges from out-right prohibition to low level controls.
Despite these fluctuations, the study entitled “International trade in recovered paper and plastics: international regulations and commercial practice”, explains that as a whole regulation for transboundary waste movement has increased in stringency and become more strict.
However, the fifteen page document does expressly state that “there are very few overseas reprocessors that provide specifications tailored to their own requirements to assist in the supply of material”, and instead they refer to national or industry body standards.
In its summary notes, the research expressed that further thought could be given to the variance of interpretation of regulations between UK and overseas officers, the link between collection methods and varying quality of material, as well as the variability of the application of national provisions in overseas markets, the need for good practice to be consistent, and the interactions between legislative requirements and specifications commonly used in export.
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