With economic concerns spreading over the impact of the global coronavirus outbreak, plastics recyclers are the latest to signal that the market is facing price pressures and weaker demand.
One recycler explained that which way the market goes will depend on how much the PRN system supports plastics recycling should the price of virgin polymers drop because of the oil price crash.
Sector experts have told letsrecycle.com that particularly in the export sector, recyclers are beginning to feel the implications of the coronavirus but have said the fall in oil prices would only hit them if it’s sustained.
Recyclers are reporting a backlog of grades which are normally exported to Asia
With large parts of China and the surrounding areas heavily impacted by Covid-19, the official name for the virus, demand has fallen, with recyclers saying that piles of grades which are normally exported to Asia are growing.
“There is always a bit of a slowdown for the Chinese New Year, but because this was extended it left a backlog of some grades which are not recycled in Europe,” said one recycler.
“High level grades which are always recycled in the UK have been unaffected so far but otherwise prices are reducing across the board, that’s before demand is taken into account,” they added.
Containers
Another recycler whose markets are largely in Europe echoed this and said the biggest problem for his company has been the lack of containers available with the shipping market cutting the number of vessels operating internationally as well as price rises for using containers.
“With less ships moving it means we have had to export material to Europe by road, and we have had some meant to go to Italy which we’ve now had to halt,” one exporter commented.
One of those impacted by the Asian slowdown however said that despite production in China “shutting down” for over a month, he thought there were actually some positive signs of the south east Asian market beginning to pick up.
“There is a potential global impact of coronavirus on short term manufacturing output and therefore material demand from those countries most impacted”
“We know vessels are now on the way, albeit around six weeks late. I’ve heard reports that offices are coming back and starting to fill up again. I think we’ve had that region’s damage, now it turns to what is happening in Europe”, they said.
Domestic demand
As the virus spreads across Europe, a number of plastic recyclers have generally reported “business as usual” so far domestically in the UK, although reduced footfall in the retail sector could see less plastic waste arising and a downturn in demand for bags.
The sector will also face price pressures though as cheaper virgin polymers could attract brands who are using recycled content in their bottles or packaging to consider a switch to virgin material. Some in the recycling sector see the oil price slump as a good test of how commitments, such as under the Plastics Pact, will stand up in the face of a difficult market.
Reduced footfall in the retail sector if more people self-isolate could hit demand for some plastics and reduce bag demand
PRN prices for 2020 are still uncertain as obligations are being finalised. However, there has been a widespread expectation that prices for plastics PRNs could be in the £300-500 range per tonne, although there is still a possibility that Defra might introduce a mechanism to help limit the price range.
For local authorities, any price reduction for plastics material is expected to cause some concern as the value of dry mixed recyclables has already been knocked by the slump in prices for used cardboard and mixed papers, with the latter grade having a negative value in a number of locations.
Disruption
Stuart Foster, chief executive of Recoup
Commenting on the current market situation, Stuart Foster, chief executive of Recoup, said to letsrecycle.com: “We have seen a number of times over the past 20 years that parameters such as oil price can really disrupt the plastics recycling value chain. But as recycled material demand is decoupled from pure economic drivers due to much stronger corporate environmental commitments and anticipated government policy, at least for packaging, this is certain to continue to drive further increases in recycled plastic content requirements.”
With regards to coronavirus, Mr Foster added: “With over 50% of UK collected plastic packaging still exported for recycling, there is a potential global impact of coronavirus on short term manufacturing output and therefore material demand from those countries most impacted, but this is yet to be quantified.”
Speaking for the British Plastics Federation, David Hellyar, chairman of Hellyar Plastics, said that the fall in oil price will hit the industry if it stays at this level “for a couple of months”.
Hellyar Plastics is involved in the primary polymer market and Mr Hellyar said that should oil prices stay at their low levels, “this is likely to drag down the prices of starting monomer and therefore polymer over a period of time but it depends on how long it stays at this level”.
The post Plastic market facing coronavirus pressures appeared first on letsrecycle.com.
Source: letsrecycle.com Plastic
