Prime virgin prices are sourced from major virgin polymer websites in China and quoted in Renminbi (RMB), including VAT, with an exchange rate of 1 US dollar equaling Chinese Yen at 7.2254.
New York oil prices closed on Friday at 73.86, a nine-week high on supply concerns and technical buying.
In China, prime prices have not substantially changed negatively over the last two weeks as the Development and Reform Commission in Beijing has announced policies to phrase out and eliminate outdated petrochemical production plants, which include a number of PE, PP, and PVC production lines. According to the notice, the reform has set Benchmarking and Baseline Levels of energy efficiency to achieve energy-saving and carbon-reduction transformation, resulting in the shutdown down of high-pollution and high-energy-consuming factories. This initiative will certainly help reduce the overcapacities in plastic resin supply chains. Additionally, Saudi Arabia’s recent announcement to cut crude oil production has boosted prices, soaring up for PE and PC. Short term improvement in market sentiments is expected to push up spot market prices, but long-term market sustainability depends on market fundamentals.
Recycled pellets in China have remained slow in demand, as downstream product manufacturers have insufficient orders. Low cost of prime materials and abundance of recycled materials domestically and imported from Southeast Asian countries are negatively impacting market sentiments. Some market players expect an increase in oil prices would support prime material prices, which would, in turn, support recycled pellet market prices. Recyclers in Southeast Asian countries are selling their pellets in their local markets, as well as exporting to India, Australia, the US, and Europe, as an alternative to the slow Chinese markets. The US imported PCR PET flake is bought for US .45 per lb, which translates to close to US $1000 per ton. The US local non-PCR pellets prices for PP and PE are sold at a price of US $ 25-39 cents, which translate to US $550 to $850 per ton. As prime /off grade are quoted at 33 cents to 39 cents per pound ($750 – $ 850 per ton.) FOB Houston in the US, recycled pellets cannot really sell higher than prime prices! Outside Asia, recycled pellets are offered everywhere, as most recyclers cannot sell easily their materials in their domestic markets or are not satisfied with their existing customer prices; hence they seek for alternative outlets.
Scrap plastics are impacted by the low prices of prime materials. Sorted mixed curbside PET bales in the US sell at $130 per ton, and natural for $ 250 per ton, while HDPE bottles mixed color at $220 per ton. It is not too difficult to imagine that all unsorted plastics and low-quality recyclables have to be sold at a negative price or sent to landfills. No agricultural films with a recovery rate of less than 60 percent have been exported to Asia, and low-end mixed supper market film, grocery bags, mixed runners are now destined for landfill or incineration. Most of recycled factories in western countries and developing countries have to put their purchase on hold and reduce their production or run it at loss to keep the factories in operation. Some have suspended their operations indefinitely. Sorted PE film, super sacks, and mixed MRP still be sold but at a reduced price to match customers’ target prices, which often exceed their costs. Engineering plastics also face a similar situations of price mismatch between what suppliers ask and what customers can afford to pay. Some suppliers choose to store until a turnaround, while others liquidate for cash flow even at loss. Markets need reduced capacities and supplies for upstream, and policies to use recycled content to support the development of recycled industries in a sustainable way.