In late January, signs of increased demand for waste plastics and recycled materials in some areas of Europe brought encouraging news to the industry. The year-and-a-half-long decline in demand and prices has made it difficult for many recycling companies to maintain operations, and some have even faced closure. Can this increase in demand be sustained, or is it a short-term phenomenon, a fleeting moment?
It is understood that the main reasons for the price increase and increased demand are Europe’s reliance on imports of certain raw materials and recycled materials from Southeast Asia and other countries. However, due to the attack on vessels in the Suez Canal by the Red Sea Armed Forces and a series of geopolitical factors, ships had to detour around the Cape of Good Hope, disrupting the supply chain. This issue is quite complex and can only be resolved slowly. As a result, users and traders have been stockpiling raw and recycled materials to meet their downstream demands.
Not long ago, with the normalization of supply chains after the pandemic, many plastic products manufacturers and recyclers reduced their excess inventory and purchased fewer goods. On the other hand, overcapacity has led to a continuous decline in the prices of raw materials, recycled materials, and waste plastics. Coupled with interest rate hikes, weakened consumer spending, and the instability of the world political situation, with wars and unrest occurring in many places, one can feel the instability of the world just by watching the news every day. Market prices have been falling wave after wave, going downwards toward the bottom, but they may not have reached the lowest point.
Many in the industry are cautious and pessimistic about this price spike. This is mainly because the market’s price spike is attributed to the rise in shipping costs and a certain degree of supply shortage, coupled with speculative activities. The pursuit will likely be temporary as it lacks fundamental factors to support the surge.
In contrast, there are still no signs of improvement in the Asian market. Many countries are still affected by overcapacity, which is difficult to reverse. Both domestic sales and exports have remained the same. The situation in the Red Sea and the Suez Canal has significantly increased shipping costs, resulting in increased costs and reduced export orders. The market for recycled materials remains sluggish, and buyers and sellers of waste plastics need help due to the increased shipping costs.
The imports and exports of the U.S. are also affected by container and vessel shortages, and many cross-regional businesses have been impacted. The days ahead are full of challenges, and opportunities have yet to materialize.
Original by Dr. Steve Wong
February 19, 2024