Sources speculate that postconsumer plastic scrap pricing has plateaued, though it won't necessarily give back the gains in pricing it's made this year.
Pricing for a range of postconsumer plastic scrap continues to show strength, but one contact says he feels pricing could plateau before year-end.
The contact, who represents a company that operates material recovery facilities (MRF) in the Southwest, says pricing for polyolefins scrap, in particular, is strong and likely will “remain strong through the end of the year.”
The MRF operator says he feels that the companies reclaimers are supplying with postconsumer resin (PCR) likely will start pushing back on further attempts to raise pricing.
A trader with a postconsumer polyolefins reclaimer that has multiple locations mentions that high-density polyethylene (HDPE) bottle bale pricing has flattened as of mid-August. “The last nine months have been unprecedented with regard to bale pricing and week-to-week increases.”
The availability of more virgin material also could affect scrap and PCR demand and pricing as chemical and plastics plants in Texas resume normal production following the winter storms that constrained their production. However, at least one virgin polyolefins producer still anticipates “sizable order backlogs.”
In the July 30 call regarding LyondellBasell’s second-quarter earnings, Michael McMurray, the company’s executive vice president and chief financial officer, said, “Polyolefin results increased by about $400 million during the second quarter as robust demand in tight markets drove higher prices and margins for polyethylene and polypropylene. We anticipate continued strength in demand and margins for our O&P (olefins and polyolefins) and Americas businesses during the third quarter. While consultants are predicting some margin compression for ethylene, recent outages have caused prices to quickly rebound and demonstrated that markets remain relatively tight. High demand, low downstream inventories and customer backlogs are expected to continue and provide ongoing support for strong polymer margins.”
Mid-August saw postconsumer polypropylene (PP) bale pricing decline by a couple of cents, the MRF operator says. He views this as an indicator that pricing is plateauing. “It doesn’t necessarily mean it will drop,” he says. “I expect it to be in the 35 to 40 cents per pound range for the remainder of the year.”
He notes that as of late December of last year, the same material was selling at 7 cents per pound.
Polyethylene terephthalate (PET) pricing remains strong, with the MRF operator saying it’s selling for roughly 30 cents per pound as of mid-August. “I give it another 30 to 60 days before it plateaus,” he adds.
A Midwest-based PP and HDPE reclaimer of postconsumer and postindustrial material says scrap supplies are tight. “[It’s] definitely more challenging to get what we need for trading and compounding,” he says. “Some producers are recycling more internally,” the reprocessor says, adding that labor shortages also are affecting material flow.
He notes “historical highs” for pricing on the scrap material his company is purchasing.
The trader says scrap is flowing better than it was in the first half of the year. “Scrap availability has improved considerably from what we were seeing earlier this year. While we still see challenges sourcing materials in different regions, overall it is much better than Q1 and Q2.”
The trader adds, “Imports from overseas are helping fill demand gaps in the domestic market. There is a big influx of materials from overseas taking advantage of commodity prices here, and these imports are increasing the overall supply available.”
A reprocessor of postindustrial and postconsumer plastics with operations in the Upper Midwest mentions the effect of the semiconductor chip shortage in the automotive sector on material flow. “Automotive scrap volumes are down due to the chip shortages, which has slowed production of cars. Other industries, like housing and medical, are still strong.”
Demand for his company’s PCR and postindustrial resins remains robust. “We have been sold out for months. We expect the demand to continue through the end of the year.”
He says pricing for his company’s processed material has been rising consistently in the last four months, fueled by tight supply.
While rising transportation prices threaten to cut into his company’s profitability, he says, “We have been able to pass along the freight price increases to our customers as they all understand the situation in the market.”
The reprocessor in the Upper Midwest notes that transportation remains constricted in light of the driver shortage. “Freight prices have doubled over the past nine months.”
Availability is less of an issue for the PP and HDPE reprocessor. “Transportation is more costly but available,” he says.
The MRF operator says trucking issues are adding to his company’s cost and lead times. “Costs are enormous,” he says, citing the “pinched” labor force as the primary factor.
The expansion will incorporate a new scrap recycling system at the converting plant.
The Albany-Dougherty Economic Development Commission in Albany, Georgia, has announced Pratt Industries plans to invest more than $18 million in an expansion in the community.
According to a news release from the Albany-Dougherty Economic Development Commission, Atlanta-based Pratt Industries has operated a converting plant for corrugated boxes in Albany since 1983. The facility takes in 100 percent recycled-content corrugated sheet and linerboard to convert them to finished boxes.
The company will be adding 100,000 square feet to that facility as well as upgrading its machinery, incorporating a new scrap recycling system, wastewater system and additional warehouse space. The expansion comes as a result of an increase in global shipping and logistics needs.
“We have been proud to call Albany home for the last 38 years and are excited to be continuing and strengthening our relationship with the local community,” says Pratt Industries Albany Plant Manager Drew Pennington.
Pratt plans to complete the expansion by January 2022.
Food-grade resins currently represent only 10 percent of the global annual capacity of recycled polymers of more than 45 million metric tons, according to ICIS Mechanical Recycling Supply Tracker.
Targets set by brand owners and regulators have been contributing to growing demand for recycled plastics globally, particularly for use in food and beverage packaging. However, the supply of high-quality food-grade recycled polymers remain limited. Challenges include, among others, low volume and quality of postconsumer scrap, costly sorting and washing technologies to eliminate contaminants and the need of approvals from governmental agencies.
Countries have their own local agencies that, among other responsibilities, control and supervise materials used in contact with food. Two central agencies widely recognized are the United States Food and Drug Administration (FDA) and the European Food Safety Authority (EFSA). Their main safety concerns are related to possible contaminants from postconsumer scrap that can be harmful to human health if they remain in resins that will be used in making packaging that will be in contact with food. Any material, including virgin polymers, must be regulated for food-contact use, thus, the same principle applies to recyclate.
Companies that wish to use recycled plastic for a food-contact application in the U.S. must submit a description of the scrap source and the recycling process, results of tests that prove the process removes potential contaminants and a proposal of use conditions in the final application, such as temperature, type of food and duration of the contact. Full guidance is published on FDA’s website.
Once submitted, the FDA then evaluates each proposal, case by case, and provides companies with a letter of no objection (LNO), which is a recommendation as to whether the recycling process is likely to produce plastic that is appropriate for food-contact purposes.
The EFSA evaluation of recycling processes requires companies to prepare a dossier along with a request for authorization of the use of recycled plastics in food-contact materials to one of the EU member states’ (MS) competent authorities. EFSA receives the dossier from the EU MS, evaluates it and then provides an opinion on the safety of the recycled plastic given its intended use. The EFSA opinion is then used by the EU MS to grant or reject authorization of the recycled plastic.
The dossier must follow EFSA guidance that includes a description of the recycling process showing critical parameters, such as temperature, pressure, process duration and other operative details, and the characterization of input focusing on qualification and evaluation of suppliers, origin of the feedstock, traceability and the ability to prevent entry of nonsuitable materials into the input stream. Also included are the results of challenge tests to demonstrate the decontamination efficiency of the recycling process, characterization of the end recycled plastic product, its intended application in food contact and compliance with relevant provisions on food-contact materials.
“Apart from evaluating whether the recycling process can reduce contaminants to levels that do not pose a risk to human health, EFSA also monitors whether the material changes the food composition, taste and odor in an unacceptable way. And unlike the FDA, EFSA requires that no more than 5 percent of the plastic waste input used for recycling comes from nonfood-contact applications,” says Carolina Perujo Holland, ICIS plastic recycling analyst, EMEA.
Food-grade resins currently represent only 10 percent of the global annual capacity of recycled polymers of more than 45 million metric tons, according to ICIS Mechanical Recycling Supply Tracker. The research includes recycled polyethylene terephthalate (rPET), recycled polyethylene (rPE), and recycled polypropylene (rPP).
However, the food-grade availability varies extensively among the resins, as represented in the following chart. Slightly more than 20 percent of rPET capacity globally is food grade in comparison with only 3 percent of polyolefins.
This difference is a result of usage of each polymer in different applications, where PET resin is used predominantly in food packaging compared with other polymers, thereby increasing the available postconsumer feedstocks for recycling back into food-grade recycled polymer. In addition, currently, some countries allow the use of recycled plastics in food-contact applications, but many others do not, and this can vary by polymer also. This is the case in Brazil, where the National Health Surveillance Agency (ANVISA) only authorizes food-grade rPET.
Source : ICIS, Recycling Supply Tracker – Mechanical, 2021
No country-specific regulation explicitly allows or prohibits the use of recycled plastics in food applications in Asia, except for Japan; hence, the lack of any regional agency equivalent to FDA and EFSA. However, recent developments in Korea, China and Thailand indicate food packaging applications using recycled materials could emerge.
Korea’s Ministry of Food and Drug Safety revised legislation allowing the use of rPET and recycled polyethylene naphthalate (rPEN) in food-contact materials as part of multilayer structures. Thailand’s Food and Drug Administration is considering permitting the use of rPET and rHDPE for food-contact applications. China’s National Center for Food Safety Risk Assessment (CFSA) agency is initiating a risk assessment method for recycled food-contact materials.
“Although the EU has set recycled content targets under the Single-Use Plastic (SUP) Directive, which is one of the main factors driving demand for recycled plastics in the region, many EU countries have not always encouraged the use of food-grade recycled plastic in food-contact applications. Italy only approved the use of more than 50 percent nonvirgin material in PET plastic bottles in 2020,” Perujo Holland says.
Historically, the European food-grade recycled polyolefin market has had difficulty growing because the level of investment was not seen to carry sufficient returns. The U.K. is the only successful example of food-grade recycled HDPE with EFSA positive opinion because of the discrete collection stream for postconsumer HDPE milk bottles used as its feedstock. The remaining EFSA positive opinions for food-grade recycled polyolefins are for closed-loop processing PP and HDPE transit packaging.
From the regional perspective, although Asia Pacific is the largest producer of recycled resins alone, accounting for almost 45 percent of the global capacity, the region’s food-grade resins only represent nearly 5 percent of the region’s total recycling capacity, while the United States and Europe have a share of 20 percent and 10 percent, respectively.
Reasons behind that include the fact that the largest recycling end market in Asia is fiber, which is not required to be food grade. In Europe, for instance, sheet and food-contact bottles are the largest end markets using rPET from postconsumer bottles, with a share of the total rPET supply of 38 percent and 32 percent, respectively, in 2019. In the United States, food-contact bottles have been gaining space in the market supply of rPET, growing from a 21 percent share in 2018 to 28 percent in 2019, while fiber reduced from 47 percent to 41 percent year over year.
Source : ICIS, Recycling Supply Tracker – Mechanical, 2021
FDA LNOs and EFSA positive opinions are internationally recognized high standards for food-contact plastic recycled material throughout the industry and allow companies with these accreditations outside the U.S. and EU to potentially trade with them.
FDA is the largest agency alone with almost 35 percent of the global registered recycling food-grade capacity, whereas EFSA represents slightly more than 20 percent. While EFSA is more prevalent in Europe, FDA is more widely used internationally, as represented in the following graph. One of the main reasons for that is the fact that the process, including traceability of feedstocks to meet the 95 percent food-contact origin source, to obtain a EFSA positive opinion is challenging for some suppliers and is not a requirement of FDA.
Source : ICIS, Recycling Supply Tracker – Mechanical, 2021
End markets for packaging with recycled content are driven, among others, by brand owners, regulation, industry associations and consumers.
The EU has mandated the industry to include 25 percent recycled content in PET bottles by 2025 and 30 percent in all plastic bottles by 2030 under the Single-Use Plastics (SUP) Directive. Likewise, in California, manufacturers are required to include an annual average of 15 percent of postconsumer resin (PCR) in beverage containers starting in 2022. By 2025 the mandate is set to increase to 25 percent and by 2030 to 50 percent. Also, Washington state recently announced a schedule for PCR requirements for different product categories, starting with beverage containers and trash bags in 2023, adding certain household cleaning and personal care products in 2025 and expanding to dairy milk containers in 2028.
In addition to legislation, several brand owners have been setting voluntary targets following the lead of the Ellen MacArthur Foundation Global Commitment which aims to have 25 percent PCR content in plastic packaging by 2025. Many global PET beverage bottle brands have even set sustainability targets beyond those required, averaging at 50 percent rPET by 2025 in Europe. Even extending to 100 percent rPET content in some European markets in time frames earlier than 2025. To fulfil their targets, companies need to source recycled resins, and applications such as beverage containers and primary food packaging require high-quality food-grade recycled resins, which are currently limited. Investment is needed in collection systems, consumer education and recycling capabilities to increase the global supply of recyclates to reach industry targets.
In the long-term, chemical recycling can be a potential complementary solution to mechanical recycling to secure supply of recycled resins suitable for food-contact applications. The industry has high expectations for the higher volumes of feedstock that chemical recycling can process, in addition to its source, as any scrap stream potentially could be used, including films and flexible packaging. Recycled resins produced through chemical recycling have near-identical properties to virgin and as such are not subject to food-contact regulation restrictions.
However, despite current investments in chemical recycling facilities, ICIS expects that industrial scale might not be achieved before the 2030 deadlines for mandates and sustainability-related pledges. Moreover, the magnitude of its environmental impact as well as its legal status are unclear.
Immediate measures are needed to improve collection rates and sorted fractions while reducing contamination in the recycling stream, in addition to mid and long-term solutions, such as regulations and technologies. Including a review of the criteria around the food safety regulations, such as the 95 percent feedstock origin, which presents more challenges for polymers that have lower concentrations of food-contact material from origin in their overall waste stream.
Paula Leardini is a senior analyst, plastic recycling, the Americas at ICIS. Carolina Perujo Holland, is an analyst, plastic recycling at ICIS. Helen McGeough, is a senior analyst at ICIS. London-based ICIS provides market intelligence that helps businesses in the energy, petrochemical and fertilizer industries. More information is available at www.icis.com.
Manufacturers and recyclers can move closer to achieving a circular economy for plastic scrap in several ways.
The circular economy can be defined as an ideal, zero-waste economy where the materials we use every day follow a closed-loop, circular journey that starts with manufacturing and utilization and then moves into reuse, repair, redistribute, refurbish, remanufacture and sometimes compost. With a circular economy, everything comes back and is used again in one form or another, minimizing or completely eliminating landfills and incineration.
The circular economy differs from the existing linear economy, where things are produced, used and then some things can be reused or recycled, but some things end up in the landfill, oceans or other places they don’t belong. Some types of plastics are especially problematic in terms of recycling, but increasingly, manufacturers are becoming more conscious of the materials they’re producing and using to ensure that they can either be recycled, reused or composted.
In some cases, nonrecyclable and hard-to-recycle plastics are designed and used largely for convenience and for marketing. These items include single-use grocery bags, beverage cups and clamshell packaging made of expanded polystyrene (EPS) that is used by some fast-food restaurants. Ultimately, these packages are designed for customer convenience. They’re easy to use, disposable in the sense that they’re not intended for reuse, and they can be designed with company branding and marketing slogans.
Because it’s often less expensive to produce and use these types of plastics for products that are only going to be used once, historically the circular economy hasn’t been at the forefront for these applications in light of cost.
But there has to be a conscious effort to use different types of plastics that can be recycled, reused and redesigned to become part of that circular economy.
Manufacturers and marketers aren’t solely responsible for the use of nonrecyclable and hard-to-recycle plastics. As noted, most of these single-use items are designed for the convenience of consumers, and consumers may or may not have a recycling program set up either in their homes or in their communities. For many people, it’s a lot simpler to throw these plastics in the trash. Sometimes it doesn’t matter if the plastic is recyclable or not; it’s a matter of being conscious about recycling.
For manufacturers, the circular economy can reduce certain costs. For example, in 2020 the Washington-based Association of Plastic Recyclers released a study comparing energy profiles of the environmental burden of virgin resin versus recycled resin. From the study, comparing just the expended energies of recycled polyethylene terephthalate, high-density polyethylene and polypropylene shows the virgin plastic expended energies for these materials are 1.7, 3 and 3 times the expended energies of their postconsumer recycled plastic counterparts, respectively. That is, it takes more energy to produce virgin resin from raw chemicals than it does to create postconsumer recycled resin that can be reused in one form or another. Using more recycled content—which manufacturers may be able to do using their internal processes—rather than buying virgin resin can cut costs and ultimately has a positive environmental impact.
Getting consumers to cooperate can be a challenge, but environmental consciousness already has received significant publicity, and many communities have either legally mandated or strongly recommended participation in recycling programs. Additionally, many product manufacturers who use plastic packaging or containers indicate that the plastic is recyclable. Some cities have banned single-use plastic grocery bags, and some stores sell their own branded, reusable bags or have receptacles for disposing the single-use plastic. Replacing plastic drinking straws with paper ones is one well-known example. Biodegradable “eco-plastics,” formulated from organic starches or from cellulose, are also an option in some cases. Again, it’s a matter of raising and sustaining awareness of the issue.
According to The SustainAbility Institute, London, “Society needs to stop thinking of plastic as 'waste,' but as a renewable resource that needs to be disposed of correctly.”
“Disposed of” are probably not the words to use here, rather recycled, reused or remanufactured. For plastics manufacturers, if plastic byproducts or defective products are recycled internally, there are potential significant cost savings within their own manufacturing process. If not, recycling programs can be set up so that the material goes to a plastic compounder that can turn it into a reusable resin. Always ask the waste haulers who collect the byproducts about where the material will end up to ensure that it won’t be dumped in a landfill. And, in every case, manufacturers can take care that their plastic scrap is properly sorted and that employees are trained to know what to do with it.
While the circular economy might not ever be perfected, there are practices and processes that can be put in place now as at least steps toward that final goal. Plastics manufacturers, those companies who use their products and end consumers can all play a role. The key is being environmentally conscious and willing to do the major and even the seemingly small things that support the effort.
A.J. Dilenno is vice president of commodity managed services at RWS Facility Services, which is headquartered in Chadds Ford, Pennsylvania. Dilenno is responsible for marketing all commodity fiber and resin throughout North America for the company. He also is responsible for maintaining and growing RWS’ national customer relationships with paper mills and plastic resin compounders, reprocessors and tolling companies. He has more than 10 years’ experience in the recycling and waste industry.
If China is retreating from “peak steel,” it could have ripple effects on scrap demand and prices.
Iron ore and steel prices in several regions around the world have been falling in August, potentially signaling some softness in what has been a historically pricey ferrous scrap market.
Steel production cutbacks in China’s blast furnace/basic oxygen furnace (BF/BOF) steel industry sector are being cited as the lead factor in falling iron ore prices.
An Aug. 19 online item by MarketWatch.com refers to 30 percent drops in iron ore futures contracts trading in mid-August on the CME exchange half a world away in the United States.
A combination of mandatory emissions cuts and uncertain economic conditions in China caused that nation’s steelmakers to make about 5.6 percent less steel in June of this year compared with the month before. That is according to figures reported by a Chinese steelmaking association to Brussels-based World Steel Association.
The story of Chinese BF/BOF steelmaking this century has been one of monthly and annual output numbers that increase significantly with few interruptions.
However, iron ore prices face “strong headwinds given China’s interest to go ‘greener’,” according to one analyst MarketWatch quotes. The analyst also notes a ferrous scrap futures contract might soon be introduced on the Dalian Commodities Exchange in China, as that nation’s government encourages steel mills to use more scrap in its furnaces.
Economically, although Chinese manufacturing output and retail activity monthly figures have shown signs of growth this summer, the figures also have come in below analyst expectations. Despite keeping its COVID-19 cases to a minimum, concerns have mounted about the government’s willingness to instantly and severely regulate entire industry sectors (something recyclers have experienced already).
Lingering corporate and regional government debt concerns also linger in that nation, with property developer and aspiring conglomerate Evergrande being one of the most recent companies to be called in for consultations with the Beijing government. The fate of Evergrande might also be tied to a Chinese apartment tower market that some observers have been calling overbuilt for nearly a decade.
Steel prices and futures contracts also are showing signs of weakness in some nations. United Kingdom-based information services firm Kallanish Steel reports that steel billets made in ASEAN (Association of Southeast Asian Nations) countries like Vietnam have been falling, based on reduced demand from China. Kallanish also says finished and semi-finished steel exporters in Turkey and India are faced with reduced demand in August.
In the first two weeks of August in the U.S., weekly raw steel production fell by 0.2 percent compared with the week before, according to the Washington-based American Iron and Steel Institute (AISI). That does not necessarily signal a new trend, but it could tie into a slowdown in new construction projects in the U.S. and ongoing microchip shortages within the U.S. automotive industry.
The global question marks might have contributed to softening ferrous scrap prices in the U.S. export market in early August. Surveyed pricing from Fastmarkets AMM showed a $40 per ton drop in bids for No. 1 heavy melting steel (HMS) bulk shipments off the East Coast in early August compared with early July.
A steel industry in China that is scaling back would not necessarily make an immediate impact in the U.S. According to AISI, which cites U.S. Census Bureau data, China is behind South Korea, Japan, Turkey, Vietnam and Taiwan as suppliers of imported steel in 2021.
However, the ripple effect of scaled-back steel output or consumption in China would likely result in more overseas steel seeking a home in the U.S., and the potential for declining steel (and eventually scrap) prices globally.