The price of new plastic materials has fallen, and the recycling market has been squeezed again

The slump in oil prices was the result of a drop in global oil demand due to the coronavirus and a surge in production following a split between major producers
.
Although major producers agreed to cut output last month, the oversupply persisted until the end of April
.
The market has only seen some rallies in recent days
.
 

Since petrochemical products are important raw materials for plastic production, the pricing of new plastic materials often follows the price of oil and natural gas
.
The pricing of recycled plastics follows the trend of new plastic materials
.
 

"The premium we're willing to pay for recycled PET will be huge and higher than we had previously expected," said Tison Keel, head of PET at IHS Markit's PTA&EO Derivatives
.
 

Keel explained that the low price of virgin plastic means the challenge of ensuring that end-users choose to use recycled plastics, especially PET
.
 

"It's going to be difficult," he said.
"
You have too much raw material, too much product
.
You have low crude oil prices, which will drive down oil prices further
.
" 

The recycled plastics market will be under pressure from commodity prices for at least the next two years, according to IHS Markit
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During this period, "even under the most optimistic scenario, our forecast for crude oil prices will not return to levels seen in past years," Keel said
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In addition, the price of recycled plastic cannot fluctuate as easily as the price of virgin material
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Kiel explained that regardless of whether the price of virgin plastic is high or low, the cost of producing high-quality recycled plastic remains largely the same
.
 

Sustainability measures may be suspended 

The situation for PET is similar to that faced by the PE and PP markets, with raw material prices falling to levels not touched in more than a decade, but the cost of producing recycled resin remaining the same
.
 

"Before this, we thought the environment for recyclers was challenging, and now it's even more challenging," said IHS Markit's Morales
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Before the impact of the coronavirus, the production capacity of polyethylene and polypropylene new materials has increased greatly
.
But Morales said that now for PP and PE, "the Covid-19 pandemic has made global market demand much lower than expected"
.
That means resin producers' margins will be challenged, he said
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In some markets, however, the coronavirus has prompted growing demand for resins
.
 

Morales noted that plastic bag bans have been delayed or suspended in many communities across the country, explaining that this is another unexpected change in the plastic market
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Morales said that due to the plastic ban, the plastic bag market was expected to decline by 5% to 8%, but now the postponement of the plastic ban order has been postponed, and the plastic bag market is "booming" again
.
 

"There will be an increase in funding for single-use plastics in the near term, but we're not sure how long that will last," Morales said
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IHS predicts that sustainability measures will come back into play in the future, but it's unclear whether this will restart later this year, or if priorities will change long after the impact of COVID-19 has passed
.
 

Inhibit the progress of infrastructure construction 

The plastic recycling sector is already facing supply-side difficulties, and experts say there is not enough PET currently collected to meet projected demand
.
Keel noted that there are ongoing efforts to improve recycling, an area that has seen more focus over the past 12 months
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But that momentum has stopped, and in some cases collections are going backwards by suspending curbside projects and container deposit redemptions
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"COVID-19 is really causing trouble for engineering," Keel said
.
As a result, more and more PET is going to landfills, and Kiel said he expects it will be difficult to get PET collection back to the same level in the short term, let alone increase it to new heights
.
 

Keel said recycling stakeholders needed to further push public attention to the importance of plastic recycling as a way to reduce plastic waste and marine debris
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In addition to collection, there is also a shortage of recycling capacity compared to virgin production
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More Recycling CEO Nina Butler highlighted new data showing that post-consumer polyolefin recycling plants recycle only as much material each year as the 10 largest virgin polyolefin producers produce.
5%
.

Butler said this shows a clear need for greater recycling capacity
.
But Butler said it's a difficult sales target to hit in the current environment: recycling volumes are low, the market is low, raw materials are oversupplied, and the value proposition is "really evaporating
.
  "

Butler said the entire recycling system, from collection to end-market demand, feels squeezed
.
But she said the current conflict was an opportunity for stakeholders working to address them to redouble their efforts
.