Recycled plastic demand is set to be stronger in Europe and US than in Asia in the first half of 2021, according to analysts from S&P Global Platts.
In an Insight Blog on the S&P Global website, the analysts note that new legislation will increase demand for recycled plastics ahead of virgin polymers.
But it warns that in Asian markets “a combination of uneconomic export opportunities and expected low virgin prices well into H1 2021 will likely mean recycled plastic markets will continue to struggle”. However, it adds that upcoming high-specification recycling plants that have been delayed in 2020 “may provide a lifeline and a new impetus to high-specification recycled plastics in the region”.
In Europe, it says markets will be dominated by the EU’s Plastics Tax that took effect on 1 January this year having only been announced in July 2020.
The blog notes that buyers rushed to buy recycled HDPE in the last quarter of 2020 as they looked to ensure they have the supply they need. Recyclers reported high production rates towards the end of 2020 compared to the half-capacity they were experiencing in the summer of 2020.
In terms of prices, rHDPE premiums over virgin material jumped as high as €150 (£133) compared to €50 (£44) in November.
With sellers of rHDPE pushing prices higher in January, light pellets of this material have risen by €10 (£8.85) per tonne it notes.
The analysts also expect rPET demand to rebound in the first half of 2021 in Europe. This will be led by major companies that have voluntary commitments to buy the material, as well as buyers preparing for legislation that will mandate more recycled content in packaging.
Those who are late to including more recycled rPET content in their packaging are finding that available supply as been secured by others.
However, S&P Global Platts Analytics expects that the premium for rPET over virgin polymers will not improve in the medium term with it forecasting higher grades of rPET to average a premium of $150 (£109) over new material.
The imposition of a plastics tax across the EU, and one planned within the UK, should start to balance out any cost benefit from virgin material however.
In Asian recycled plastic markets, a lack of container availability and competitive virgin plastics will keep these markets under pressure.
With a lack of tourism and large events in early 2021, the overall PET market is likely to be subdued in Asia due to lower consumption of bottled drinks. This will also hit feedstock for rPET recycling plants.
However, the analysts suggest that domestic supply shortages of PET bottles may see a softening of planned restrictions on imports by Asian countries.
With freight availability to Asia likely to remain tight until mid-February, this could restrain exports of PET. However, if freight rates start to come down after this point, it could provide impetus to the market especially if Asian buyers need material and government’s respond to pressures to ease import restrictions.
In the United States, the market feels optimistic that strong export demand and minimum-content mandates will support higher prices for recycled PET in 2021.
States such as California have introduced mandatory recycled content legislation that is likely to drive demand.
Export demand to Mexico is also strong due to it having an oversupply of PET film and fibre processing infrastructure. Recycled plastic demand from export markets elsewhere is also expected to be robust on the back of low bales prices for PET, helped by low crude oil prices and weak domestic demand.