Recycling market conditions: looking ahead (21 May 2018)

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Recycling market week ahead
Recycling market prices may change this week

Economic conditions this week could help to provide some support for price rises across some recycling grades.

First of all, sterling dropped below the $1.34 level today, reaching its lowest point so far in 2018.

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Although the pound recovered slightly, it was back above $1.34 at the time of writing. But this means it was lower than last week’s $1.35 and the outlook for sterling continues to look weak against the dollar unless economic data starts to improve.

However, economic data this week could help if on Wednesday the inflation data suggests improved economic performance, along with retail sales on Thursday and an updated Q1 GDP release on Friday.

For the time being, exporters of recycled goods are benefitting from a low pound making their product cheaper on the international market.

With negotiations not yet completed on June shipping for all, this week could also represent an opportunity to get material on the water at current prices. For plastics recyclers in particular, container availability is proving difficult as they do not have the scale of the big paper and metal exporters, and they are most subject to shipping lines looking to increase prices for June.

Additionally, the Chinese ban on US exports does not expire until 4 June, so there remains the potential for Chinese buyers to focus on European and UK paper and metal.

The most likely recipient of any price rises is likely to be OCC with Chinese buyers expected to continue to drive prices for the best quality cardboard. Will we see UK, European and other Asian buyers respond for fear of losing out at current prices and up their prices a little? Not clear as yet, but not likely. There are fears that a US flood will be on the way once US exporters can ship to China again, and it already appears that US OCC is a cheap option for non-China Asian buyers in particular at the moment.

Other paper grades look set to stay stable in price.

Over the weekend, there was also an announcement that the US and Chinese governments have agreed a truce on the previously escalating tit-for-tat tariff impositions on certain goods including industrial metals. As a result of this truce, industrial metals have increased in value on the LME, and we may see scrap copper and aluminium grades respond too. Ferrous isn’t as strongly impacted, so these may stay stable.

The situation for plastic grades is less clear, with demand still good for bottle grades within UK and European markets, while PP and HDPE remain strong at the top end of the market. Film is moving for higher quality grades, but low quality plastics as a whole remain a challenge. This situation looks unlikely to change this week.

Although back down at around the $78 per barrel level, an oil price for Brent Crude that was hovering around $80 also could impact on virgin polymer prices, and in turn scrap plastic prices. But any reaction is likely to be a few weeks away yet.

Forecast prices    One week     Four week

OCC                      £115-119       £113-117
ONP                      £90-94           £90-94
Mixed                    £23-27           £22-26

PET                       £218-224       £218-224
HDPE                    £409-415       £409-415
LDPE                     £197-203       £197-203

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