Exporters of PET scrap say prices have plummeted in the past two weeks because of the abrupt withdrawal of orders from several large players in the Republic of China. The result could be a better supply of the material for recyclers in the United States who have suffered for about a year from lack of supply of PET scrap and high prices.
Floyd Flexon, board chairman at Los Angeles-based Plastics Recycling Corp. of California, confirmed that prices had dropped significantly in the Far East in a matter of days.
PRCC is a consortium of PET bottle makers and end users, and a main focal point for collection and export of PET collected in the state.
``The prices have fallen [in the Far East] more than 10 percent since the first of June,'' Flexon said. ``We think [prices dropped] because a whole group of players in the entire Chinese market apparently dropped out.''
He cautioned that it is difficult to determine exactly what has happened, because of conflicting information, or no information at all coming from China.
Flexon said involvement with Chinese molders and other processors had been instrumental in ``bidding up'' the PET scrap market since early in 1994.
``The price increased about 450 percent on a bale of PET scrap bottles between May 1994 and May of this year,'' Flexon said.
``PRCC was a major exporter of material during that time.
``We think about 150 million pounds per year of PET was going to Far Eastern markets. We had a volume of about 5 million pounds per month, and a majority was being exported,'' Flexon said.
Although most brokers and exporters were reluctant to discuss the trend on the record, some estimated that last year as much as 80 percent of the available PET bottle scrap on the West Coast was being sold in the Far East, severely cramping the ability of U.S. reprocessors to get their hands on feedstocks.
That demand - coupled with high prices for virgin PET caused by the lack of availability of the paraxylene monomer essential to its production - contributed to an unprecedented escalation.
Some brokers and exporters speculated that the Chinese companies dropped out of the market at the order of the Chinese government, but offered no confirmation or reason.
Some buyers reported prices as high as 35, or even 45, cents per pound [for short periods on the West Coast] for baled bottles during the last year, depending on the volume and destination of the material, compared with about 10 cents per pound 18 months ago.
``It is very ironic,'' said one West Coast exporter, who asked not to be identified for competitive reasons. ``We think that the price just went too high, and that they [the Chinese] decided to sit out for a while and see what effect that had on the prices.''
The exporter said the Far Eastern demand for PET and polyester was driven by successive low-yield cotton crops that made it a less profitable choice for fiber makers than polyester. Increased use of PET in bottles, though less significant than the fiber market, also played a part in demand.
Korea and India, also were major players in taking PET offshore from the United States, said one exporter, who also requested anonymity.
``The Asian markets are all a matter of relationships,'' he said. ``A company will put out word that they want, say, 2 million pounds of PET per year for their plant. First thing you know everybody who has a cousin is coming to the U.S. and buying 2 million pounds. So the company ends up with maybe 10 million pounds, instead of two.
``There are always a lot of brokers out there, and the demand might not be real,'' he said.
Flexon cautioned that the drop in demand from the East was probably temporary, and that they had not yet translated into a drop in prices for flaked or pelletized post-consumer PET.
``You might see India, Korea and the others coming back into the market,'' he said. ``They might have dropped out because of the high price. It could also mean that more PET scrap would be available to U.S. recyclers.''
One U.S. broker, who deals closely with municipal recovery facilities, said the prices he has seen for export bottles was as high as 40 cents per pound in April and May, but now had leveled off.
He said, however, that demand still was high in other markets, and that the prices probably would not drop drastically from present levels domestically, since U.S. PET users might be able to satisfy more of their demand.
Representatives of the Peoples' Republic of China could not be reached for comment.