Plastics recyclers suffering, PN pricing in the news

Plastics recycling is in the news today, the subject of a Page 1 story in The Wall Street Journal headlined “Recycling becomes a tougher sell as prices drop.”

The story tells the plight of plastics recyclers that is the result of lower prices for virgin resin.

When virgin plastic prices were high, as recently as September, recyclers benefited because they could offer plastics processors a low-cost alternative resin.

But now that virgin prices have spiked up, recyclers are suffering. The report cites several major plastics recyclers in Europe that have filed for bankruptcy.

PN connection

We knew this story was coming, because the WSJ staff asked Plastics News senior reporter Frank Esposito last week for our data on virgin and recycled resin pricing. The WSJ used the data in a graphic that accompanies the story.

The key thing that the WSJ reporter Serena Ng wanted to show was that prices for certain virgin resins are actually higher right now than prices for their recycled equivalents. The example we gave her was virgin PET bottle resin and post-consumer clear PET pellets. That's one of the highest volume recycled plastics, and it's a fair apples-to-apples comparison, especially for readers who aren't that familiar with plastics materials.

The virgin resin prices that the WSJ is showing are different from what PN currently shows on its resin pricing chart, which may confuse our readers. We adjusted the current price for virgin bottle resin down 15 cents per pound to reflect actual market prices, as opposed to contract pricing. That's why the WSJ story says that as of late March, the cost of virgin PET had fallen to 67 cents a pound (rather than 83 cents, which our pricing page says).

Not the first time

This isn't the first time that virgin and recycled plastics prices have crossed paths, to the detriment of recyclers. I reported on this same situation several times over the past 25 years. And the WSJ story acknowledges that this isn't all that unique.

But the difference this time is that some recyclers were caught off guard by the rapidly falling virgin resin prices.

And that, as we all know, is the result of sustained low oil prices.

What will be the fallout for the global plastics industry?

Plastics recyclers will suffer, for sure. Some of their customers will pay a premium price for recycled plastic. But that's not sustainable for the long term. For recycling to work, it has to make economic sense — everyone knows that.

If recycling suffers, that's bad for the image of the plastics industry.

How long will virgin resin prices stay low? That's a complicated question. In North America, most virgin resins are made from natural gas. Natural gas feedstocks have been cheap for a long time, but resin prices have only started to come down now that oil prices have dropped, too.

If the U.S. economy continues to grow, there will be pressure to increase prices regardless of oil and natural gas. Already we're starting to hear resin companies talk about supply and demand instead of feedstocks costs as the pricing drivers.

Plastics processors — the companies that use either virgin or recycled raw materials in their products — are flexible and will adjust either way. In most cases, they don't decide when to use recycled plastics — that's a decision made by their customers.

If companies like Procter & Gamble, Coca-Cola, Kraft, Wal-Mart, Target and Clorox want to continue to offer products made from recycled plastics, then we'll keep seeing them, regardless of if they cost more.

If they think the public no longer cares, or isn't paying attention, to sustainability issues, then recyclers are in for some tough times. But isn't that always the case?