New Orleans – It's no secret that the plastics recycling industry has been slugged around thanks, in part, to lower oil prices.
But the future will get better, according to the chief economist at the Institute of Scrap Recycling Industries Inc.
Predicting exactly when life will improve, however, is a different matter, said Joe Pickard at the Plastics Recycling 2016 conference in New Orleans.
Pickard doubles as director of commodities at the trade group and he knows all about the cyclical nature of the business.
Lower oil prices have put pressure on the recycled plastics industry as the price of recycled resin typically trades at a discount to virgin resin.
But that's not the only factor making life challenging these days.
Pickard pointed to the strong dollar relative to other currencies that is putting the squeeze on plastics recyclers who export materials. The stronger the dollar, the more expensive it is for buyers to pay for material coming from the United States.
Pickard also talked about what he called “global deflationary pressures” coming from China, a major importer of recycled plastics. China, he said, is experiencing a slowdown in manufacturing.
U.S. exports of recycled plastics to China were down by 20 percent during the first 11 months of 2015 compared to the same period in 2014, he told the crowd. “But we've seen those loses partially offset by gains in other markets,” Pickard said.
“Certainly our industry continues to face a number of challenges. Talk to some ISRI members and they will tell you 2015 was probably the worst they've seen in several [years], if not in a generation,” he said.
“Chinese manufacturing slowdown continues to weigh on commodity and scrap demand as well,” he said. “We're continuing to see a sluggish demand in China and that's had a big impact on our U.S. plastic scrap exports.”
In the short term, 2016, the economist expects the plastics recycling market to continue to experience difficulties.
“But it's not all doom and gloom,” he said, as the global economy is expected to grow.
“For scrap recyclers, we're really still searching for signs of life,” Pickard told the crowd. Few are expecting a sudden recovery.
Plastic recyclers can use this downturn to improve operational efficiency, increase quality and add product diversification. “All of these things, I think, will leave scrap recyclers well positioned once this downturn comes to an end,” he said.
“I think it's important to remember this is a cyclical, evolving industry,” Pickard said. “Even though we are going through a short-term downturn, long-term indicators are extremely positive for your industry. So the challenges we face today also present us with opportunities.”