New Orleans — PET recyclers will feel pressure for the foreseeable future because of continued low prices of virgin resin, one plastics industry analyst believes.
“The bad news for you is the low cost of virgin resin PET is going to be sustained,” said Tison Keel, a senior director at IHS Chemical in Houston, at the recent Plastics Recycling 2016 conference in New Orleans.
“And, therefore, the pressure on recycling material, which has already dropped quite substantially over the last six to nine months, is likely to remain and remains a challenge for you and your companies,” he said.
Global PET markets are “vastly oversupplied,” meaning that manufacturers are pumping out PET beyond current demand, Keel told the crowd.
And it's not a regional issue. There's oversupply in North America. There's oversupply in Europe. There's oversupply in Asia, he said.
“We think there needs to be some rationalization in the industry,” he said about virgin PET producers. “I really think you will see a couple of units shut down in the next few years.”
Keel told conference-goers that he does not expect the situation to swing back toward the recyclers' favor any time soon.
“The price pressure on recycle is going to be sustained and the commitment of your customers to sustainability is going to be tested,” Keel said, over the next three to four years.
Plastics recyclers, because of the low virgin pricing pressure, need to be able to sell on more than just price, said Phillip Karig, managing director of Mathelin Bay Associates LLC, a plastics consulting firm.
“Anybody can sell regrind. Anybody can sell repro. We found in our day-to-day working with our customers is the things we sell best are systems,” Karig said.
“If there's anything I can emphasize to you, don't just sell scrap. Don't just sell recycled materials. Sell systems,” he said. “We see that in our business. And we see it every day. That is the way to move along with things.”
Added services can cover areas such as design and the environment, including greenhouse gas tracking.
Keel said that PET recyclers can “challenge” their customers over whether they will turn away from recycled material over a small price difference. Many manufacturers have sustainability targets in place that can trump price.
“There's always an opportunity to sell something to a customer who wants to be more green,” Karig said.