Demand for recycled PET complicates market outlook, PS has ‘some options'

Houston — Global markets for PET bottle resin and polystyrene are keeping their heads above water in 2019.

Virgin PET is facing challenges from sustainability-fueled demand for more recycled PET, IHS Markit analyst Tison Keel said at Global Plastics Summit 2019, June 4-6 in Houston.

"Global [recycled PET] will penetrate but not replace virgin," he explained. "The percent of virgin will decline over time but will still be 90 percent of the market by 2025."

In 2025, North America will become the largest producer of recycled PET. But collection rates in the region remain too low to meet projected demand, according to Keel.

"U.S. [recycled PET] collection rates are among the lowest in the world. They've been stuck in the high 20s [in percentage rates]," he said. "There's also [recycled PET] demand for fiber in carpet. There's not enough collected to fill all needs."

Keel projected that U.S. recycling rates would need to be more than double their current levels to meet consumer brand objectives and "it's hard to reach that target by 2025."

Keel added that recycled PET currently faces a pricing challenge since it's more expensive than virgin material. "Will consumers pay a premium price for products made from [recycled PET]?" he asked.

Recent acquisitions of recycling assets made by PET makers Indorama, Alpek and FENC "could change the dynamics of the industry in a five- to 10-year horizon," Keel added.

Virgin PET remains oversupplied worldwide, with global operating rates expected to be 70-75 percent in 2019-23, below the high 80s to low 90s that would indicate a healthy market.

North American oversupply could get even worse if an unfinished plant in Corpus Christi, Texas, is completed while demand growth remains flat.

And even though recent antidumping measures have stopped PET from some foreign countries from entering the U.S., materials from elsewhere could take their place, according to Keel.

"Pushing out imports isn't easy," he said. "There's a high level of competition."

Over in PS, Javier Ortiz of IHS Markit said that the material "isn't dead yet" and has some options for the future.

Although North American PS demand was down 5 percent in 2018, demand for the material was up 5 percent in Asia last year. And 2019 was off to a better start for PS in North America, with sales up 1 percent through April. Much of that growth came from exports, consumer products and electrical/electronic.

"We can expect stable pricing so as not to cause more demand erosion," Ortiz said. "But PS remains under from bans around the country, like in New York City for EPS."

He added that another challenge is that PS in the U.S. remains more expensive than polypropylene and PET.

But Ortiz said he's finding hope in initiatives like the Agilyx chemical recycling joint venture for PS: "That's the kind of thing than can keep the PS market alive in the next few decades."