Prices for virgin and off-spec resins are decreasing, putting pressure on North American plastics recyclers.
With rising capacity even as a slowing economy reduces demand, prices are falling for many virgin resins. On top of that, suppliers are producing more low-cost off-spec materials — 8-10 percent of virgin output, according to one estimate.
"If I'm a molder and I'm buying recyclable materials because of costs, but now I can buy wide-spec at equal or cheaper cost, I'm going to go to wide-spec," said Greg Janson, president and CEO of Granite Peak Plastics LLC.
While some buyers will pay a premium for post-consumer resins, recycled polyethylene and polypropylene are often used in durable goods such as pipe, pallets and crates because it is typically cheaper than virgin resin.
St. Louis-based Granite Peak recycles PE and PP scrap, and Janson said that competition from low-cost wide-spec resin is hurting recyclers.
Janson also raised concerns about buyers staying committed to using recycled resin to meet sustainability goals and pledges.
"I think that companies have to — when it comes to their sustainability goals and using less virgin and more recycled materials — they have to take a longer look than monthly or even quarterly," Janson said.
"They have to look at it over a longer time span and look at the average cost of say, post-consumer polyethylene or post-consumer polypropylene vs. virgin and wide-spec," he said.
Janson said long-term supply contracts could help recyclers.
"I believe the reason they're not doing that is that they want to maintain the option of being able to switch to wide spec," he said.
Howard Rappaport, a longtime plastics consultant, noted that demand for recycled resin is growing, but recyclers have to be prepared to deal with the competition.
"We're in a tough market environment for recyclers, because now they're competing against wide-spec and off-grade pellets and then they've always been competing against virgin pellets," Rappaport said.
"You got these two product streams that they're competing against, on a price basis," he said. "The question is, financially, can you weather the storm?"