Polyester11-Oct-2024

LONDON (ICIS)–Imagine you sold a product with
no control over how much of it was produced at
any one time; that you had to sell it within
weeks of it being produced regardless of what
the demand for it was like; and that the demand
was constantly changing.

For most waste managers, no imagination is
required, this is their daily reality. And it’s
one of the biggest drivers of volatility
throughout the recycling chain globally.

Waste originates from both the general public
and industry, and as a result, the composition
and quantity of waste generated at any one time
varies continuously depending on consumer
behaviour and industrial production trends.

Waste managers typically hold contracts for
waste collection with municipalities. They
cannot turn material away. Because of
variations in consumer and industrial
production trends, different countries can have
vastly different supply at any one time.

The quality of that input waste (how
contaminated it is, the tensile strength etc.)
depends on a variety of factors including how
it’s been treated and stored before its entered
the chain, the type of additives it contains,
what other materials it has come into contact
with (because contact with substances such as
polyvinyl chloride (PVC) causes contamination),
level of discolouration, gel content, and
odour.

Coupled with this, the more times a polymer has
been recycled, the lower its tensile strength,
and typically end-use suitability becomes
increasingly limited. How many cycles it takes
before the waste material becomes unusable
varies from polymer-to-polymer, process to
process, and level of other degradation.

The longer you store waste (this is typically,
but not exclusively, in the form of bales)
without reprocessing it – or selling it on for
reprocessing – the more it degrades.

This can be due to a number of things,
including the contaminants it contains,
thermolytic degradation (from heat – typically
the sun), and hydrolytic degradation (from
water – common in the case of polyethylene
terephthalate (PET).

Meanwhile, new (and perhaps more valuable)
strains of waste are constantly entering the
chain, and warehouse space is limited.

If the waste quality is too low, then waste
managers either need to dispose of the
material, sell it to the burn-for-energy
sector, or use it captively for energy
creation. Burn-for-energy bales typically sell
at negative values, whereby sellers pay for the
removal of waste based on cost saving against
alternative disposal methods.

As a result, most waste managers look to
offload bales within a timeframe of around 4-6
weeks (although this varies from market to
market).

Reprocessed recycled material, meanwhile,
serves a huge variety of end-use markets. Major
offtake markets include, but aren’t limited to,
packaging, construction, automotive, outdoor
furniture, refuse bags, strapping, and
horticulture.

Demand between the end-uses also varies
dramatically, and players in each market
purchase for differing reasons.

Some markets, such as packaging, are heavily
driven by brand sustainability targets and
regulation, other markets, such as
construction, mostly purchase on cost saving
against virgin.

This has huge impacts on willingness to pay,
Intensifying legislative and consumer pressure
on sustainability in packaging over the past
few years has seen a significant pricing gap
develop between display packaging suitable, and
non-display packaging suitable grades across
most global recycled polymer markets.

There is currently, for example, a spread of up
to €1,500/tonne between the highest priced
grade of Europe recycled polypropylene (R-PP)
pellet (which is a post-consumer natural grade
predominantly used in domestic goods and
cosmetic applications), and the lowest priced
grade (which is black injection-moulded
pellets, which typically serves non-packaging
applications).

Ideally (from their point of view) waste
managers and recyclers would primarily serve
applications driven by sustainability targets
where premiums are typically highest.

Nevertheless, each downstream market has
differing technical requirements  – with
display packaging and automotive typically
having the strictest technical requirements and
construction, bin bags and outdoor furniture
the lowest. This means that there is typically
a higher volume of material sold into
non-packaging applications.

While sorting allows waste managers to extract
the valuable fractions and, to an extent,
control contaminants etc. it doesn’t control
the input waste mix. So the type of material
suitable to serve each application is changing
constantly. There is also a direct correlation
between feedstock waste quality and reprocessed
output quality for both mechanical and chemical
recycling.

This creates a continuous supply/demand
mismatch that is often underappreciated by
players newly entering the market.

This mismatch coupled with the need to offload
material relatively quickly is the reason, for
example, 90% mixed polyolefin bale prices have
traded as high as €600/tonne ex-works NWE
(northwest Europe) and as low as €0/tonne
ex-works NWE since July 2022.

Because waste
fractions typically produce a variety of
different flake and pellet grades depending on
what is extractable from individual bales –
especially for recycled polyolefins – they
typically react to system wide demand in each
locality.

Individual flake and pellet prices, though,
often react to demand from specific end-use
markets. This can result in periods where waste
bale prices are high but prices for some flake
and pellet grades those bales serve are low,
resulting in squeezed margins.

This is especially true for grades that are
purchased for cost-saving reasons, meaning that
they need to aggressively compete with virgin
and off-spec material.

The reverse also regularly occurs, whereby bale
prices can be low because demand in key
end-uses such as construction is weak and
general availability of waste is high, but
volumes extracted for packaging suitable grades
are limited and demand from that particular
sector is firm.

It is also increasingly common for material
with broadly identical specifications to trade
at different price levels depending on which
sector it is being sold into.

Further distortions in the chain are created
because reprocessed material such as flakes and
pellets can be stored for long-periods of time,
and flake and pellet producers are not forced
to offload material as quickly as waste
managers.

This leads to fragmented and localised
downstream markets where spreads against
feedstock costs and profitability are
constantly shifting.

Volatile feedstock costs also results in
challenges for investment. This is particularly
true for emerging technologies such as chemical
recycling and bio-based plastics.

Thatis because new producers seeking private
investment are often required to project future
costs (typically for a period of at least 5
years), with waste feedstock typically their
largest variable cost. The unpredictability of
waste values make this a herculean task.

When players first explore circular plastic
markets, they are often surprised by the
variability and fragmentation of prices through
the chain. In the majority of cases the direct
cause can be traced back to the feedstock waste
markets.

ICIS assesses more than 100 grades
throughout the recycled plastic value chain
globally – from waste bales through to pellets.
This includes recycled polyethylene (R-PE),
recycled PET (R-PET), R-PP, mixed plastic waste
and pyrolysis oil. On 1 October ICIS launched a
recycled polyolefins agglomerate price range as
part of the Mixed Plastic Waste and Pyrolysis
Oil (Europe) pricing service. For more
information on ICIS’ recycled plastic products,
please contact the ICIS recycling team at
recycling@icis.com