PPRC 2021: What’s next for HDPE, PET, OCC and mixed papers markets
Demand for recycled paper and plastics will be influenced in the near future not only by international trade and major brand commitments, but also by consumer spending habits and new state laws, speakers said at the meeting. the virtual conference on paper and plastic recycling from October 21 to 28. .
Speakers saw a generally positive outlook for many paper and plastic products through 2022, attributing stable demand to influences such as e-commerce packaging changes, international shipments and expected capacity expansions in North American paper mills. Here are some takeaways from the event.
Ecommerce packaging changes could play a role in driving demand for recycled content
Recyclers and brand owners have long discussed the role of corporate sustainability goals in influencing the markets for packaging made with recycled materials. As the 2025 sustainable development goals loom, companies will need to commit to significant changes to use packaging that can be successfully recycled in existing FRMs, said David Feber, McKinsey partner.
E-commerce packaging is an area where market trends are likely to lead to an increase in demand for recycled paper and plastic over the next several years, Feber predicted. At the start of the pandemic, the percentage of sales made directly from e-commerce sites fell from around 10% to around 17%, and he estimates that number could continue to rise to around 20% of purchases in four or five years even. as the pandemic abates.
Many of these products were never designed to ship direct to consumers, which means businesses are seeing opportunities to create more effective and efficient direct-to-home packaging. Companies that aim to reduce the amount of protective shipping packaging they use should choose materials that are easily recyclable, such as filler paper instead of plastic, he said.
Filler paper is easily recyclable and made from materials that paper mills already use and want, added Brent Bell, vice president of recycling at Waste Management. “We’re talking with all kinds of brands about how they can maybe make their packaging with something a lot more recycling-friendly, something that would be accepted in these collection programs,” he said.
Feber predicted that companies would capitalize on the e-commerce trend not only by switching to more recyclable shipping boxes and void fillers, but also by changing the packaging of the products themselves to make them easier to navigate. dispatch. It’s an opportunity for companies to reinvent their packaging for sustainability, he said.
Brand commitments could be the key to decoupling the prices of virgin and recycled HDPE and PET resins
The brand’s demand for more recycled content has had a direct impact on the prices of plastic resin types in 2021, speakers said.
Prices for polypropylene and HDPE, including natural and fixed colors, “are currently giving aluminum cans a run for their money because there is a lack of supply,” Bell said. “We are desperately trying to unlock the supply of plastics that meet the demands of these customers,” prompting Waste Management and other FRM operators to seek out untapped commercial ventures or underserved multi-family housing as potential new sources of supply.
The growing demand for recycled HDPE and PP resin is great news for recyclers and resin manufacturers who hope to capitalize on brands’ recycled content commitments, which forecast “solid” prices for the year ahead to 18 months. However, experts also expect these prices to drop slightly at the end of the year.
Scott Saunders, Managing Director of the KW Plastics recycling division, the brand’s commitments play a huge role in the demand for natural-colored recycled HDPE resin, especially because it is easy to dye to match the characteristic color of a product. However, brands are facing inflation and rising operating costs in 2021 and beyond, prompting them to seek cheaper alternatives to recycled resins.
“We’re seeing a price pullback from brands that we didn’t see last year because of their commodities and shipping costs, and [costs of] chemicals to make their products, have increased, ”Saunders said. “They see a lot of inflation and they are looking to cut costs.
Meanwhile, brands that buy recycled, colored HDPE resin typically look for the material for applications that aren’t sensitive to a brand’s look and feel, meaning they want a cost-effective alternative to the Virgin. This could cause recycled resin prices to fall further as the cost of virgin HDPE weakens, he said.
Eadaoin Quinn, director of business development and purchasing for EFS Plastics, said near-term prices for recycled HDPE and PP grades are expected to decline as they are still largely coupled with pristine prices. In the long run, however, “brand commitments could change the dynamic.”
She sees recent price trends as evidence that the prices of virgin and recycled HDPE are starting to decouple. If this trend continues, “Recycled could sometimes be cheaper or sometimes more expensive, but overall it could have more stability because it wouldn’t depend as much on what’s happening on the world stage. It would be more focused on the fixed costs of national recyclers, ”Quinn said.
Upcoming Recycled Content Mandates Raise Concerns About PET Availability
Meanwhile, the tight trends of the recycling market PET is driven not only by the brand’s demand, but also by upcoming changes in state law that will require beverage containers to include more recycled content.
Speakers on a panel on PET raw materials explained how high-quality grades of PET, usually sourced from bottle depot states, are currently in high demand, but “there are not enough bales. for everyone ”, especially in California, where companies like Global Plastics Recycling works. About a quarter of the bales collected through the state’s container depot system are currently exported, company president Paul Bahou said, and Mexico is a destination with particularly high demand.
Persistent logistics and supply chain issues have compounded the problem, he said. “There is a giant traffic jam at the port, so it doesn’t matter how much resin costs compared to flakes right now. Can you get it? Will it arrive in time for you to use it? ” he said.
Bahou is concerned about how local and regional businesses will be able to meet the demand for recycled content starting in 2022, when the first part of California’s 15% recycled content mandate for beverage drinks takes effect . Washington could face similar demand cuts when its own minimum recycled content law goes into effect next year.
Lori Carson, site manager for PET recycler Phoenix Technologies, worries that recycled content mandates will further disrupt the PET market because “there are no mandates for collection yet.” If recyclers don’t find other ways to collect larger volumes of marketable PET, warrants could continue to push prices up. In the past, the price of rPET was historically associated with virgin, but John Cook, director of sustainability at Niagara Bottling, sees recycled content mandates as a driver that could more permanently decouple the two resins.
Paper mills focus on national capacity
Meanwhile, paper mills are balancing the demands and challenges of international and domestic markets for OCC and mixed papers. Demand for these qualities has been generally favorable this year, but this positive trend is offset by continued supply chain, freight shipping and international trade issues, speakers said. These trends could keep more mixed papers and OCCs in domestic markets over the next several years compared to current levels, they predicted.
John Daniel, CEO of Canusa Hershman Recycling, said shipping bookings have been consistently delayed or canceled, and a dumpage shortage has plagued calendars again, marring an otherwise positive export market.
“While the markets have reached record highs and there has been a crazy surge in prices, logistical challenges have really been the most notable issue as it stands now,” he said.
His company had already reduced its international shipments of OCC and mixed paper by more than 25% since 2017, when China began to put in place import restrictions. He pointed out that several international “winners” were still buying mixed paper, such as India, Vietnam and Thailand, but said India was the only country to buy it in significant quantities.
Kurt McLaughlin, vice president of Quincy Recycle, says his company has largely stopped exporting, in part because of ongoing shipping issues, but said the focus on domestic markets has been good for deals. “We’re really bullish on the industry for the next five plus years. In the short term this could be quite exciting and volatile, but we’re excited about the new capabilities to come.”
Shawn State, president of the recycling division of Pratt Industries, said North American mills are already increasing recycled paper capacity to accommodate materials that once went overseas; more and more factories accept mixed paper in their products; and more mills are being built overall. This represents huge potential for the next four or five years, he said.
“If you are looking to avoid all the freight issues associated with shipping and exporting … I think the capacity will be there to consume domestically, both OCC paper and mixed paper,” said declared State. “With the Pratt mill at [Henderson, Kentucky], and then some of these other factories come online, everybody tries to use a little more mixed paper. If companies choose not to export it, there will be more places to sell it.