In the midst of Mardi Gras season, more than 1,600 plastics recycling leaders headed to New Orleans this week for Plastics Recycling 2016. But prices, not parades, were on attendees’ minds.
As many companies in the plastics recycling chain slog through a prolonged period of sluggish markets, conference attendees were hungry for insight on the trends and conditions that will shape plastics recovery in the months ahead.
“There’s a reason why there are so many people here in a down market,” said Envision Plastics’ Tamsin Ettefagh while onstage during a conference session Feb. 2. “Everyone is wondering what’s going to happen next.”
Such energy extended into the Plastics Recycling 2016 trade show hall, which featured nearly 190 exhibitors. The conference drew a total of 1,643 attendees from 42 states, six Canadian provinces and 40 countries countries.
The show opened Feb. 1 with the Technical Forum from the Association of Plastic Recyclers (APR). The afternoon event covered the industry’s latest bale specs and also featured a showcase highlighting innovative products and concepts from APR members.
The opening plenary session on Feb. 2 attacked the topic of markets head-on, with a trio of market analysts explaining the factors driving the industry’s recent price fluctuations.
Tison Keel of IHS Chemical broke down supply and demand for the feedstocks that go into a virgin PET molecule. He said a number of petrochemical production projects are planned, under construction or have recently come on-line in both North America and Asia, leading to major oversupply in the PET resin market. That fact, along with low oil prices, has meant low prices for virgin material – and difficulties for sellers of recycled material because the discount for recycled resin has evaporated.
Consumer trends have exacerbated price issues. For instance, American beverage preferences have shifted from carbonated soft drinks to water, energy drinks and other products that don’t require as much PET usage in their packaging. That has produced lower demand from brand owners and lower PET prices as a whole.
“Everything we see is conspiring to keep prime PET price in North America low for the next two to three years,” Keel said.
Joel Morales, a colleague of Keel at IHS, added to anxieties when he predicted reduced demand from Chinese PE and PP buyers for recycled material over the next two years. “How that reverberates across the world will be influential,” he said.
But the IHS representatives also offered some good new on the pricing front. They said they believe oil prices have hit their floor and that by the end of 2017, those prices may be back above $60 per barrel, up from the current level around $33 per barrel.
The opening session’s third speaker, Philip Karig from plastics consulting firm Mathelin Bay Associates, addressed the pricing situation in part by pointing out that plastics recycling companies can get off the “elevator of pricing” by smart positioning.
For instance, industry businesses can strive to make themselves more than just resin suppliers to customers by also offering services such as equipment installation and technical consulting.
“Don’t just sell scrap, sell systems,” said Karig. “Do everything you can to tie your customers to you.”