Scrap PET imports reached an all-time single-month record high in January, coming on the heels of a year that brought record-high imports of the post-consumer resin.
For the U.S. plastics recycling industry, the influx, primarily of flaked material, is piling onto a surge of virgin PET flowing into the country to create a situation one reclaimer described as “brutal.”
“It’s really pushed the sale price down for reclaimers in California to try to compete,” said Paul Bahou, president of Global Plastics Recycling, a Perris, California-based PET reclaimer. “Most people are selling at cost just to get orders.”
The imports are driven by a confluence of global factors, including an economic slowdown in China and shipping availability opening up. Additionally, in California, the surge in imported feedstock comes at the same time scrap PET bales are increasingly being bought by reclaimers in Mexico, leaving California’s processors hunting for inbound material.
“It’s a bit of a perfect storm situation,” said Sally Houghton, executive director of the Plastic Recycling Corporation of California, a PET broker. She noted California reclaimers are being forced to pay more for bales, then sell their output RPET for lower prices because of the competition from imports. “It’s a tough market for California reclaimers.”
Factors behind the surge
In January the U.S. imported 52.5 million pounds of scrap PET. That’s well over double the amount imported into the country in January 2023, and it’s the highest single month of recycled PET imports on record. It also comes after a year that saw recovered PET imports jump 33% year over year, reaching a new high of 450 million pounds.
The 2023 increase was driven by a spike in RPET imports coming into the U.S. from southeast Asia, particularly Thailand: Imports increased from 20 million pounds in 2022 to 51 million pounds in 2023. Canada also sent 21% more RPET in 2023 than the prior year. The large increases were offset by Mexico sending substantially less, as its domestic reclamation industry has expanded significantly.
The RPET entering the U.S. is typically in flake form, recovered and processed outside the country but in high demand by U.S. end users – particularly for the low prices offered by overseas sellers.
It’s an unusual twist to see such high imports of what was – until a few years ago – a major export commodity. In 2014, the U.S. exported 813 million pounds of recycled PET, with 65% of it going to China; in 2023, several years after China restricted imports of scrap plastic, U.S. exports of recycled PET had dropped to just 142 million pounds, with less than 1% of it going to China.
There are a few factors playing into the surge in U.S. imports of scrap PET. For one, moving material across the Pacific suddenly became economically viable.
“I think the main driver was a return to cheap shipping containers after COVID had kind of worked its way through the global economy,” Bahou said.
Additionally, a surge in resin capacity in China – the Washington Post recently reported China added 17 new resin plants last year – led to a situation where resin producers in the region were suddenly looking to move material to markets elsewhere. That has been exacerbated by an economic slowdown within China.
The import data, first reported by market research firm ICIS in February, puts numbers to what PET reclaimers have been feeling for several months.
Bahou was blunt about the impact on reclaimers.
“It’s just brutal,” he said.
A lifeline in California?
Bahou noted California has been particularly hard hit, because it’s particularly attractive to ship flake and resin from Asia across the Pacific to California.
His company buys post-consumer bales of California deposit material, and it has the capacity to process 40 to 50 million pounds of PET per year. But right now, he says, “myself and many other companies I know are not at full capacity – most of us are at half capacity.”
He and other reclaimers have identified one possible fix in California. Bahou suggested that CalRecycle “adjust its parameters on how it incentivizes the use of bales within the state, and incentivizes the use of post-consumer products within the state.”
CalRecycle’s Plastic Market Development Payment Program is designed to do just that, and in fact a recent update to the program was intended to specifically incentivize PET recycling in the state. But Bahou said the program has one major drawback currently: The payments are set far too low to meaningfully help reclaimers.
He says there’s a 10-cent-per-pound gap between post-consumer resin prices currently and the price they need to be at for reclaimers to be financially sustainable. But the payment program currently pays between $50 and $75 per ton to PET reclaimers, which translates to about 3 or 4 cents per pound for reclaimers.
“That’s not going to bridge your 10-cent gap,” Bahou said.
He and other plastics reclaimers have joined together as a group called the Alliance of Plastic Processors to lobby CalRecycle to increase the payments to $150 per ton. That gets the payments closer to closing the price gap between virgin or imported recycled material and California-generated bales.
The push for policy solutions stretches outside of California. A March 19 discussion hosted by ICIS emphasized that plastics recycling companies in Western countries need “maximum protection” from the overcapacity in the virgin resin market.
“Governments must do much more to protect recycled polymer producers in the west as rising oversupply in virgin markets, led by China, threatens to undermine their business model,” the consultancy noted.
Bahou says the push for assistance in the reclamation sector reflects a wider need for focus on all stages of the plastics recycling system, rather than what many reclaimers see as a narrow emphasis on collection.
“The human body can’t exist if you only give healthcare to the top third of it,” Bahou said. “Recycling is the same way. If you’re only focused on one third of the process you’re going to run into problems.”
