Although recent tariffs may exclude resin shipments, market players are seeing no shortage of confusion and consternation. | AlexKol Photography/Shutterstock
After many weeks of shifting narratives and uncertainty, participants in recycled polymer markets are working to navigate the new tariff environment, in which buyers and sellers as well as customs officials struggle to align federal mandates with on-the-ground implementation.
On April 2, President Donald Trump enacted steep tariffs on goods from most other countries, citing inequities in trade relationships. Although Trump has maintained his commitment to tariffs since his inauguration on Jan. 20, throughout February and March he threatened, delayed, imposed, suspended and delayed again various measures – in the process removing any semblance of calm from commodity buyers and sellers alike.
“The big problem right now is there’s not complete clarity,” said James Derrico, vice president of new business at commodity brokerage Cellmark. For example, RPET resin is en route to the U.S. from areas that include Southeast Asia and Canada, and the back-and-forth nature of the tariff dialogue can significantly and unpredictably increase the cost, he said.
“We crossed the border with material that had been scheduled that day to cross (before tariff implementation), and then we got billed for it,” he said, adding that the tariff applied to the RPET resin was incorrect when compared to what the administration had previously said. “So we don’t even know. We’re like, well, you want the wrong rate. And two, is this real?”
The lack of clarity also is forcing market players to interpret the regulations to the best of their ability. For example, Cellmark believes its commodities are covered under the U.S.-Mexico-Canada Agreement. The Recycled Materials Association has stated that recycled material imports into the U.S. from Canada and Mexico qualify for the USMCA tariff exemption, provided they were collected in North America and that the importer goes through a process of certifying the material’s origin.
“We think it’s likely that most of these plastics are excluded, and at least Canadian and U.S. businesses excluded,” Derrico said. A federal list of exemptions that includes the 39076100 and 39076900 tariff codes, under which RPET resin is shipped, also seems to support this interpretation.
“But even with the reciprocal tariffs, we’re not sure how that will affect the plastics market, exports out of the U.S. from what other countries are going to do,” he said.
Unsurprisingly, neither buyers nor sellers are keen to pay more, Derrico said. However, after being stung by the previous round of tariffs in 2018-2019, all of Cellmark’s supply contracts now include clauses to account for tariffs, he said, though the majority of the company’s business is done on a spot basis.
“In situations like that, I do feel that you probably will see (paying the tariff) fall onto the broker or the shipper of record,” Derrico added.
Major producer KW Plastics has seen some Mexico RHDPE suppliers reduce selling prices for both natural and color resin to compensate for the tariff, while others are delaying sales in case the tariffs are lifted, according to Scott Saunders, general manager of the company’s plastics recycling division. “If the tariffs hold, we expect some onshoring to take place,” he added in an email to Plastics Recycling Update.
Trader sees mix of potential effects
Ted Kaiser, owner and founder of Dock 7 Materials Group, said that any time a customer’s import costs change, “the first thing they’re going to do is ask me for a lower price, and either I’m going to eat some of that or not.”
However, Kaiser cautioned that pricing adjustments can only go so far. “Obviously, you can’t price something ridiculously out of market.” In addition, some of his customers import plastics from the U.S. into Mexico, and then their end markets are back in the U.S., “so they kind of get hit both ways.”
Dock 7 also does significant business exporting LDPE film bales to Southeast Asia, but the tariff impact so far has been negligible, he said, though this could change if these countries implement reciprocal measures.
However, he noted that even before this year’s tariffs, added costs in the form of local trucking fees and taxes were steep to export to Vietnam, for example, and could sometimes be as much or more than the cost of the load itself. “So if (the tariffs) do actually end up working something out, and it lowers that, that would be amazing in the long term, but obviously in the short term, there’s a lot of uncertainty about how different places will react,” Kaiser said.
With increasing domestic demand for film bales, such as the startup of Nova’s new mechanical recycling facility in Indiana, exporting already had been a less attractive option for the higher grades.
In addition, continuing congestion caused by rerouting to avoid Houthi attacks in the Red Sea has presented logistical challenges, Kaiser said. For example, the number of “free days” – time during which a container is in use but does not incur fees – is important, to allow for customs processing, unloading and perhaps a return trip.
With the increased congestion as well as an insufficient number of vessels in some regions, some shippers are cutting back on free days, and the added confusion over tariff implementation at the destination port can wind up incurring more fees. “A lot of those are not adequate right now,” Kaiser said. “There’s some places where they either accept lower free days or we don’t ship it because I can’t get it available.”
Another element that could become problematic is a proposed port fee on Chinese ships. This could cause shippers to prioritize bigger volumes and head to ports that can handle them, like Los Angeles and New York, increasing congestion there, and to skip smaller ports like Baltimore, Mobile and New Orleans, Kaiser said.
Support for domestic price increases?
So far Derrico said he has not seen major pricing changes for RPET, but he expects prices to firm seasonally in the coming weeks. “It has been very flat, with the exception of domestic producers asking for a potential increase if tariffs go through, but I think a lot of that is because no one really knows even how much to ask for yet, because no one really knows what exactly is going to happen or what the actual rate applied to each good is yet,” he said.
This lack of clarity has led to delays in purchasing, he said, during what typically is the start of the peak buying season for summer beverage bottle production.
Previously, when tariffs were first threatened, recycled plastics markets did see a temporary pause on buying in Canada and Mexico. That caused prices to drop slightly, especially near the northern and southern U.S. borders. But as soon as the tariffs were delayed, spot pricing rebounded to previous levels, Derrico said.
Comparisons to previous disruptions
Despite weeks of leadup, the administration’s waffling made implementation seem sudden to market participants, as the market could not be sure the tariffs were more than mere threats or “negotiating tools.” In 2019, the first Trump administration gave a 30-day notice for its tariff measures against China. That gave buyers and sellers time to determine how they wanted to proceed, Derrico said.
“It’s a little bit different (now), and it’s kind of scary in that as of today, it’s still not clear if things are exempt or not, and what tariff rate is applied to each shipping lane.” As a result, Cellmark is waiting to ship new loads until the company gains clarity, he said.