A global recession may result from the US/China trade war and the uncertainties of Brexit. Global demand for commodities is decreasing and prices are under pressure. The plastics market is settling down following new regulations. Initiatives for the circular economy are growing. Chemical recycling could be a positive addition to mechanical recycling.
The US/China trade war and the uncertainties surrounding Brexit may well lead to a recession, not only in the relevant countries but also in the rest of the world. The global plastics sector has always been sensitive to economic developments. As representatives of this sector, we are hearing the alarm bells ringing louder and louder. Moreover, the attack on the oil fields in Saudi Arabia has added to the tensions in the world. Although there was a huge rise in the oil price the day after the attack, this is not expected to have a lasting effect on commodity price developments.
The uncertainties mentioned above have meant a dip in confidence in the economy, which has led to a global reduction in demand for commodities. The recovery in demand anticipated for some materials after the end of the holiday months was much weaker than had been hoped. This has put great pressure on the prices of LDPE, HDPE, PP, PET and HIPS; prime material is frequently offered cheaper on the spot market than recycled material. As a consequence, it is attractive for final processors to use prime rather than recycled material for their production. This could be resolved by means of legislation which sets out that products must consist of a specified percentage of recycled material. On the other hand, fortunately, we are also seeing a trend towards large packing companies starting up their own programmes for more recycled material in their products by means of a circular concept.
Owing to the stagnation of the Chinese economy, sales of European recycled material in Asia are currently under pressure, leading Europe’s recyclers to hold relatively large stocks.
The European automotive industry is also in a bad way; it is expected that production of new cars will drop to its lowest level since 1997. Because of this car industry malaise, many suppliers of recycled material are feeling increasingly under pressure as the recycling industry is a major supplier to the automotive industry.
The first impression is that all these news items do not bode well, but I am nevertheless positive about the various developments in our industry. Price fluctuations and the approaching economic cooling have happened regularly in the past - there is nothing new in this. What is new, however, is that the recycling industry is playing its role in the circular economy and is co-operating with producers of finished products in order to create new value chains. This offers huge potential to us as an industry.
Our industry has also shown a high level of resilience regarding the problems surrounding the new export legislation. Much has been invested in production capacity in our own region within a short period of time, which means plastic waste is now processed regionally and exported globally as a commodity.
Technical developments are not standing still either. In addition to progress in mechanical recycling, there are major developments in chemical recycling, including an approach that enables us to separate monomers from low-quality mixed plastic, which then serve as building blocks for new plastic. This has provoked a lot of interest in the petrochemical industry; companies like Dow Chemicals and LyondellBassell have made investments in these technologies. Dr Rob de Ruiter from TNO (the Netherlands Organisation for Applied Scientific Research) will give a presentation on chemical recycling at our plenary meeting in Budapest on October 14.
Henk Alssema
VITA Plastics (NLD), Chairman of the BIR Plastics Committee
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