Quarterly Report – May 2021

With an increasing number of countries seeing an upturn in their economies, extremely tight market conditions are driving prices to historically high levels and recyclers are screaming out for input material. Meanwhile, the container shipping market remains precarious.

More and more countries are witnessing an improvement in their economies, spearheaded by the USA. Europe is also counting on growth now the strict lockdowns are being relaxed.

This has produced a run on raw materials, creating an imbalance between supply and demand. Experts are already talking in terms of a commodity “super-cycle”, which means a long period of rising prices for raw materials. The previous super-cycle started nearly 20 years ago and lasted around 10 years.

The upward trend in prices began this year and has continued to historically high levels. For example, rLDPE, rHDPE, rPP and rHIPS have risen by typically Euro 300-400 per tonne to unprecedented levels of upwards of Euro 1300 per tonne.

Whereas recyclers were facing poor sales and high stocks a year ago, most are completely sold out at present. The extremely high demand for recycled materials is being fuelled by shortages of new prime material. The trend is continuing towards increasing numbers of manufacturers switching to more sustainable raw materials that are part of a circular business model. It goes without saying that this is a fantastic development for our sector, but it also creating issues in terms of availability of material. Recycling companies are screaming out for input materials to keep their lines running. Last year, machines were idle because the bottom had fallen out of demand for recycled material but now, as mentioned, our sector is facing a shortage of input material.

How will the future look if this trend continues? Will there be enough material? With anticipated regulations requiring recycled content in new products, demand will only increase. Ultimately, this may cause delays in supplying recycled material to the plastics processing industry. We can state unequivocally that there is an extremely fragile balance in the transition to a circular economy. Yet we all know that an extremely limited percentage of plastic is recycled around the world, and that there is much more plastic waste available than the amounts currently recycled by our industry. The quality of the plastic waste now going to incineration or to landfill will have to improve dramatically in order to supply the industry with raw materials that fit a circular model. This will require a focus on improved separation technology, but particularly on materials that are easier to recycle. That makes co-operation extremely important; together with the packaging industry, we need to share our knowledge to ensure that we can increase the percentage of recycled material. Fortunately, we are moving in the right direction on that front.

Right now, the global logistics market is not in balance, with exorbitant prices, delays and the recent blocking of the Suez Canal all having a negative impact. We understand the reasons for the price increases and the delays, and there is still a serious shortage of empty containers. Around the world, there are an estimated 42 million containers in circulation. According to experts, an additional 10% would be required to solve current issues. The shortage of sea containers is expected to propel prices even higher in the future as a quick end to the transport misery is not in sight. Although we expect the situation to improve over the course of the year, logistics will never be as fast or as cheap as in the past.