Quarterly Report – July 2021

After declining to a low of US$ 66 per barrel on July 20, oil prices have rebounded and, at the time of writing, are holding firm at slightly above US$ 70 as the market reacted to falling US inventories and to anticipated strong demand in Asia.

In China and other Asian countries, prime prices of PE and PP have been moving within a range of US$ 50 per ton over the last two weeks. Despite price hikes posted on major websites and offers from petroleum companies, demand is weak and there is a lack of market momentum. Traders describe the situation thus: “There is a price, but no market.”

The challenges faced by downstream manufacturers remain substantial, with shipping costs and availability of vessel space for export markets on one side and, on the other, weak domestic demand partly due to seasonal and economic conditions. The engineering plastics, styrenic resins and PET markets are slow amid negative sentiment. Trade is being impacted by excess supply, a downtrend in feedstock prices and the geopolitical situation in China owing to the possibility of sanctions from the USA and Europe on exports of some finished products. The Chinese government’s crackdown on real-estate prices has also added to this negative sentiment.

As for recycled pellets in China, prices have changed according to the extent of prime price movements. China’s virgin prices are the lowest globally for PET, PE, PVC, PS, ABS and PP; the country has lost market share for the importation of recycled pellets. South East Asian recyclers are selling their reprocessed LDPE domestically in Indonesia, Vietnam, the Philippines and Malaysia. Additionally, recycled pellets are being shipped to the USA as post-consumer recycled sustainable materials, which sell at a premium. There has been an undoubted trend towards recycled pellets being sold by developing to developed countries owing mandated recycled contents.

There are shortages of scrap plastics amid price differentials between what recyclers in the Far East can offer and what exporting countries’ processors can pay. The most significant drops in quantities are resulting from prolonged logistics problems which are slowing the whole process of moving materials from exporting countries to Asian recyclers, against the backdrop of lockdowns, curfews and other restrictions imposed in certain Asian countries owing to an exponential increase in COVID cases. Indeed, many factories have shut down temporarily.

Ahead of any improvement, the outlook for the recycling business appears set to remain gloomy for some time.