Global Market Outlook on PCR Resins

Europe and North America continue to remain as the most preferred sourcing destinations for global PCR buyers. Despite higher prices, these regions ensures adequate supply and access to advanced technologies for food grade buyers.

Market Analysis – RHDPE – NA

Recycling rate in 2016 fell from 31.1 percent to 29.7 percent. However, growth rate of 2-3 percent is expected in the next five years. HDPE recycling rates are expected to increase to 32-35 percent by 2022 primarily due to the higher recycling targets set by the regulatory bodies. EPA and USDA advocates the re-use of 50 percent of total plastics by 2030. Trade tensions between the US and China could affect surplus capacity for exports, which would increase the availability could affect the collection rates in the short-term.

Trend (2016 - 2022)

  • Recycling rate in 2016 fell from 31.1 percent to 29.7 percent. However growth rate of 2-3 percent is expected in the next five years. HDPE recycling rates are expected to increase to 32-35 percent by 2022 primarily due to the higher recycling targets set by the regulatory bodies. EPA and USDA advocates the re-use of 50 percent of total plastics by 2030
  • Capacity Trends: The total rHDPE capacity in North America for 2016 amounted to ~0.68 MMT/YR. The operating rate for 2016 in the region was ~ 66 percent. The decline in operating rates can be attributed to the increase in capacity which witnessed an addition of 0.029 MMT/YR
  • US-China Trade war: Trade tensions between the US and China could affect surplus capacity for exports, which would increase the virgin availability which could affect the collection rates in the short-term
  • Impact of crude oil prices and new virgin HDPE capacity on recycling rates: Increase in crude oil prices through most of 2018 are likely to support the prices of virgin resins. This in-turn is expected to keep rHDPE prices attractive for the consumers. However, the addition of new HDPE capacity to the tune of 2 MMT in the US in the next five years is expected to increase the supply surplus and therefore exert a negative pressure on the virgin and recycled HDPE prices. Many US reclaimers are of the view that new virgin HDPE capacity expansion is a threat to recycling industry. The question is how much of the virgin resins will be available in the domestic market. With around 40-50 percent of the new virgin HDPE production earmarked for exports by the US producers and the increase in recycling targets, it could be assumed that the US HDPE recycling rates may not be affected much in the next five years

Regional Trends –North America

Around 52 percent of the recyclers are located in states that have bottle bill imposed. These states have an average recycling rate of ~70 percent which is much higher than the US overall recycling rate of 28.4 percent

Market Analysis – RHDPE – Europe

Demand for rHDPE is expected to grow at a CAGR of ~2.5-3 percent from 2017-2022 due to increased consumer awareness and recycling targets set by major FMCG companies. Europe’s recycling rate is expected to increase to 43-45 percent by 2022 supported by investments in recycling plants and increase in recycling targets. Recycling rates of PCR resins for Sweden, Ireland and Germany are among the highest in Europe.

  • Demand: While the demand for virgin HDPE is expected to increase at ~1.2 percent, the demand for rHDPE (bottle grade) is expected to grow at a CAGR of ~2.5-3 percent from 2018-2022 due to increased consumer awareness and recycling targets set by major FMCG companies. With European retail sales and business confidence expected to increase, the rHDPE recycling rates and rHDPE demand would also increase
  • Recycling Rate: Europe’s HDPE total bottle production from virgin resins is estimated at 615 thousand MT during 2016. Its rHDPE collection rate for recycling stood at 42 percent in 2016, making the total HDPE collected and recycled to be 249 thousand MT. The recycling rates are expected to increase to reach 43-45 percent by 2022, on the back of European Commission waste management targets and EU’s target of recycling 50 percent of the plastics by 2020
  • Collection Trends: In household waste, HDPE collection rate was ~76 percent, while in commercial and industrial it was found to be 40 percent in 2014. The total collection rate in 2016 in EU is ~40 percent. The collection rate in the majority of the countries is above the mandate of 22.5 percent in 2016
  • New recycling plants are expected to come online: Suppliers like Rymoplast are currently building a factory which will be operational from Q2 2019 for post-consumer PP and HDPE packaging. The new facility that will open in 2019 will have a capacity of 25.000 tons of output in post-consumer based HDPE and PP compounds

Cost Structure Analysis

The costs for baling and sorting has witnessed a increase of 5 percent Y-o-Y . This increase in costs can be attributed to the lower bale quality and tighter bale supply in the region. Quality of bales impacted margins for the recycler as they varied by ~ 4 percent based on the degree of quality.