Fundamentally sound?

The price of oil may influence how plastic scrap is valued, but public opinion and corporate directives are helping ensure plastic scrap enters the recycling chain, according to presenters at the Institute of Scrap Recycling Industries (ISRI) 2016 Convention & Exposition.

Mark Eramo, a vice president with Houston-based IHS Chemical, said the supply chain from energy exploration through chemicals production into plastic commodities and end products involves numerous variables that affect supply, demand and price of virgin plastics.

Eramo listed more than a half-dozen key variables affecting this chain in 2016, including the price of crude oil, the health of China’s economy, the lifting of sanctions in Iran and the sustainability movement.

Regarding where plastics manufacturers and users rate sustainability as a priority, Eramo said, “I would rate it extremely high.” He said for global petrochemicals producers like Dow Chemical Co., ExxonMobil and BASF, “it is a major issue that the industry has to deal with.

Considering all the variables together, Eramo said IHS sees crude oil and virgin plastics prices bottoming out in the first half of 2016 before rebounding slowly in the second half of 2016 and into 2017. It could be 2021, however, before oil returns to a sustained $80 per barrel level. “It’s going to be a while before you see $1,600 to $1,800 [per metric ton for virgin plastics] in these markets again,” he remarked.

Recycled plastics markets add another layer of variables, according to Patty Moore and Nina Bellucci Butler of Moore Recycling Associates Inc., Sonoma, California. Moore said pricing for plastic scrap in 2015 and so far in 2016 has been “rather bleak,” but she added, “I do believe better times are coming.

Moore noted that recycled-content polyethylene terephthalate (rPET) has at times sold at higher prices than virgin PET, a situation that she said “makes me nervous” because it could cause users to pull back on purchases.

Among the problems in the United States rPET market is “pretty serious reclamation overcapacity,” Moore said. “We could easily absorb all the PET bottles generated in the U.S.

The nonbottle rigid plastics market has benefited from increased collection volumes but suffers from uneven processing quality and unclear collection instructions, Moore said, urging session attendees to spread the word about www. recycleyourplastics.org

Pricing for the mixed rigids grade remains tied to the spot market, she said, which is “not what bankers want to see” when reclaimers try to get financing. She urged recyclers to increase their use of contract pricing.

Patty Moore of Moore Recycling Associates Inc., Sonoma, California, said that pricing for plastic scrap in 2015 and so far in 2016, has been "rather bleak," but she added, "I do believe better times are coming."

Bellucci Butler said plastic film recycling in the U.S. has been assisted by the growth of composite lumber companies, such as Trex and AERT, which themselves benefitted from seed money provided by ExxonMobil and Dow, respectively.

These end markets have helped film recyclers to establish a U.S. collection infrastructure with more than 18,000 locations, Bellucci Butler said, and greater "overall acceptance" for film as a recyclable product.

The ISRI 2016 Convention & Exposition was April 2-7 at the Mandalay Bay Convention Center in Las Vegas.