Plastic Department

Since the start of the year, Chinese consumers had been steady buyers of plastic scrap, but that changed in late May.

"Export buying was doing great until a few weeks ago when the inspectors were changed in China/Hong Kong," says a reprocessor based in Texas. "They started really checking what was coming in, and it caused a backup of containers going to China, which scared buyers and dropped prices, if they were even willing to buy." He adds, "This is still the case now, although material is moving," he says of the situation as of mid-June.

A recycler based in the Midwest says Hong Kong ports are operating at 10 percent of their normal capacity as of mid-June in light of the tighter inspections. "Export demand is throwing a wrench in things," he says.

According to sources, the tighter inspections are the result of concerns about Swine Flu as well as a response to attempts to misrepresent scrap material to pay lower tariffs on the shipments. Some shippers have been misrepresenting material as being of a lower value to pay a 5 percent VAT (value-added tax) as opposed to the 20 percent VAT the material would actually command.

As shipment of produce begins to heat up with the summer months, recyclers could find more competition for transportation. The Midwest-based recycler notes that containers will be more difficult to get in July as produce and similar commodities take precedence over scrap materials.

"Containers have been tight since November when they started parking vessels," he says. "And I see it getting increasingly tougher to get containers."

The Texas-based reprocessor says, "It’s produce season for us in Texas, and since they pay more for runs than plastic scrap buyers, we get what freight is left over. It slows things down a bit, but we are still able to move all that we need."

A reprocessor based in Illinois adds, "Containers continue to be an issue, but with the decrease in exports, it has not been the limiting factor lately."

Domestically, demand appears to be picking up slightly. "With the price announcements of increases in PP (polypropylene) and PE (polyethylene) [in mid-June], recycled consumers have been hitting the phone hard to lock up cheaper material for July deliveries," the recycler based in Texas says.

Sources say generation is steady to moving up as of late spring, but summer shutdowns are around the corner, meaning demand and post-industrial generation likely will decline.

The effect of General Motors’ and Chrysler’s bankruptcy filings on Tier 1 auto suppliers also is a concern. These companies say they will build twice as many cars in the second half of 2009, but a recycler based in Michigan says he wonders where the credit is going to come from for the Tier 1 suppliers to buy the material they need. "There have been long closures and they are tight on cash," he says. "It will take a while to get cash back into the system."

Of his own company, the Michigan-based recycler says new contracts begin in August and require the purchase of more material. "Are we going to be able to get credit for that?"