Seasonal slowdown

As December 2014 was winding down, secondary plastics markets were doing the same thing.

“As we hit the holidays, many generators and end users take time to do scheduled maintenance,” according to a broker based on the East Coast who serves clients throughout the U.S. “We’ll see a slowdown in the last two weeks on both ends of the spectrum. This should have generators sitting on a little bit more material than usual as they try to push every last ton off their floor before they close the fiscal books of 2014,” he adds.

A reprocessor based in the Southeast also mentions declining generation in the second half of December resulting from automotive industry shutdowns.

In terms of export buying, the broker says he’s seen more interest from China as of mid-December. “China has taken more of an interest in PET (polyethylene terephthalate) in hopes of securing material throughout their holiday time off in the beginning of the year,” he says, referring to the Lunar New Year, which falls on Feb. 19 in 2015. “We’ve seen more market activity on the export of PET bottles to China over the past six to eight weeks. This can be attributed to the lower pricing and the demand for more recycled goods into China again.”

The broker characterizes PET demand in general as “on par or a little bit below average.”

He continues, “Falling pricing has many end users ‘waiting for the other shoe to drop’ with pricing. No one ever wants to overspend if they don’t have to. They also see a lot of factors contributing to downward pressure (oil prices, virgin resin prices, holidays, etc.) in the PET market, so many are holding off over purchasing at today’s pricing.”

He says PET pricing for December delivery has declined slightly and is due to fall further. “Collapsing oil prices, PET virgin resin prices falling and the market still continuing to adjust from the closure of multiple end using plants has hurt PET pricing throughout the country.”

 

Despite this, the broker adds that demand remains relatively strong. However, he adds that consumers are considering purchasing virgin material to supplement their recycled PET purchases.

HDPE (high-density polyethylene) pricing also was trending downward as of mid-December, the broker says. “With the inflated HD market for most of the year, many generators are seeing pricing coming back to earth; however, the demand for much of this material has stayed relatively strong. We believe the lower pricing has many end users grabbing material at a significant discount for the year.”

While declining petroleum pricing does not always bode well for those in the plastics recycling industry, it can be a benefit when it comes to trucking costs. However, that does not appear to be the case currently, according to the broker.

“Gas pricing dripping significantly would normally trigger pricing on trucking rates to drop; however, they have stayed pretty steady,” he says. He attributes this to third-party logistics firms’ efforts to increase their margins during historically slower months.

The broker adds, “We’re seeing these trucking companies take two strategies: gain market share or increase revenue. In my opinion, the ones who balance this the best will end up on top.”