Low-Cost Scenarios

Economic activity in the manufacturing sector for the U.S. as a whole contracted in June for the first time since July 2009, according to the Institute for Supply Management (ISM) Report on Business. This slowdown is apparent in terms of the volume of plastic scrap generated by manufacturers, which sources report as light.

A reprocessor based in the Southeast describes generation as “unusually slow.” She says that even though the automotive manufacturers in her region did not close for the July 4 holiday as they normally would, less scrap material was generated than in a typical year.

She attributes the slowdown in manufacturing to the uncertain economy and the election year. “People are holding their breath regarding the elections,” the reprocessor says, citing uncertainty about how health care costs might affect overall business operating costs as implementation of the Affordable Care Act continues.

When it comes to post-consumer generation of material, the news is a bit better. The excessive heat in many regions of the country has people reaching into their coolers and refrigerators for bottles of cold beverages. One material recovery facility operator in the Midwest says generation of post-consumer PET (polyethylene terephthalate) was increasing as a result.

Pricing has experienced some softening in response to increased generation. “Demand is good, but pricing has retreated sharply, especially for PET,” he says.

The reprocessor also characterizes domestic demand as strong. However, finding raw material to meet customer demand can be challenging, she adds, particularly for ABS (acrylonitrile butadiene styrene). “It seems like there is no ABS out there.”

Recovered PE (polyethylene) and PP (polypropylene) are moving well, though at lower prices than earlier this year, the MRF operator says. Demand for recycled PP continues despite a considerable decline in virgin PP prices, the reprocessor in the Southeast says. Pricing for virgin PP declined from 20 to 25 cents per pound, she adds.

Post-industrial engineering grades were sliding slowly in price in mid-June, sources say, though pricing seems to have stabilized by mid-July.

Declining oil prices, which correlate to virgin and recycled plastics pricing, do offer a benefit in the form of less expensive transportation. “We are getting some relief in transportation,” the reprocessor in the Southeast says. She says pricing is more affordable and more trucks are available now that demand from the produce industry is decreasing in her region. She adds that her company is building its own trucking fleet so it is less vulnerable to trucking company lack of availability.

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