Strange but steady

It’s been a strange year but steady,” says Jon Stephens, vice president of trading at Avangard Innovative, Houston, speaking of the polyethylene terephthalate (PET) market.

Avangard Innovative manages the sale of scrap commodities, including plastics, paper and metals, through its Natura Zero program. The company also processes raw material feedstock and manages the distribution of reprocessed resins as well as some virgin resins.

While Stephens says generation from postconsumer sources and at the commercial level through third-party logistics firms and grocers is increasing, he adds, “The value of the commodity is the biggest issue right now.”

Restrained pricing

Pricing for recovered PET and other plastics dropped at the start of the year, as did pricing for a number of other commodities, says Patty Moore of Moore Recycling Associates, Sonoma, California. However, pricing for a number of secondary commodities has gained strength since, though Moore adds, “PET has been slower to recover because of the global oversupply of virgin PET. It has come up, but will probably remain a little soft until global oversupply is normalized.”

Supply and demand play leading roles in determining pricing for recovered PET containers and rPET (recycled PET), and recyclers and reprocessors can point to seasonal trends in these areas that affect pricing. Stephens says pricing for PET bales and rPET generally increases in April and May, though it remained flat this year, owing largely to the oversupply of prime material on the market.

Despite the softness in PET pricing that Moore and Stephens describe, as of mid-July, clear rPET is selling at a premium to virgin material, with Xavier Cronin, editor of the Repro/Regrind Report from PetroChemWire, based in Austin, Texas, saying the differential is 5 cents per pound.

According to the July 17, 2015, Repro/Regrind Report, U.S. produced bottle-and-packaging-grade virgin PET sold in the 65-to-69-cent-per-pound range, while imported prime packaging-grade PET sold at 55 to 59 cents per pound.

Meanwhile, clear rPET that has received nonobjection status with the FDA (Food and Drug Administration) sold in the 70-to-73-cent-per-pound range delivered FOB (freight on board) to the East Coast, according to the report. Its green counterpart was offered at 50 cents per pound, delivered to the Midwest, as of the July 17 report.
 

Flooded market

According to a presentation at the 2015 Plastics Recycling Conference delivered by Chase Willet, global business director of aromatics and fibers at IHS Chemical, headquartered in Englewood, Colorado, North America has roughly 1 million metric tons of virgin PET overcapacity. He predicted that PET prices would follow global energy markets, with prices for rPET getting further compressed by virgin prices.

The oversupply situation is exacerbated by the volume of low-priced imported prime packaging-grade PET that is entering the U.S. In fact, three U.S. PET producers have sought antidumping duties in response to this situation.

On March 10, 2015, DAK Americas, M&G Group and Nan Ya Plastics Corp. asked the U.S. Commerce Department and the U.S. International Trade Commission to impose antidumping and countervailing duties on PET imported from Canada, China, India and Oman.

In response, the U.S. Commerce Department said March 31 that it would investigate the complaint. The investigations focus on PET with an intrinsic viscosity of at least 0.70, but not more than 0.88, deciliters per gram. The scope includes blends of virgin PET and recycled PET containing 50 percent or more virgin PET resin content by weight, provided such blends meet the above intrinsic viscosity requirements.

According to Charlotte, North Carolina-based DAK, Canada, China, India and Oman accounted for nearly 53 percent of the PET imported into the U.S. in 2014. From 2012 to 2014, the company says, imports from these countries grew by almost 44 percent to 725 million pounds.

The Commerce Department says imports of PET resin from Canada, China, India and Oman were valued at an estimated $239 million, $92.1 million, $51.7 million and $51.1 million, respectively, in 2014.

Final determinations in the investigation are not expected until spring 2016.
 

Export demand

While imports of PET material into the U.S. have increased, the same cannot be said of exports of recovered PET bottles.

Moore says most people believe much of the plastic collected for recycling in the U.S. is shipped to China. “That is not the case,” she says. “The vast majority of plastics collected for recycling stays domestic.”

According to the “Report on Postconsumer PET Container Recycling Activity in 2013,” which was released Oct. 8, 2014, by NAPCOR (National Association for PET Container Resources), Florence, Kentucky, and The Association of Postconsumer Plastic Recyclers (APR), Washington, U.S. reclaimers purchased 17 percent more bottles in 2013 than in 2012, accounting for 74 percent of all U.S. bottles collected. “In total, U.S. reclaimers purchased 1,587 million pounds of PET scrap material, using more alternative feedstock (postconsumer thermoforms, preconsumer bottles, postconsumer strapping and other unprocessed industrial scrap) and imported material than ever before,” the report states.

Reclaimers outside the U.S. purchased 26 percent of the total U.S. bottles collected. According to the NAPCOR/APR report, “This is the lowest volume of material exported since 2004, and the lowest percentage of total collections since 2000.”

Canadian reclaimers purchased 47 million pounds of PET bottles from the U.S. in 2013 compared with 54 million pounds in 2012, a decline of 13 percent.

“Exports to the Far East, predominantly to Chinese buyers, dropped by 84 million pounds, while exports of the estimated PET bottle fraction of mixed plastic bales also dropped from 35.5 to 12.5 million pounds,” the NAPCOR/APR report states.

When it comes to China in particular, Stephens says demand for recovered PET from the U.S. is soft, adding that the country’s economy is “very unstable” currently.

He adds that economies in Asia are generally unstable and that much speculation surrounds their future buying habits. “It could be a phase, and they could start buying strong in mid-August," he says.

Stephens notes that Avangard Innovative has shipped 10 to 20 percent less material by volume to China so far in 2015.

“Demand from China is not nearly as great as it used to be,” Moore says, adding that the economy is “very slow” and that the country is generating and collecting PET scrap internally.

“We’re seeing slowing demand and a reduction in volume going to China. It started with Green Fence,” Moore says.

Operation Green Fence was the Chinese central government’s initiative designed to clamp down on the import of illegal solid waste. It began in February 2013 and ran through October 2014.

“We are never going to see those hay days again,” she adds, referring to last decade, when China’s demand for recycled commodities was insatiable.
 

Domestic demand

While recovered PET pricing could be better, Stephens says, domestic demand remains steady to strong.

“U.S. demand is the least of the issues we have right now,” Moore adds.

RPET use in the U.S. and Canada increased by 15 percent in 2013, according to the NAPCOR/APR report. Converter consumption totaled 1,513 million pounds across the fiber; sheet and film; strapping; engineered resin; food and beverage bottles; and nonfood bottles product categories. The report notes that this is the highest consumption figure to date.

Use of rPET in the food and beverage bottle sector increased 34 percent to 369 million pounds in 2013, while it more than doubled in the nonfood and beverages sector, reaching 106 million pounds, according to the report. When combined with the sheet and film categories, which consumed 315 million pounds of rPET in 2013, 790 million pounds of rPET was used to make new PET packaging.

“Growth in fiber allocation end use also stood out in 2013, with a 9 percent increase over 2012 to a total of 558 million pounds used in the domestic end market,” the NAPCOR/APR report notes. “This reflects continued investment in fiber market applications, primarily in the southeastern United States.”
 

A question of yield

As the volume of recovered PET consumed by domestic reprocessors increases, so too does the need for quality, Moore says.

“We’re seeing a trend toward having bales valued based on their yield,” she says. “Those that create good quality bales with good yield are getting paid more. That is really becoming much more normal.”

PET thermoforms are a potential source of contamination. Infrastructure to process thermoforms is developing, and the containers often end up in PET bottle bales.

“Bottle reclaimers can handle a certain percentage of thermoforms without compromise,” Moore says. However, she adds that their presence in the recycling stream is growing relative to that of bottles and may be reaching a tipping point.

According to the NAPCOR/APR report, reclaimers reported “crisis level” contamination in 2013, particularly in PET bales from curbside recycling programs.

“And, while domestic collection is growing, the materials generated by community programs in the U.S. are still not sufficient to meet the demand, both current and potential,” the report adds.

The author is managing editor of Recycling Today and can be contacted via email at dtoto@gie.net.