Analyst: higher PET prices creating opportunity for recyclers – Recycled PET has been in a fist fight with its virgin resin brother for years now, battling depressed prices brought on by lower oil and gas prices – Higher PET prices creating opportunity recyclers
Nashville, Tenn. — Recycled PET has been in a fist fight with its virgin resin brother for years now, battling depressed prices brought on by lower oil and gas prices.
But Tison Keel sees possible improvement for the recycled PET market over the next couple of years.
And his advice to recyclers is take advantage while you can.
As a senior director for IHS Markit, part of his job is to keep track of the ebbs and flows of the PET market, including the interplay between recycled and virgin resins.
Lower virgin prices have bloodied the nose of recyclers, but Keel sees an opportunity this year and next as the virgin PET market works through some issues that have driven prices higher.
“The key message is carpe diem,” Keel told the audience at the Plastics Recycling 2018 conference in Nashville.
“You’ve got an opportunity. I think the industry has a good opportunity because, even though there are still some fundamental conditions that have created a very intense competition with virgin material, the conditions in the next couple of years are actually going to be different.”
Keel pointed to the recent Chapter 11 bankruptcy of M&G Polymers as a market force that’s helping virgin PET prices climb higher.
And when virgin PET costs more, recycled PET has a better chance to compete in the marketplace.
M&G’s problems “has created a much tighter market condition for PET and the producers that are left are taking advantage of that and they’ve jacked the prices up,” Keel explained.
Far East New Century Corp. recently purchased M&G’s production site in Apple Grove, W.Va., and Keel expects production to eventually resume there. He also believes the unfinished M&G site in Corpus Christi, Texas, will be sold and eventually completed.
So recyclers need to put on their best suits and start pounding the pavement looking for new opportunities while they have the chance.
“You have an opportunity to gain entry, get a foot in the door, to use old sales jargon,” Keel said.
With new virgin capacity coming on line in the years ahead, Keel does not see these better times lasting long. But for the next two years, he has reason to feel optimistic about recycled PET.
“The prices for recycled PET are going to become more competitive,” he said. “You are going to have renewed interest, if you haven’t seen it already. A renewed interest on the part of buyers in the U.S. and Canada and Mexico to increase their purchases of recycled PET.”
The virgin PET sector, he said, will have trouble keeping up with demand in the peak bottling seasons of the spring and summer in the United States and Mexico in the near term. That means operating rates are actually going to be unsustainably high, Keel said, if his assumptions end up being correct.
“The news, I think, is good,” Keel said, for recyclers. “The key question is how long will these good days last?”
“I really see at least one and maybe more likely two years of higher PET prices that will benefit the recycling. But, longer term, if my forecasts are accurate, it’s not a permanent impact,” he said. “Beyond 2019, the party might not continue.”
Recyclers, however, can use the more-even playing field to help permanently move some applications to recovered resin.
“If a company who has sustainability goals and converts and increases their recycled content in their packages, and especially if that’s part of their marketing, it becomes very difficult for them to pull that back out again even if [virgin] prices come back down,” he said.
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