Viewpoint: US polymer recyclers see weak 2023 market

Fallingvirgin polymers prices have driven demand and prices for US recycled polymers down significantly in the last part of 2022, and some market participants expect those conditions to continue into early 2023, largely for reasons outside of the industry's control.

"Most of our issues are just fundamentals, not event-driven issues," one producer said. "We've gotten numb to the aftereffects of economic issues caused by the Ukraine war, and inflation is continuing to cause demand to drop."

US recycled polymer supply is falling as cooler weather brings down consumption of plastic bottles, but bale and recycled resin prices still remain volatileand low due to reduced consumer demand.

Falling prices for virgin polymers also have pressuring recycled polymer prices. High-density polyethylene (HDPE) blow-molding FAS Houston prices have fallen by 45pc since May to 39¢/lb. Virgin polypropylene has followed a similar trajectory.

One market segment that has been hit particularly hard is the decking and piping industry. Reduced demand and thin margins are expected by participants to continue into 2023, as rising mortgage rates have slowed and housing starts and construction. Housing starts in October fell by 6.1pc from September and housing completions fell by 6.4pc, according to US Census Bureau statistics. In 2023, housing construction could slow further, putting more pressure on demand for recycled polymer piping and decking.

"It feels like earlier this year, we were running at 90 miles per hour, and now we're at 70," one market participant said. "It's like everything is still working, but has slowed to a crawl."

To be sure, some buyers are largely positive about the future, highlighting the start of new recycling operations that add to the supply of recycled material. Still, supply is not yet expected to increase to the point where sourcing will not be a regular concern for some buyers.

"Markets have been like this before," one participant said. "This level of pricing and demand is not too far out of the norm if you look more than two years in the past. But after many of us hit record prices earlier this year, it feels different."

While recyclers generally agree that prices and demand have likely hit a floor, many see concerns about high inflation and a possible recession as preventing a demand surge at the start of the new year.

"We're near the bottom if we're not already past it," one recycler said. "There could be a little bit of a bump at the beginning due to seasonal effects in 2023, but it will all depend on the economy."

In spite of a spate of recycling commitments made by multinational conglomerates and large US companies, recycled polymers prices are still highly influenced by virgin polymer prices. As some of the corporate commitments have been waylaid, delayed, and dropped, according to a November report by the Ellen MacArthur Foundation, low virgin polymers prices are expected to continue putting downward pressure on recycled plastics prices and demand throughout 2023.

By Zach Kluver