Changing dynamics in recovered plastics market
Brian R. Hook
The ebb and flow of the recovered
plastics market may be on the cusp of changing again, impacting
prices and supply, according to industry insiders.
“As with all businesses,
strong demand for a product changes the business dynamics,”
said Kenny Stapp, president of Plastics Kept Simple Inc., based
“More people jump in for
the short-term. Once demand decreases to normal levels, these
short-termers fall by the wayside. We have seen three such market
cycles since 1991.”
Plastics Kept Simple purchases
around two million pounds per month of polyethylene scrap. This
includes stretch wrap, bags and grocery sacks. Stapp said that
demand has been strong due to high oil prices as well as new plants
“Personally, I think the
bubble will burst soon, pinching some players hard by catching
them with high priced inventory,” Stapp said. “I feel
that prices are about to decline. We hope they do. At that point
we can assume our normal business pattern because the very people
pushing prices higher are those who will be the first out.”
Mike Berger, president of DSC
Inc. – a full-service plastics-brokering firm based in St.
Louis that purchases and sells a wide-range of recycled, reground,
reprocessed and virgin resins – said he has also recently
started to notice prices softening a bit.
“I’m starting to
see some pushing back on pricing,” Berger said, who focuses
mainly on industrial scrap. “Demand is beginning to change
a little bit,” he said.
Because of this, Berger said
he is a bit more cautious. He looks at customer’s credit
more frequently. “It seems every year that we go through
a rash of bankruptcies and you find some of your larger customers
basically going under,” he said.
Berger said dollar wise, business
is up simply because plastic prices have inflated. “In some
cases you’re seeing that prices have doubled in two years,”
he said. This increased his risk, increasing his amount of receivables.
“If you have a customer that goes under, the amount that
they go under by is going to be much larger,” he said.
“People who hold huge inventories
of material are now going to find themselves in a position where
their base cost of their inventory is going to be extremely high
and if prices really sink dramatically, they can wind up in a
difficult position,” he said.
Berger said that the competition
from China is also hurting his customers, which will eventually
impact prices. “I’ve seen a lot of our customers,
especially the smaller ones, the family-owned companies basically
just get decimated,” Berger said.
Many of these companies had a
difficult time pushing the higher prices of recovered plastics
through to their customers, according to Berger. “It is
a commodity driven business, they can go from feast to famine
and back fairly quickly,” he said.
Laura Sharp, an analyst at Business
Communications Company, Inc. (BCC), in Norwalk, Connecticut, recently
completed a report on the recovered-plastic rates. She said important
factors to consider when predicting trends include Chinese economic
growth, waste fee structures, legislation, energy prices and the
general state of the U.S. economy.
is complicated by an unwillingness on the part of many companies
to share information, difficulties in tracking exports and a number
of other diverse factors, all of which can be difficult to measure,”
Despite these difficulties, BCC
estimated that 2.7 billion pounds of post-consumer plastics were
recovered in 2004. It expects over 3 billion pounds will be recovered
by 2009. Sharp said that these estimates are higher than some
other widely distributed reports, mainly because BCC covered more
types of post-consumer plastics, including peanuts packaging,
polyurethane from padding, plastics from siding and carpeting,
battery casings, grocery sacks and various plastics from packaging
BCC found that plastic bottles
are the most commonly recovered post-consumer plastic products.
But it sees plastic films being recovered in increasing quantities,
driven by demand for use in plastic composites. It also found
that over half of post-consumer recovered plastics are used in
consumer items such as containers, carpet and padding.
“While domestic fiber markets
are struggling, tremendous potential exists for using recycled
plastics in building materials and infrastructure applications.
Many building and infrastructure applications are also more tolerant
of the slightly degraded properties often found with recycled
plastics,” BCC reported.
“Essentially endless markets
exist for recycled plastic. The determining factor in whether
plastic waste is marketable is whether or not it can cost effectively
(and consistently) be collected and converted to an acceptable