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European plastic recycling industry faces plant shutdowns, consolidation

May 21, 2023
Energy & Chemical Value Chain

The European plastic recycling industry faces a dire outlook of production cuts and plant shutdowns, as recyclers see pressure from cost competitive virgin material and imports amid waning demand.

Platts, part of S&P Global Commodity Insights, assessed black pellet recycled polypropylene (PP) down €30 per metric ton at €900 per metric ton DDP Northwest Europe in the week to May 17, down 5% month on month and 47% year over year (YOY), with bearish pricing trends driven by weak derivative appetite.

Similar trends have been seen across recycled polyethylene terephthalate (r-PET) and recycled polyethylene (r-PE) spot pricing. R-PET clear flake spot prices fell to €1,150 per metric ton FD NWE on May 17, down 15% on month and 42% YOY, while recycled low-density polyethylene (r-LDPE) translucent pellets stood at €1,210 per metric ton DDP NWE on May 18, down 9% on month and 27% YOY.

Plant shutdowns
The weak fundamentals and pessimistic sentiment have resulted in plant shutdowns across Europe. Waste management company Suez Veolia announced on May 18 it would close a PET recycling plant in Germany by the end of 2023. The nameplate capacity of the plant is 30,000 metric tons per year, according to a company source. Suez Veolia did not return a query for comment.

“This is not the first big recycler I have heard struggling,” one recycled PET trader said. “It definitely seems like the issue has got to the point where even the big guys are struggling. My question is how are the little guys still open?”

In the UK, Scottish recycler Yes Recycling announced on April 25 its joint venture (JV) project with supermarket chain Morrisons was going to administration, after six months of operations.

Switching to virgin feedstock is appealing to consumers across all recycled polymers, as the price disparity between virgin and their recycled counterpart has remained wide. The increased switch has further reduced the demand for recycled plastics, weakening the already troubled recycling industry.

“There was already lower demand and alongside the switch to virgin,” a converter said. “Everyone is in cost-cutting mode at the moment,” said a trader. “Many are using recycling as the first thing they cut cost-wise.”

A lack of coordinated recycling policies in Europe and the UK has led to a shortage of high quality recyclate feedstock.

Active M&A
Within this environment, merger and acquisition activity is becoming more commonplace, as major petrochemical brands are seen gearing up for acquisitions of recyclers.

LyondellBasell (Houston) said on May 16 that it would acquire the remaining stake in Quality Circular Polymers (QCP) from its JV partner Suez Veolia. QCP is a plastic recycling arm for Suez pre-merger and has locations in Belgium and the Netherlands.

TotalEnergies (Paris) also announced earlier this month the acquisition of Spanish recycler Iber Resinas. Iber Resinas recycles PP, PE and polystyrene (PS) at two plants in Valencia, Spain, with feedstock derived from household and industrial waste. The material produced is used in automotive, packaging and building materials.

Earlier in the year, LyondellBasell said it would buy Mepol Group, which produces recycled durable plastic pellets through subsidiaries in Italy and Poland.

While such activity shows the continued interest and potential profitability of recycled markets, it also reflects the need for wider investment from sector participants in the face of limited demand and oversupply.

Bearish mood
Amid the downturn in industry macro-economics, some industry players have announced extensions of holidays in their operations, in some cases reducing working hours for employees and cutting production run rates to mitigate the impact of weak demand levels.

“There’s going to be more consolidation of [the] market … Producers are taking over recyclers in the market rather than starting new facilities, it’s hampering growth in the sector,” a recycler said.

More widely, producers in both the virgin and recycled polymer fields have indicated that not only will buyer appetite not return in summer months, but that demand will be lacklustre throughout 2023. “Demand won’t come back for the rest of the year,” a virgin PET producer said. “This is right across the globe, in the US, Middle East and Europe.”

Analysts are equally bearish. “Europe’s petrochemical outlook remains challenging, as producers grapple with narrow margins, intense competition driven by massive Chinese capacity additions and weak local polymer demand,” the International Energy Agency (IEA; Paris) said in an April report.

The global olefins and polyolefins outlook could stay weak through 2027 if the market remains on its current path of capacity additions, analysts at S&P Global said in a recent Global Olefins and Polyolefins Outlook. Capacity rationalizations will need to take place globally by 2026, if there is to be an earlier recovery, they said.

Article by editorial staff, S&P Global Commodity Insights


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