Plastics Recycling 2017: Looking for direction
Plastics Recycling 2017: Looking for direction
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From left: Stephanie Baker of KW Plastics, John Maddox of SBAcci,
Kailin Fu of IHS Markit and Joel Morales of IHS Markit.
A number of chemical industry analysts shared their outlooks on the state of virgin plastic production and its potential impact on recycled plastics markets during a plenary session at Plastics Recycling 2017, which Resource Recycling hosted March 6-8 at the Hyatt Regency in New Orleans.
“In general, new expansion of virgin resin production is not good news for the recycled business in the near term,” Joel Morales, the Houston-based senior director of polyolefins for the Americas with IHS Markit, which is headquartered in Englewood, Colorado, told Recycling Today in late 2016. At that time, IHS was forecasting downward price trends as the result of this new capacity, which he describes as “unprecedented,” being introduced over a three-year period.
“What happens in prime [markets] has a direct relationship to what happens in recycled [markets],” Morales said during the conference.
From 2016 through 20017, approximately 3 million metric tons of virgin polyethylene (PE) production capacity are slated to come online in North America, Morales told Recycling Today in late 2016. Most of the additions will occur on the U.S. Gulf Coast and will include legacy players like ExxonMobil, Dow Chemical and Chevron Phillips Chemical. The additional capacity is being built not only to respond to growing North American demand but also to focus on export demand, with Morales saying in late 2016 that a “significant amount will be earmarked for export.”
Of these projects, according to Morales’ presentation during Plastics Recycling 2017, the Chevron Phillips plant in Old Ocean, Texas, will have two reactors producing 1 million metric tons of traditional high-density polyethylene (HDPE) products plus linear-low-density polyethylene (LLDPE) metallocene film. The Exxon Mobil plant in Mont Belvieu, Texas, will produce 1.33 million metric tons for export only, while the Dow plants in Freeport, Texas, and in Plaquemine, Louisiana, will products 400,000 tons of LLDPE and 350,000 tons of low-density polyethylene (LDPE).
In 2017, Morales said to expect imports of virgin material into North America to continue as domestic demand grows steadily. Export demand also will show growth for the year.
He predicted potential delays on new investments in capacity in light of feedstock uncertainty, which could raise the floor on virgin prices. Morales said margins will be historically good but will not quite support reinvestment.
“While prices will come down, it’s not going to be as bad as we originally thought,” he said of the impact of new virgin capacity, noting that some of the plants have experienced delays of from six months to a year. Morales added that IHS analysts generally have been adding 36 months to the projected completion date for announced projects.
While Morales said more PE will be arriving, it will have less of an impact on global prices and margins than previous forecasts predicted. He said this would be good news for recycled material.
Regarding PP investments in North America, Morales said the material is treated as a byproduct in many cases, supporting the PE or the refining business. This in part is why PP has been a “lousy” business in North America, he added.
In 2016, Morales said, the amount of PP being imported into North America increased 100 percent. He said that while margins were good, they are not at reinvestment levels.
No new PP greenfield capacity in North America will be realized until the end of the decade at the earliest, Morales said, adding that that would lead to higher prices in the meantime, which would be good news for recycled PP.
Kailin Fu, senior analyst, polyolefins Americas, at IHS Markit, said Asia sets the floor price for the world when it comes to virgin PP.
She said a clear correlation exists between virgin PP pricing and recycled PP demand, adding that when virgin prices increase, recycled PP demand increases.
The typical price gap between prime and recycled material in China is $230 per ton, Fu said. However, as new virgin capacity came online in 2015, lowering pricing for this material, she said, it displaced recycled PP demand. Nearly 1 million tons, or 28 percent, of recycled PP demand were displaced in 2015.
Fu said China has three grades of recycled plastics, with Grade One being characterized by the highest quality and pricing. Prime substitution occurs first with this grade.
Each grade accounts for roughly one-third of demand, she added, with China importing a “substantial supply” of recycled material.
China’s environmental policy led to the closure of plastic recycling capacity in the country beginning in 2016, Fu said, noting that small family operations were primarily targeted. She said she expected these closures to continue and for these operations, which currently account for 70 to 80 percent of China’s plastics recycling industry, to be replaced by large scale recycling facilities that will be located in as many as 50 recycling parks throughout the country.
Fu predicted that recycled demand in China will stabilize at 8 to 9 percent through the end of the decade and that the supply/demand situation with prime will tighten during that time as well.
John Maddox, president of SBAcci, Jacksonville, Florida, addressed polyethylene terephthalate (PET) markets, noting the consolidation that has occurred in the North American Free Trade (NAFTA) region since 2009. In 2009, the region was home to nine PET resin producers. That number has declined to four.
Of the 10,879 million pounds of PET consumed in the NAFTA region in 2016, domestic virgin production in the U.S. accounted for 63 percent of this demand, while recycled PET accounted for 9 percent of demand. The use of recycled PET in Mexico and Canada was much smaller at 2 percent and 1 percent, respectively, according to Maddox’ presentation.
He said the region has more than 2 billion pounds of excess virgin PET capacity, adding that the region will “never” experience a shortage for this material.
Of the PET that is recycled in the United States, bottles account for 82 percent, while thermoforms account for 14 percent, Maddox said.
He predicted that virgin PET prices would remain low for the foreseeable future because of excess capacity throughout the supply chain and low oil prices.
Maddox also said little growth has occurred in recycled PET demand because of the weak economy and the minimal investment made in PET packaging innovation relative to other packaging materials.
Where there has been growth in PET packaging, Maddox said, the applications generally don’t favor recycling. As examples he offered food-contact packaging, opaque and colored PET used in the dairy industry and the use barrier solutions and full shrink wrap labels. He added that thermoforms are a bright spot for PET, potentially replacing styrenes in food packaging applications for meat and poultry.
Plastics Recycling 2018 will be Feb. 19-21 at the Gaylord Opryland Resort & Convention Center in Nashville, Tennessee.
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Source: Recycling Today
Plastics Recycling 2017: Looking for direction
<![CDATA[From left: Stephanie Baker of KW Plastics, John Maddox of SBAcci, Kailin Fu of IHS Markit and Joel Morales of IHS Markit. A number of chemical industry analysts shared their outlooks on the state of virgin plastic production and its potential impact on recycled plastics markets during a plenary session at Plastics Recycling 2017, which Resource Recycling hosted March 6-8 at the Hyatt Regency in New Orleans. “In general, new expansion of virgin resin production is not good news for the recycled business in the near term,” Joel Morales, the Houston-based senior director of polyolefins for the Americas with IHS Markit, which is headquartered in Englewood, Colorado, told Recycling Today in late 2016. At that time, IHS was forecasting downward price trends as the result of this new capacity, which he describes as “unprecedented,” being introduced over a three-year period. “What happens in prime [markets] has a direct relationship to what happens in recycled [markets],” Morales said during the conference. From 2016 through 20017, approximately 3 million metric tons of virgin polyethylene (PE) production capacity are slated to come online in North America, Morales told Recycling Today in late 2016. Most of the additions will occur on the U.S. Gulf Coast and will…