Source of Picture: The Earth Institute at Columbia University
I was speaking to a Singapore-based trader this morning over the reasons behind the polyolefin price rally.
Here are his views:
"A maor factor has been a lack of availability of recycled material. This is because people in the West are buying less durable consumer good, for example electronics, which arrive wrapped in plastic.
"During the economic mega-boom lots of this plastic was collected in the States and Europe and exported to China to be recycled back into film for wrapping durable goods. For hygiene reasons you can't use recycled material for food wrappiing.
"Stricter government regulations have also reduced the trade in recycled material. The new rules were introduced because of environmental concerns.
""A lot of the traders who were handling recycled material went bust because of the great petrochemical price collapse last year. T
"hey were left holding high stocks of recycled stuff they couldn't sell. Factories were no longer interested because they could buy virgin material and very-much reduced prices.
"Last year was also very good for selling fillers to make virgin polymer go further. For example, I was able to sell lots of calcium carbonate at $900-1,300/tonne. This year I haven't sold a single tonne."
Very interesting stuff - especially when you consider that in the last few years imports of scrap plastic have taken around 4-5 percentage points of China's polyolefin demand growth.