Economic slump hits recyclables

You would think that recyclable materials and chemicals should do well with manufacturers and retailers looking for cheaper and more environment-friendly alternatives during a global economic recession.

Unfortunately the excess waste of the economic boom era as well as the current weak demand for products (thus the slow-down of manufacturing) seemed to have driven the supply balance to tilt more to its side.

According to a report from Greenbiz.com, the production slowdown in China because of the global economic recession is the major driver for the slump in demand for recycled materials in the US and the UK.US scrap dealers and recycling firms are reportedly seeing growing stockpiles from California companies and they are said to be refusing drop-offs from the public or charging customers for picking up materials as well. Rebates for paper and cardboard in New England communities drop from more than $100 a ton to as low as $30 and $40 a ton, according to Greenbiz.

The market data provider BCC Research reported that the recycling industry in China processed 142.3 million metric tons of waste material last year. Metals such as aluminum, copper, iron and steel have the largest share of the market, accounting for 76.7 million metric tons of recycled materials in 2007. Recycled waste paper is the second largest segment followed by recycled waste plastic.

According to ICIS news, even recycled polyethylene terephthalate (RPET) prices in Europe were facing downward pressure because of competitive virgin plastic prices mostly coming from Asia and the Middle East.

3 Responses to Economic slump hits recyclables

  1. Pradeep 21 November, 2008 at 4:56 pm #

    Doris,
    “You would think that recyclable materials and chemicals should do well with manufacturers and retailers looking for cheaper and more environment-friendly alternatives during a global economic recession.”
    I am not sure about this. Recycled plastics (ex: PET) are of a lower quality than the “virgin” plastic. So, I dont think that they are a substitute for the virgin plastics.

    Moreover, in a recession characterized by low oil prices and deflationary pressures, falling demand means that there is lesser incentive for recycling and more drive towards making cheaper materials from lower-cost crude.

  2. Doris de Guzman 21 November, 2008 at 5:26 pm #

    Hi Pradeep,
    It might be true in some applications that recycled plastics are of lower value although how come chemical associations worldwide are big proponents of recycled plastics? Even chemical companies (e.g Teijin, Sabic) are selling recycled plastics. The question is if two plastic products with the same price are for sale, and one says recycled, which one do you think will be more favorable to a consumer?

    You also have a point in the lowered cost of crude. But coming back to my comparison with the auto makers and the chemical industry, when crude oil was so cheap back then, GM shelved their electric car project because there is no use for it. Now they are behind the hybrid game.

    Chemical companies who go back to the ways of just using traditional feedstock/energy source (just because they’re cheap now) will be left behind as innovative companies who look for alternative feedstock/energy source will also be able to market their products as competitive, sustainable and environment-friendly.

  3. Pradeep 21 November, 2008 at 10:25 pm #

    Doris,
    I see with your point about doing business-as-usual. I think the key is to invent processes that are environment-friendly as well as economically feasible I am not asking for it, but high gas prices seems to bring out the best of innovation, and this not only for the chemical industry.

    About the recycled plastics prices, take a look at the following links:
    Virgin plastics and Recycled

    Looks like there is a price differential of 30-60 cents/lb between virgin and recycled plastics (with recycled plastics cheaper than the virgin plastics). Of course, companies would like to make profits by marketing them at the same (higher) prices. Then, given both have the same prices, I would obviously choose the recycled plastic, but this might not be the full story.

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