Polypropylene (Recycled) European Pricing Intelligence

Supply

Recycled polypropylene (R-PP) supply remained broadly balanced with demand throughout the first quarter, with the exception of natural pellet which remain structurally short.

Nevertheless, as the coronavirus outbreak gathered momentum production at plants not serving the packaging sector began to grind to a halt. This was first seen in mid-February among the automotive industry. Automotives are not only a key end-user of R-PP but end-of-life automotive are the major source of post-industrial waste material. As movement restrictions intensified across Europe, other industries began to be affected, including construction, automotive and flower pot construction. This has lengthened supply of R-PP pellets.

Consumption

A raft of legislative announcements across Europe, including in France, Italy and the UK added buyer caution at the start of the first quarter. As this began to subside, it was replaced by concerns over the coronavirus. By the end of the first quarter, consumption outside of packaging had largely ground to a halt.

Sources estimated that demand has fallen by up to 30% year-on-year throughout the chain as a result of coronavirus restrictions, but sectors like automotive and construction have been harder hit, with the majority of end-users in these sectors having suspended production.

Nevertheless, demand through most of the quarter remained firmer than for recycled polyethylene (R-PE) due to the early stage in of its lifecycle the R-PP market is in.

R-PP Global Market outlook

Supply

There are limited post-consumer collection activities in France, the UK and other parts of Europe. In both countries, collection activity varies between local authorities, with some operating as normal, and others no longer taking in recycled waste. Coupled with this, the closure of automotive firms – meaning consumers are not replacing vehicles – has limited end-of-life automotive post-industrial waste availability, the major source of R-PP industrial waste.

As a result, feedstock supply is expected to tighten in the second quarter, although this is anticipated to take longer than typical to be felt in the chain because of widespread end-user shutdowns.

Demand

With increased competition from virgin PP and widespread coronavirus related shutdowns outside of the packaging industry, consumption in the second quarter is expected to be weak, albeit highly dependent on how long free-movement restrictions remain in force.

Because of staff shortages, some packaging firms have already switched entirely to virgin production. Coupled with this, the majority of non-packaging applications are in shutdown.

Nevertheless, players expect demand to rebound once the lockdowns finish, and given feedstock shortages, this could limit availability. Some producers are stockpiling as a result of this.

With smaller recycling firms typically holding limited cash reserves, there are mounting concerns for their survival, depending on how long movement restrictions continue, and depending on localised economic support measures. There is already talk of some firms struggling to cope with the outages.

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