Energy

EU energy policy must be less ideological in next five years, GIE conference hears Lowering high energy prices, which harm industry, a key goal for incoming Commission Commissioner confirmation hearings to take place 4-12 November MUNICH (ICIS)–The incoming European Commission must move away from ideological energy policy if it hopes to stabilize prices and keep industry competitive, delegates heard at the Gas Infrastructure Europe (GIE) conference in Munich on 17-18 October. However, despite an announced focus on a ‘clean industrial deal’, doubts remain that Europe can apply the lessons learned from the energy crisis. Speaking to ICIS on the sidelines, Tsvetelina Penkova, vice-chair of the European Parliament’s energy and industry committee said the thought the upcoming commissioner hearings would be “dynamic”, though she hoped the meetings would be constructive rather than unpleasant. Nominated commissioners must be confirmed by the European Parliament before they can take up their roles. Hearings are scheduled for 4-12 November. “The problem is quite a lot of topics are overlapping [in commissioners’ portfolios], so it’s very difficult to distinguish exactly the area of expertise,” she said, citing concerns over who would ultimately be responsible for decisions and the time involved if multiple people sign off policies. Penkova told delegates that fluctuations in energy prices between different regions harmed competitiveness and energy security. The discrepancy “really depends on the energy source that’s being used at the moment,” she said, as a lack of proper grid interconnections created bottlenecks, and without fixing this Europe’s energy landscape would remain dominated by local, regional or national solutions. The topic of surging heatwave-driven power prices experienced in central and southeastern Europe also dominated a meeting of EU energy ministers in Luxembourg on 15 October. Penkova called for energy resilience as well as a diversity of sources, including renewables, hydrogen, ammonia and other carriers, alongside storage and flexibility solutions. “We must understand that dependency only on one single sector or energy source is naive. That’s definitely not going to work,” she said. GIE president-elect Arno Bux stressed to delegates that gas infrastructure would remain vital for decades to come, citing nascent hydrogen, biomethane and carbon dioxide markets. “We all know pipelines … are by far the most efficient way to transport and store energy,” he said. But the industry was hindered by 1990s-era regulation, Bux said, which failed to foresee the need to maintain and expand infrastructure under uncertain conditions or the costs involved. NUCLEAR SCEPTICISM? Penkova dismissed concerns over nuclear skepticism previously voiced by the nominees for energy commissioner, Denmark’s Dan Jorgensen, and executive vice-president Teresa Ribera from Spain, tasked with delivering the ‘clean, just and competitive transition’. Noting that the parliament considered nuclear generation as strategic and sustainable technology, Penkova told ICIS she didn’t foresee any change in Europe’s policy, but instead hoped for better integration. “When we’re speaking of nuclear waste, we shouldn’t be looking only [at] the countries that are producing nuclear energy, but also at countries that are consuming [it], because we are all part of the waste creation,” she said. CLEAN AND INDUSTRIAL Ilaria Conti, gas expert and coordinator for strategy and development at the Florence School of Regulation, told delegates it was important the EU had not watered down its commitment to decarbonize, instead aiming to use industry as the “engine” of the transition. The shift followed the results of European parliamentary elections in June, which saw a perceived backlash against green policies. "The election results forced people to realise that achieving climate neutrality targets on time but losing the economy and the electorate along the way was unhelpful, " said Niko Bosnjak, head of policy and communication at the German grid operator OGE. Bosnjak said he worried that there was less urgency for policymakers to act since the pressure had eased, despite net-zero goals rapidly approaching. “I’m afraid we’re getting into the regular slump that we’ve been in before. I’m not saying I’m all for crises, ok? I think no one wants that, but we need to do better a better job in translating the learnings,” he said. For example, Bosnjak wondered why there was not middle ground between the 9-month construction of an LNG-import pipeline during the crisis and the return to an average of 6-8 years to build infrastructure. Conti said she thought plans to make the Commission more interdependent was “actually in my opinion a very smart move by Ursula von der Leyen.” The overlapping briefs would hopefully force incoming commissioners to cooperate, Conti said, breaking down past silos where each commissioner focused only on their own portfolio.

22-Oct-2024

Iberia holds four of six projects ICIS data shows product costs could drop to sub €3/kg with subsidy Projects must commence operations in five years LONDON (ICIS)–On 7 October the European Commission announced it had signed grant agreements with six renewable hydrogen production projects as part of the EU Hydrogen Bank scheme, indicating that one of the original seven winners of funding had withdrawn. ICIS data shows project costs could result in hydrogen below €3/kg as a result of the support. From the point of signing contracts, the five projects will need to commence hydrogen production within five years, indicating that their supply would be online before 2030, the year 42% of all hydrogen used in industry must be renewable fuels of non-biological origin (RFNBO) according to the renewable energy directive. The total production from the six projects will amount to roughly 1.5 million tonnes of hydrogen over the entire 10-year period covered by the EU Hydrogen Bank process, meaning that at least 150kt/year of RFNBO will be produced by the scheme by 2030. Companies bid on a €/kg basis for support, meaning for every kilo produced by the projects, a subsidy would be paid to the bid amount, thus reducing the potential sales price for the projects to RFNBO buyers. Bids ranged from €0.37-0.48/kg of RFNBO. The support was designed to bridge the gap between RFNBO and conventional high emissions hydrogen. ICIS understands that current RFNBO sales prices for around 2029 can reach up to €15/kg, with some producers citing production costs in the single figures. ICIS Hydrogen Foresight project data for Spanish electrolysers indicates that, following the subsidy, product costs from the Catalina and HYSENCIA projects respectively could fall to €2.73/kg and €3.11/kg. The project to withdraw from the scheme was the El Alamillo H2 project, coordinated by Benbros Energy S.L. The project had bid for support of €0.38/kg, the second-lowest bid level of the seven successful bidders.

21-Oct-2024

SINGAPORE (ICIS)–Saudi Aramco chief Amin Nasser on Monday called for a new energy transition plan that considers the needs of all countries, specifically those in Asia and the broader Global South, amid growing oil demand. Single one size fits all plan for every country is unrealistic – Nasser Transition will be a costly affair, with an estimated $100-200 trillion required globally by 2050 World not yet at peak oil demand “This may be Asia’s century. But Asia’s voice and priorities, like those of the broader Global South, are hard to see in current transition planning, and the whole world is feeling the consequences," Nasser, the President and CEO of Aramco, told delegates at the Singapore International Energy Week (SIEW) conference in Singapore. "Transition progress is far slower, far less equitable, and far more complicated than many expected… Our main focus should be on the levers available now.” Each country needs to choose an energy mix that helps them meet their climate emissions “at a speed and a manner that is right for them”, Nasser said. Asia, accounting for over half of the world’s energy supplies, still relies on oil and gas for 84% of its energy needs. Alternatives are mostly meeting consumption growth, not displacing demand for oil and gas, he said. Furthermore, large segments such as heavy transportation and petrochemicals have few economically viable alternatives to oil and gas. Instead of forgoing conventional energy, Nasser encouraged countries to invest in these “proven and reliable” energy sources that developing nations need and can afford. At the same time, the world needs to invest in technologies that will reduce the cost of renewables and that can compete in price and performance. “We need to provide… energy that is secure, affordable, and sustainable. You cannot talk about sustainability without making sure you ensure security and affordability,” he said. On energy transition costs, Nasser said: “Transition will be expensive for everyone, with estimates of between $100 and $200 trillion required globally by 2050." "For developing countries, almost $6 trillion may be required each year. Moreover, in a transition that requires staggering amounts of front-end capital investment, the cost of capital is more than twice as high in developing countries where the need is greater.” GLOBAL SOUTH OIL DEMAND TO CONTINUE GROWTH TRAJECTORYEven though oil growth has plateaued in some mature economies, such as the EU, the US, and Japan, they still consume large amounts of oil, Nasser said. “While US oil consumption is roughly 22 barrels per person per year, and the EU is around 9 barrels, it is 2.4 barrels in Vietnam, 1.4 barrels in India, and only 1 barrel in Africa,” Nasser said. This means that oil demand will continue to grow in the Global South, he said. Currently, the world is consuming “record amounts of oil”, at 100 million barrels, or 80% of energy, compared to 84% thirty years ago. More than 100 million barrels per day will realistically still be required by 2050, a stark contrast to some predictions that oil will fall to 25 million barrels per day by then, Nasser said. “Being short 75 million barrels every day will be devastating for energy security and affordability,” Nasser added. Focus article by Jonathan Yee

21-Oct-2024

HOUSTON (ICIS)–Green hydrogen company Ohmium International announced it has signed a term sheet with renewable energy joint venture SwitcH2 BV to develop electrolyzer solutions for an offshore floating green hydrogen and ammonia synthesis project. Ohmium designs and manufactures scalable proton exchange membrane (PEM) electrolyzers, which it touts as enabling cost-competitive green hydrogen production, and under this agreement they will develop PEM electrolyzer solutions for the offshore project to be led by SwitcH2. Ohmium's PEM electrolyzers will utilise nearshore solar and wind power, along with treated seawater, to produce green hydrogen. The hydrogen will be fed into an on-deck ammonia synthesis unit, and the resulting product will eventually be offloaded onto an ammonia carrier for transport. The project will be located off southern Europe and create an industrial scale floating green hydrogen and ammonia production facility with an estimated an annual production capacity of up to 55,000 tonnes of green hydrogen and almost 300,000 short tons of green ammonia. Officials said the project is anticipated to have green ammonia production by 2029. “We are pleased to have Ohmium join us in making this pioneering project possible,” said Bob Rietveldt, SwitcH2’s director and co-founder. “Their product delivers high efficiency, and the comprehensive, standardized design enables flexible and rapid installation, at scale.” Ohmium CEO Arne Ballantine said the company was thrilled to be part of what it called a transformative project and that they appreciate the expertise that SwitcH2 brings to offshore floating production. “The market for green ammonia is poised to grow exponentially in the coming decades, especially as a source of clean fuel for the global shipping industry, and Ohmium is looking forward to collaborating with SwitcH2 in helping address that need,” said Ballantine.

18-Oct-2024

LONDON (ICIS)–Chemicals sector executives are increasingly facing up to the idea that the sector is going through a process of reinvention, with no big recovery on the horizon and a return to pre-crisis normalcy less likely. Executives are now looking at next steps for the sector. In this Think Tank podcast, Tom Brown interviews Paul Hodges, chairman of New Normal Consulting, Katherine Sale,  ICIS head of editorial strategy, and Chris Barker, senior editor covering PVC and caustic soda, on impressions from the EPCA assembly. Growing acceptance of no big demand recovery, while demographic shifts to an ageing population reduce potential future demand growth Consolidation trend likely to continue, but environmentally sustainable products offer a growing opportunity Mood at EPCA less muted than previous two annual meetings, but far from positive Energy pricing less of an issue in 2024 so far but worries remain for 2025, with the specter of high costs likely to speed closures Caustic soda, chlorvinyls markets continue to suffer amid low demand, with substantial closures seen as necessary to balance the market Upcoming EU clean industrial deal likely to be a benefit, but will not be the end of regulatory conversation in Europe Tariffs continuing to proliferate in Europe against lower-cost imports, but do not address underlying competitiveness issue Click here to watch ICIS' analyst podcast on future chemical and recycling market trends from EPCA. Editor’s note: This podcast is an opinion piece. The views expressed are those of the presenter and interviewees, and do not necessarily represent those of ICIS. ICIS is organising regular updates to help the industry understand current market trends. Register here . Read the latest issue of ICIS Chemical Business. Read Paul Hodges and John Richardson's ICIS blogs.

17-Oct-2024

HOUSTON (ICIS)–Rates for shipping containers from east Asia and China to the US continue to face downward pressure after an early end to the peak pre-holiday shipping season, but backlogs at some East Coast ports following a 3-day strike could lead to short-term delays. Rates to the US West Coast edged lower by 3% this week, according to online freight shipping marketplace and platform provider Freightos and as shown in the following chart. Judah Levine, head of research at Freightos, said transpacific rates are now down by 30% from the peaks during July but remain several thousand dollars higher than what would be typical peak season rates. They are also about $1,000/FEU (40-foot equivalent units) higher than the adjusted floor set in April to account for diversions away from the Red Sea. “As long as Red Sea diversions continue to absorb capacity on an industry level, prices may not fall much further than seen back in April,” Levine said. Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), are shipped in pellets. They also transport liquid chemicals in isotanks. PORT CONGESTION The International Longshoremen’s Association (ILA) strike at US Gulf and East Coast ports lasted just three days, and market analysts initially expected backlogs created by the work stoppage to be cleared up in two to three weeks. Some ports, such as the Port of New York/New Jersey, were expecting to be back to normal sooner than that. But Levine said the backlog at the Port of Savannah, Georgia still needs another two weeks to get back to normal as Hurricane Milton added to the number of waiting vessels. Ships are waiting more than two days to get into Savannah, and Levine said other ports are citing delays of one to four days, which he termed as significant congestion, but not extreme. Port Tampa Bay remains closed and is expected to reopen on Monday after damage caused by Milton, which will mostly impact the fertilizer industry. Levine said that some carriers have announced blank sailing in response to the congestion, but this may also be aimed at reducing capacity to adjust for the lower, post-peak season volumes. Visit the ICIS Logistics – impact on chemicals and energy topic page

16-Oct-2024

SAO PAULO (ICIS)–Here are some of the stories from ICIS Latin America for the week ended on 11 October. NEWS Dow shuts Argentina polyols plant on global oversupplyDow has decided to stop producing polyether polyols at its site in San Lorenzo, in Argentina’s province of Santa Fe, on the back of poor economics, the US chemicals major confirmed to ICIS on Wednesday. Brazil growth story props up chloralkali sector; Argentina still distant from being out of woods – CloroSurBrazil’s healthier than expected growth in 2024 has greatly propped up the chloralkali sectors, while Argentina's woes, although improving, will take some time to be fixed, said the director general at Brazil’s trade group Abiclor. Brazil’s September inflation ticks up to 4.4% on drought-induced higher electricity, food costsThe drought affecting Brazil filtered through consumers prices with higher energy bills and foods prices, pushing the annual rate of inflation to 4.4%, up from 4.14% in August, the country’s statistics office IBGE said on Wednesday. Argentina’s chemicals output down 3.5% in August, manufacturing down 6.9%Argentina’s chemicals and some petrochemicals-intensive sectors such as manufacturing and construction continue to bear the brunt of the recession, with output falling again in August, the country’s statistics office Indec said on Tuesday. Chile’s September inflation down to 4.1%, central bank expected to cut rates furtherChile’s annual rate of inflation fell in September to 4.1%, down from July’s 4.7%, reinforcing analysts’ expectation the central bank is to cut interest rates further later this month. Brazil’s Q3 automotive output highest since 2019Brazil’s petrochemicals-intensive automotive output posted in Q3 its best quarter since 2019 and fully recovered its pre-pandemic levels, trade group Anfavea said. Lula signs law to promote cleaner energy in BrazilOn Tuesday, President Luiz Inacio Lula da Silva officially signed into law the Combustivel do Futuro (PL 528/2020), a significant legislative step aimed at promoting cleaner energy in Brazil. Mexico's Alfa completes key step towards Alpek spinoffThe proposed spinoff of Mexican polyester producer Alpek has reached a key milestone, with corporate parent Alfa saying on Tuesday that it has solicited consents from more than 90% of the holders of a batch of senior notes. Argentina’s inflation falls to 209%; monthly price rises finally below 4% markArgentina's annual rate of inflation fell in September to 209%, down from 237% in August, the country’s statistics office Indec said on Thursday. Brazil’s Grupo Potencial to expand soybean oil-based biodiesel plant in ParanaBiodiesel and glycerine producer Grupo Potencial is to invest Brazilian real (R) 600 million ($107 million) to expand its facility in Lapa, in Parana state’s region of Curitiba, to up its capacity to 1.62 billion liters/year (1.42 million tonnes/year) of biodiesel, the government of Parana said this week. PRICING LatAm PP international prices increase in Chile, Peru on higher Chinese offersInternational polypropylene (PP) prices increased in Chile and Peru on the back of higher offers from China, while in Argentina and Brazil, prices dropped tracking competitive offers from abroad. LatAm PE international prices fall on competitive US export offersInternational polyethylene (PE) prices fell across Latin American (LatAm) countries on competitive offers from the US. Brazil expanding sectors drive PVC import surgeBrazil's polyvinyl chloride (PVC) imports emerged in 2024, driven by the improved demand from the construction and automotive sectors.

14-Oct-2024

HOUSTON (ICIS)–Rates for shipping containers from east Asia and China to the US continued to fall after a lengthy strike was averted at US Gulf and East Coast ports and as peak season volumes have largely been pulled forward. The International Longshoremen’s Association (ILA) strike lasted just three days, and market analysts expect backlogs created by the work stoppage to be cleared up in two to three weeks, or even less at the Port of New York/New Jersey. Some ports extended gate hours to allow more time for containers to be delivered or picked up. Nathan Strang, the US Southwest director of ocean freight for Flexport, said the company is seeing relatively fluid terminal operations and railroad operations. Strang said all detentions and demurrage rules from the Federal Maritime Commission (FMC) remain in effect but noted that time frames for detention and demurrage restarted on 7 October after the strike ended. CONTAINER RATES FALL Global average rates for shipping containers continued to fall, according to multiple analysts. Supply chain advisors Drewry has its World Container Index (WCI) at $3,349/FEU (40-foot equivalent unit), which is down by 4% and shown in the following chart. Drewry said Shanghai to Los Angeles container rates fell by 5%, and Shanghai to New York rates fell by 3%, as shown in the following chart. Following the tentative deal between the ILA and the ports, Drewry expects rates ex-China to continue to decrease marginally in the coming weeks. Online freight shipping marketplace and platform provider Freightos said rates fell by a larger degree, but its rates had been higher. Judah Levine, head of research at Freightos, said carriers are also planning to reduce deployed capacity on the transatlantic trade lane later in the month in the hope of preventing rates from falling back to the $1,600-1,800/FEU level they had maintained for much of the year. “With the strike over and peak season demand largely behind us from a significant pull forward of volumes in the last couple months, transpacific container rates should continue to ease on the seasonal lull in volumes between peak season and Lunar New Year,” Levine said. Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), are shipped in pellets. They also transport liquid chemicals in isotanks. LIQUID TANKER RATES UNCHANGED US chemical tanker freight rates held steady again this week for most trade lanes, even though vessel demand is growing for some routes. Most rates from the major chemical hubs remain sideways as a good portion of the market were attending the European Petrochemical Association (EPCA) conference in Berlin. The USG to Asia lane was also quiet following holidays. Although it is likely that increased exports ex–USG will be seen going into Europe and Asia, primarily as clean petroleum products (CPP) tonnage continues to focus on alternative cargoes in the petrochemical space, thereby adding to spot availability, which is already well supplied. On the transatlantic front, the eastbound leg is expected to warm up with cargoes being quoted including styrene to ARA from several US Gulf ports. With additional reporting by Kevin Callahan Visit the ICIS Logistics – impact on chemicals and energy topic page

11-Oct-2024

LONDON (ICIS)–The risks for Germany’s chemical industry keep rising, economists said during a webinar hosted by chemical producers’ trade group VCI, and noted: Weak demand, domestically and abroad Investments stall Geopolitical uncertainty Contrary to hopes at the start of the year, Europe’s largest economy is likely to shrink for a second straight year in 2024, the government said this week in revising its previous 0.3% GDP growth projection to a 0.2% decline. The economy shrank 0.3% in 2023 and has not been able to generate strong growth since 2018. Weak or negative GDP trends translate into lower demand for chemicals. So far this year, demand for chemicals from nearly all domestic key customer industries, except food and paper, has been weak, said VCI economist Christiane Kellermann. Year-on-year % changes in domestic chemical sales, by major customer markets, January-August 2024: Construction: -3.9% Plastics: -4.5% Metal products: -7.4% Autos: -5.8% Food: +1.5% Glass, ceramics: -7.8% Paper: +0.9% Printing products: -7.3% Furniture: -7.3% Machinery: -8.3% Electrical equipment: -16.1% Source: VCI Many of the chemical industry’s customers in manufacturing are curbing their production, and in the important construction end market there is no noticeable recovery. Meanwhile, export sales of German chemicals were weak in most regions, with the exception of Asia, Kellermann said. Year-on-year % changes in chemical exports, by region, January-July: EU: -2.5% Non-EU Europe: -1.1% Asia: +1.8% North America: -3.6% Latin America: -3.4% Source: VCI INVESTMENTSThe low demand translates into low production rates and low capacity utilization. In fact, over the past two-and-half years chemical producers have been running plants at utilization levels that were below profitability thresholds, Kellermann said. As companies suffer low demand in Germany, with little prospect of improvement, and cannot run existing plants and equipment at profitable levels, it does not make sense for them to invest in new plants, she said. In a recent VCI survey, 74% of chemical companies said they were unlikely to invest in expanding production in Germany, she noted. Only 15% said they were likely to invest in expanding production while 9% were undecided, according to the survey. Companies cited the country’s bureaucracy and long project permitting processes, high energy and labor costs, and high and complicated corporate taxes as key obstacles to investing in Germany. Only 13% said that a lack of trained workers deterred them from investing in the country. With little or no new investment, “import pressures” rise and the chemical industry’s export capabilities will decline in coming years, she said. Germany’s chemical industry loses in international competitiveness, in particular in energy-intensive basic chemicals, she added. GEOPOLITICAL RISKS Michael Gromling, an economist from the German Economic Institute in Cologne, who was also presenting at the VCI webinar, estimated that in order to return to a meaningful growth path and achieve a recovery (“Aufschwung”), Germany needed to generate annual average GDP growth of 2.5% from 2025 through 2030. This, however, was “not realistic”, given the weakness across all industries and the geopolitical and structural challenges companies face, he said. The country’s industries were export-dependent and therefore sensitive to geopolitical tensions, trade conflicts and protectionism, he said. Geopolitical tensions were holding back investment decisions, and without a detente it would be very difficult for Germany to achieve its Aufschwung, he said. An end to the Ukraine war and peace in the Middle East would be a “game changer”, creating an opportunity for reviving the global investment cycle, he added. However, rather than relaxing, tensions could further sharpen after the 5 November US presidential election, he said. Gromling did not say which candidate – current Vice President Kamala Harris or former President Donald Trump – he sees as the greater risk. For the time being, VCI maintains its 2024 growth forecast for the country’s chemical-pharmaceutical production unchanged at 3.5% (excluding pharma: +5.0%). If realized, the increase would only partially offset last year’s 7.9% production decline (excluding pharma: -10.4%). However, VCI may cut its 2024 sales forecast of 1.5% as exports were trending weaker than expected, Kellermann indicated. Focus article by Stefan Baumgarten Thumbnail image source: VCI

11-Oct-2024

LONDON (ICIS)–Imagine you sold a product with no control over how much of it was produced at any one time; that you had to sell it within weeks of it being produced regardless of what the demand for it was like; and that the demand was constantly changing. For most waste managers, no imagination is required, this is their daily reality. And it’s one of the biggest drivers of volatility throughout the recycling chain globally. Waste originates from both the general public and industry, and as a result, the composition and quantity of waste generated at any one time varies continuously depending on consumer behaviour and industrial production trends. Waste managers typically hold contracts for waste collection with municipalities. They cannot turn material away. Because of variations in consumer and industrial production trends, different countries can have vastly different supply at any one time. The quality of that input waste (how contaminated it is, the tensile strength etc.) depends on a variety of factors including how it's been treated and stored before its entered the chain, the type of additives it contains, what other materials it has come into contact with (because contact with substances such as polyvinyl chloride (PVC) causes contamination), level of discolouration, gel content, and odour. Coupled with this, the more times a polymer has been recycled, the lower its tensile strength, and typically end-use suitability becomes increasingly limited. How many cycles it takes before the waste material becomes unusable varies from polymer-to-polymer, process to process, and level of other degradation. The longer you store waste (this is typically, but not exclusively, in the form of bales) without reprocessing it – or selling it on for reprocessing – the more it degrades. This can be due to a number of things, including the contaminants it contains, thermolytic degradation (from heat – typically the sun), and hydrolytic degradation (from water – common in the case of polyethylene terephthalate (PET). Meanwhile, new (and perhaps more valuable) strains of waste are constantly entering the chain, and warehouse space is limited. If the waste quality is too low, then waste managers either need to dispose of the material, sell it to the burn-for-energy sector, or use it captively for energy creation. Burn-for-energy bales typically sell at negative values, whereby sellers pay for the removal of waste based on cost saving against alternative disposal methods. As a result, most waste managers look to offload bales within a timeframe of around 4-6 weeks (although this varies from market to market). Reprocessed recycled material, meanwhile, serves a huge variety of end-use markets. Major offtake markets include, but aren’t limited to, packaging, construction, automotive, outdoor furniture, refuse bags, strapping, and horticulture. Demand between the end-uses also varies dramatically, and players in each market purchase for differing reasons. Some markets, such as packaging, are heavily driven by brand sustainability targets and regulation, other markets, such as construction, mostly purchase on cost saving against virgin. This has huge impacts on willingness to pay, Intensifying legislative and consumer pressure on sustainability in packaging over the past few years has seen a significant pricing gap develop between display packaging suitable, and non-display packaging suitable grades across most global recycled polymer markets. There is currently, for example, a spread of up to €1,500/tonne between the highest priced grade of Europe recycled polypropylene (R-PP) pellet (which is a post-consumer natural grade predominantly used in domestic goods and cosmetic applications), and the lowest priced grade (which is black injection-moulded pellets, which typically serves non-packaging applications). Ideally (from their point of view) waste managers and recyclers would primarily serve applications driven by sustainability targets where premiums are typically highest. Nevertheless, each downstream market has differing technical requirements  – with display packaging and automotive typically having the strictest technical requirements and construction, bin bags and outdoor furniture the lowest. This means that there is typically a higher volume of material sold into non-packaging applications. While sorting allows waste managers to extract the valuable fractions and, to an extent, control contaminants etc. it doesn’t control the input waste mix. So the type of material suitable to serve each application is changing constantly. There is also a direct correlation between feedstock waste quality and reprocessed output quality for both mechanical and chemical recycling. This creates a continuous supply/demand mismatch that is often underappreciated by players newly entering the market. This mismatch coupled with the need to offload material relatively quickly is the reason, for example, 90% mixed polyolefin bale prices have traded as high as €600/tonne ex-works NWE (northwest Europe) and as low as €0/tonne ex-works NWE since July 2022. Because waste fractions typically produce a variety of different flake and pellet grades depending on what is extractable from individual bales – especially for recycled polyolefins – they typically react to system wide demand in each locality. Individual flake and pellet prices, though, often react to demand from specific end-use markets. This can result in periods where waste bale prices are high but prices for some flake and pellet grades those bales serve are low, resulting in squeezed margins. This is especially true for grades that are purchased for cost-saving reasons, meaning that they need to aggressively compete with virgin and off-spec material. The reverse also regularly occurs, whereby bale prices can be low because demand in key end-uses such as construction is weak and general availability of waste is high, but volumes extracted for packaging suitable grades are limited and demand from that particular sector is firm. It is also increasingly common for material with broadly identical specifications to trade at different price levels depending on which sector it is being sold into. Further distortions in the chain are created because reprocessed material such as flakes and pellets can be stored for long-periods of time, and flake and pellet producers are not forced to offload material as quickly as waste managers. This leads to fragmented and localised downstream markets where spreads against feedstock costs and profitability are constantly shifting. Volatile feedstock costs also results in challenges for investment. This is particularly true for emerging technologies such as chemical recycling and bio-based plastics. Thatis because new producers seeking private investment are often required to project future costs (typically for a period of at least 5 years), with waste feedstock typically their largest variable cost. The unpredictability of waste values make this a herculean task. When players first explore circular plastic markets, they are often surprised by the variability and fragmentation of prices through the chain. In the majority of cases the direct cause can be traced back to the feedstock waste markets. ICIS assesses more than 100 grades throughout the recycled plastic value chain globally – from waste bales through to pellets. This includes recycled polyethylene (R-PE), recycled PET (R-PET), R-PP, mixed plastic waste and pyrolysis oil. On 1 October ICIS launched a recycled polyolefins agglomerate price range as part of the Mixed Plastic Waste and Pyrolysis Oil (Europe) pricing service. For more information on ICIS’ recycled plastic products, please contact the ICIS recycling team at recycling@icis.com

11-Oct-2024