Virgin PET, recycled pellet market narrows

Author: Andrew Guy Jr

2016/01/14

A worker inspects recycled plastic in a factory. (Cultura/REX Shutterstock)
Plummeting mid-point price differences give little incentive for bottle and packaging makers to use recycled pellets. (Cultura/REX Shutterstock)

HOUSTON (ICIS)--An oversupplied US polyethylene terephthalic (PET) market and plummeting crude oil had a devastating effect on pricing in the PET and recycling markets in 2015, an ICIS analysis has found.

The mid-point price difference between virgin and recycled PET (R-PET) pellets fell rapidly in 2015.

The price spread between virgin PET in January 2015 and R-PET pellets on the east coast in January 2015 was 12 cents/lb, the analysis showed. By December, that price difference had fallen to 3.5 cents/lb. That is a drop of 78% in the difference between the two products.

On the west coast, things were somewhat better, but the spread still saw a decrease.

January 2015 started out at an 8 cents/lb difference between pellets and virgin PET. By December, that spread had fallen to 3 cents/lb. That is a drop of 62%.

What this means: In 2015, virgin PET prices decreased, while recycled pellet prices remained relatively stable. As a result, by the end of the year, the cost of virgin PET had inched closer to the cost of recycled pellets.

Why it is important: Recycled pellets are the closest material to PET resin. As a result, they sometimes compete against each other in the market. Lower virgin prices give little incentive for bottle and packaging makers to use recycled pellets.

Sources in the market said this week that 2016 is likely to remain the same for the recycled pellet market.

“As long as resin is [falling], and there is no law forcing companies to use a minimum post-consumer [recycled] content, there is no reason to buy,” the source said.

The softer virgin prices have finally begun to push down recycled pellet prices.

ICIS-assessed R-PET pellet prices fell 3 cents/lb on Thursday, based on source feedback and market conditions.

INSET IMAGE: Close-up image of a worker holding recycled plastic in a factory (Cultura/REX Shutterstock)