R-PET flake market divided between low virgin price, sustainability targets

Matt Tudball

11-Mar-2020

LONDON (ICIS)–The European recycled polyethylene terephthalate (R-PET) has seen a continuing divide within the colourless (C) flake market in March, exacerbated by the drop in virgin prices.

Prices for free delivered (FD) northwest Europe (NWE) C flakes have already been in a wide spread for some months now, with demand for higher-quality flake for food-grade application pushing prices up to €1,000/tonne. On the other hand, ample availability of non-food-grade material, together with generally bearish virgin PET values, have also seen prices in the mid €800s/tonne since last October.

“The market is disjointed in a way I’ve not seen in five years,” a flake producer said earlier in the month.

“Some [buyers] are going pure low-cost and competing with virgin, or hitting [sustainability] targets and paying in the high 900s/tonne,” the producer added.

The drop in virgin PET prices could lead those cost-based buyers who have not already done so to return to purchasing virgin material to the detriment of any sustainability targets.

At the other end of the spectrum, buyers who have committed to their sustainability targets are moving to secure material to meet recycled content goals, supporting prices at the higher end of the range.

“There is no doubt that if [the buyers’] decision is to change to virgin, the recycling industry all over Europe will have a huge problem as we cannot now compete at all with the very low price of virgin PET,” a source in the Spanish market said.

The idea that the market is split down the lines of cost versus sustainability or between the sheet and bottle-to-bottle market is not new, but it is becoming more apparent.

“Suppliers/recyclers are keen to leave some material [for] the sheet [market] because of the seasonality of bottles, so they would sell to sheet buyers when bottle [demand] is low,” a buyer said.

Material that goes into the non-food-application sheet market can be substituted for virgin PET, especially when current virgin prices levels are below that of R-PET. Therefore, suppliers may sell smaller quantities of R-PET at lower prices in order to keep business relationships open.

There is also the issue of quality, with material coming from the German and Dutch markets fetching higher prices because it is considered to be better quality.

Downstream, post-consumer bottle (PCB) availability will tighten in the coming months, according to players in the market, and there have already been some higher offers heard for colourless PCBs for March. The Italian monthly tender saw colourless bale prices increase €60-70/tonne, according to several sources.

“In Italy, we had €540-550/tonne FD (free delivered) for colourless bales and that kills the business, you can no longer compete with other European countries, and [we] are simply out of the market,” a source in Italy said this week.

If PCB prices do firm in the next couple of months, this may give some room for higher offers for certain grades of R-PET flake – however, this is likely to be tempered if virgin prices remain flat or continue on their downward trend.

What is clear is that the European R-PET market is in a period of change – leaving a lot of players unsure about how it will look by the end of the year.

Focus article by Matt Tudball

Click here to see regulatory targets and a list of chemical and mechanical recyclers on the ICIS Circular Economy topic page.

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