US R-PP markets monitoring creeping feedstock costs amid already high premium resin prices

HOUSTON (ICIS)–US recycled polypropylene (R-PP) players are currently watching polypropylene (PP) bale price movement as recent increases have put pressure on finished recycled resin margins.

As R-PP pellet prices are already established close to or over 2x virgin PP costs, recent increases in bale feedstock costs can be difficult to pass through, though recent increases in virgin PP prices have somewhat softened the blow.

Bales

East Coast PP bale prices have nearly doubled since last fall, on strong demand from several existing players who have increased processing capacity over the last year, PureCycle in particular.

With the recent start-up of PureCycle’s plastics recovery facility (PRF), bale markets have seen surprising upwards movement on tight supply as players are having to compete for the same pool of available bales.

Bale supply could further tighten as the 25% tariffs on imports from Canada and Mexico take effect this week.

Some recyclers who are located near border regions have historically purchased bale feedstock from neighboring countries. The proposed tariffs could render imported bales from Canada and Mexico uneconomic, thus further limiting supply, or lending support to higher domestic pricing.

Post-consumer resin

On the finished resin side, demand remains mixed, as recyclers and converters continue to field increased customer inquiries but have struggled to transition these to sales volumes.

Target end markets include consumer goods/packaging, automotive and fiber applications, though most end markets are currently grappling with the challenging macroeconomic outlook.

The latest quarterly earnings results suggest most global brands saw single digit volume growth at the end of last year, though it remains to be seen how consumers react as inflation remains persistent

Moreover, as bottom line pressure grows, those considering higher cost sustainable materials may shift back to lower cost virgin resins.

Prices for natural post-consumer R-PP material were heard as high as $1.30/lb. This was considered to be an outlier.

Prices for PureCycle’s dissolution based material, PureFive, were quoted at $1.36/lb, according to company representatives during their latest earnings call.

Moreover, it was noted PureCycle has inventoried 7.2 million lbs of resin, awaiting third party certification. This compares to the Q4 production volume of 3.6 million lbs and uptime of 67% in December.

Despite the small initial supply from PureCycle and other PP mechanical recyclers, the ability to compound should increase potential volumes.

PureCycle noted typical fiber applications of their resin are a 50/50 blend, where as film applications are centered around a 30/70 blend of recycled/virgin material.

Pricing for a 50/50 blend of natural mechanically recycled R-PP and virgin PP material was heard in the range of $1.20-1.30/lb.

Moreover, compounding is relatively popular with the PP space, as many PP applications require specific materials properties which can only be achieved through a blend of materials.

Though as the recycled plastic space remains nascent, many worry initial failures will deter future interest.

One producer noted customers might trial one source of R-PP, and if the resin does not perform as expected, they abandon plans for R-PP integration without trialing other types of R-PP from other providers which can vary significantly in quality and technical support.

ICIS is currently developing US R-PP market coverage.

Monthly, free prototyped reports target those involved in the processing and purchasing of PP bales as well as mechanically recycled post-consumer and post-industrial PP resin within the US. These reports have market discussion on pricing, supply, demand and current news, split by post-consumer vs post-industrial market categories.

If you are interested in learning more about this coverage and or receiving these prototype reports, please reach out to Emily.Friedman@icis.com.