Understanding the forces that drive recycled resin pricing: Talking Points

Finding resin to add to plastic parts used to be a simple process — when comparable recycled material cost less than virgin, processors purchased recycled resin from a relatively stable source and mixed it in to reduce the final cost of the part. Brand owners appreciated the savings.

It’s a little more complicated nowadays. More brand owners are dictating using recycled resin regardless of the cost, the available supply fluctuates and new forces are at work pushing collection, processing and use of recycled materials.

“Why is my recycled resin costing more in some cases than virgin?” is a frequent question, but the answer is not as complicated as you might think.

How does the recycled resin market look for processors? Emily Friedman, recycled plastics senior editor for ICIS in Houston spends her days studying the subject. ICIS provides worldwide business intelligence focusing on the chemical, fertilizer and energy markets.

“From a recycled plastics perspective, I would say I can speak to two different trends,” Friedman said. “One, if a recycled resin is cost-sensitive driven — i.e., it is being purchased because it is a cheaper alternative to virgin, that material is still seeing very weak demand coming off a market oversupply after last year.”

The second trend pertains to sustainability-driven recycled resins such as food grade in clear or natural colors. “The grades of recycled resin are still seeing strong demand due to companies wanting to make progress against their own goals or against the regulations they have to meet,” Friedman said. “They were slightly impacted by long inventory towards the end of last year, but, for example, in rPET we are starting to see inventory levels come back to normal and demand pick up with the coming beverage season.”

Friedman, who spoke at the Plastics Recycling Conference in March and in a follow-up telephone interview, said there isn’t just one story for this market, but in fact, “it really just depends on sustainability-driven vs. cost-sensitive-driven demand,” she said.

Plastics processors need to pay close attention to recycled resin markets. Here is some background.

COVID significantly impacted the recycled resin market in the U.S., particularly collection of post-

consumer material caused by labor shortages. Demand — which went from record lows to record highs — was volatile for recycled as well as virgin material.

Looking ahead, the overall economy will play a big role in recycled resin supply and costs in 2023, and whether we experience greater inflation or a recession is still uncertain.

“If we look at it from a sustainability perspective, the commitments these brand companies have made [to increase recycled content] still far outpace their current progress,” Friedman said. “I do expect to continue to see increased demand from consumer food and beverage brands as they try to source more and more recycled resins to meet those goals.”

Friedman points out that on the supply side, there is not much progress.

“We have yet to see substantial improvement in domestic collection rates, so supply is more or less stagnant,” she said. “I don’t expect that to change significantly because while there has been some infrastructure funding passed in recent legislation, there hasn’t been substantial programs, such as a bottle bill, introduced that could significantly boost collection.”

Several chemical recycling plants have been announced, but some are delayed in getting online for technical problems or feedstock supply issues.

Friedman said supply changes will have to come through imports. That means demand and pricing might be more at the mercy of global economic factors.

Sourcing recycled resin will continue to be difficult. Friedman offered these tips:

• Change your mindset. Ten years ago, recycled material was only used as a cheaper alternative, but today new players are entering the market due to sustainability purposes. It is its own material class. The cost structure is now based on recycling production costs and feedstock costs.
• Develop a dedicated source for recycled resin.
• Work with companies such as ICIS to find recyclers with available supply. This is a relatively new industry with plenty of small and larger suppliers. You might not know all of them.
• Resin demand ebbs and flows. Even if all available recycled resin seems to be tied up in contracts now, make contacts with suppliers. When there is an ebb period, you will be in position to buy recycled resin and develop a long-term supplier.

Understanding the forces at work and developing contacts will pay off as recycled resin becomes more mainstream.  

Ron Shinn, editor 

[email protected]